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.
Check out our video that provides an overview of FIND. Or better yet, request a demo at demo@seventhsenseconsulting.com or contact us at (301) 392-1895 or lakers@seventhsenseconsulting.com.
Make it an enlightened day,
Pat Shields
Director – Acquisition Practice
Seventh Sense Consulting