Background
13 May 2020

Time and Material: what kind of contract it is
and why it is being called the future of the business?

To build a good relationship between the customer and the contractor today is considered to be half of the success. The next step is the selection of the right type of contract that will help to minimize the risks and increase the chances for a positive outcome for both parties.

What is the Time&Material contract?

 

One of the most common pricing models in outsourcing is Time&Material contract. Time&Material is the model when not final result, but the time spent on the task is paid. This scheme is completely flexible, not requiring a long and deep analysis at the beginning.

How to work under the Time&Material contract?

 

Time&Material is expedient to apply in cases where it is impossible or tough to determine the full scope of work or the timeline for their implementation. Applying the Time&Material model is recommended for such projects:

  1. The project is at the testing stage, maintenance, or improvements. 
  2. The project development period takes up to 6 months for a team of 5 people and require technical documentation.
  3. Large-scale projects that require teams of 25 people, with the development time from one year.

 Usually, all tasks are divided into levels of difficulty (easy, medium, hard). Further, these tasks are allocated according to the workload and qualifications of the professional and the time frame is specified, which the specialist must meet. At the end of the month (or another period of time that depends on the scale of the project) a full report on what has been done, by whom, and in what time frame should be prepared. And only after that, on the basis of the report and the level of complexity of the tasks, an act of completed work is drawn up.

Why choose Time&Material:

 

Time & Material implies that you pay for the result. Payment is based on time spent on the development of specific tasks. Depending on customer requests, payment is made after each stage of the development process. Unlike the fixed-price model, the development team is not limited by tight budgets and timelines. This creates the opportunity to provide customers with the most thoughtful and, therefore, effective solutions. The Time & Material pricing model is easily combined with Agile approaches, such as Scrum. Dividing the workload and dividing tasks into separate blocks called sprints makes work more efficiently.  Each sprint is evaluated separately (in hours). Such estimates are agreed with the customer.  Once the task is completed, the customer pays for the work, and the developers begin to work on the next sprint.

The Time & Material model allows you to delegate authority. You do not need to communicate directly with the developers and explain to everyone what you want to get as a result, the project manager contacts them. Also, this model makes it possible to save and control all processes. It is also worth noting that you can easily change the work plan in accordance with current requirements.

Conclusion

 

The Time & Material model is a solution for long-term projects without any established requests and visions. This work option is suitable for different types of projects and, with trust between the contractor and the customer, it is beneficial to both parties. The client pays in fact for the work performed, the contractor understands how much work the project carries and how much the company can earn and, thus, both parties can plan their resources.