My Favorite Contract Type – Time-and-Materials-Hours (T&M)
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Written by: Patrick Shields
FAR Part 16 describes types of contracts “… that may be used in Federal government acquisitions.” Although the time-and-materials (T&M) type and its “kissing cousin” labor-hours (LH) type are officially disfavored due to inherent risks and due to historical mis-usage, the T&M type is my favorite type because, when properly selected and managed, they provide user acquisition teams with a highly flexible business arrangement to balance the risk when an acquisition’s costs cannot be accurately anticipated because the amount of work to meet the need is highly uncertain. This enables effective and efficient reaction by the contracting partners to both predicted and unpredictable circumstances that may arise.
The T&M contract type can be suitable and is often used for services when the “M” refers only to minor, incidental items such as travel, software licenses or similar purchases to enable performance of the services needed, rather than physical materials. T&M also is suitable (was probably “invented”) for more materials-intensive requirements such as repair or overhaul of major equipment when the exact amount of the labor and new/repaired components needed is unknown until the equipment is torn down and the root problem analyzed.
Although the inherent risks and a history of misuse and mismanagement of the high-risk T&M/LH contract types require specific, high-level approval that can be difficult to obtain, followed by diligent post-award oversight and management, it remains my favorite because of the potential for flexibly and efficiently accomplishing the underlying mission objectives in highly uncertain situations.
Are you new to working on an acquisition team? Could you use help in assessing whether a T&M (or LH) type contract is the best choice for your acquisition? One source of assistance is the video tutorials available in our acquisition planning app called Facilitated Intelligent Needs Development (FIND). These short tutorials help you to decide which type of contract may be most suitable based on your objectives and acquisition circumstances. The FIND Library also has many Templates, Formats and Guidance documents to assist you in documenting your contract type choice, each of which is tailorable for your agency’s needs.
Mr. Patrick Shields has over 45 years of experience as an acquisition and contracting professional and innovative leader. Since 2016 Mr. Shields has served as the Seventh Sense Consulting LLC (SSC) Director of Acquisition Practice in which his extensive knowledge pf Federal Government acquisition and contracting, plus his passion for innovation and enlightened efficiency enable him to serve SSC’s clients, both directly through consulting engagements and indirectly, both as a “reachback” resource for all SSC personnel and by providing subject matter expertise (SME) for the development and support of SSC’s suite of Enlightened Solutions intelligent products. Prior to joining SSC, Mr. Shields was the Senior Manager for Research Services for ASI Government (ASI) (2012-2016), where he led a team of acquisition experts within ASI’s Virtual Acquisition Office (VAO) who researched and developed responses to inquiries on acquisition/ contracting topics that spanned the acquisition lifecycle plus various acquisition organization and policy-related topics. Also, Mr. Shields authored, co-authored or contributed content to dozens of VAO educational/advisory publications. Inquiry responses and VAO’s publications were provided to over 25,000 acquisition professionals within the numerous VAO subscriber agencies. Prior to joining the VAO, Mr. Shields served as a senior subject matter expert within ASI’s consulting division, providing expertise to various clients, including DoD and Intelligence Community agencies, GSA, and numerous other civilian agencies. Mr. Shields’ consulting efforts included development of acquisition-specific documents, agency-specific policies, and requested topical training materials and presentations. While at ASI, he earned ASI’s Masters Certificate in Performance Based Acquisition and was selected as an ASI Research Fellow. After a short time as a high school and collegiate level mathematics teacher, Mr. Shields began his acquisition and contracting career at the Naval Air Systems Command (1987-2004), advancing to serve in various Division Head level assignments for over 10 years before retiring from civil service. During this tenure, he executed and/or oversaw over $10B in contracts spanning the full major systems acquisition cycle for some of the most consequential major weapon systems programs in Naval Aviation. Mr. Shields earned numerous certifications, awards and recognitions, including DAWIA Level III in both Contracting and Program Management, was a Charter Member of the Navy Acquisition Corps, and a Meritorious Civilian Service Medal. Mr. Shields holds a bachelor’s degree in Mathematics Education from Virginia Tech, plus master’s degrees in Mathematics from Virginia Commonwealth University, and in Strategic Studies from the U.S. Army War College.