Email Signature Time and Materials Contract Made Easy

Esign time and materials contract

a frequent type contract that many service oriented clients might have would be time and materials we're gonna acquire supplies our services and I think most of our clients that we've had their service providers rather than providing widgets we use direct labor-hours using loaded labor rates if you're not familiar with the term loaded labor rate loaded labor rates are let's say a guy makes $10 an hour okay you are gonna pay him $10 an hour but you have a lot of indirect costs that you want to recoup so loaded labor rates would be in excess of the basic labor rate that you're paying the individual so it's a percentage extra that's added on to what that individual is going to be paid to cover all the indirect costs that you could incur and if there's if it's a TM there's materials materials are reimbursed and proposed at costs there in most cases that you can there are times where you can negotiate to get GNA added on to your materials the TNM rates are fixed but the hours are not fixed so there's usually an expected range of how many hours you'll need to perform on the contract at the time of the proposal and it's based on what the solicitation is asking for so that the total value of the TM could be materials plus whatever you're loaded labor rate times the total maximum number of hours anticipated but with TM you don't necessarily get paid for all the labor hours it's only at the labor hours that you incur so the contract might have expected a thousand labor hours but in actuality the government only needed 750 that's what you'd be paid for here's an example of a loaded labor rate let's say let's say your sole proprietor and you feel that as a senior scientist your fair rate of pay based on local markets is $50 an hour see the proposed loaded rate on the bottom one hundred and thirteen dollars well gee I'm I think I'm worth $50 an hour well actually you're worth a hundred and thirteen and how do we get to that it's not necessarily clear but these are additive you start with the basic labor rate of $50 an hour and you've calculated that your overhead costs or represent 80% of every labor dollar spent so 80% of 50 is 40 so now we're up to 90 dollars an hour we've computed your ga rate at 10% so that gets added to the $90 so now you're up to 99 dollars and then we have profit of 15% that 15% gets applied to the 99 dollars if I've done my math correct and when it all adds up it's a hundred and thirteen dollars one hundred and fourteen dollars an hour the materials part doesn't factor into the computation of your loaded labor rate so what's the load on here started with $50 you're up to 113 eighty-five the difference is the load so again if you're in a TNM situation you want to make sure that not only are your direct cost being direct labor cost of being recaptured you want to make sure that you're getting recoupment of your indirect expenses