The Time & Materials (T&M) Change Order, Done Right

Some changes you can price in ten minutes. Others — open up a wall and find rot, hit rock where the plans said soil, chase a leak nobody can locate — you can't. That's where the time and materials change order earns its keep. Instead of guessing at a fixed price and eating the overrun, you bill the actual hours and actual materials, plus an agreed markup. Done right, T&M protects both sides. Done sloppy, it's the fastest route to a payment dispute on the whole job.

This guide covers when to use T&M, exactly what the change order needs to say, the daily ticket habit that makes it bulletproof, and the mistakes that get T&M invoices kicked back.

What Is a Time and Materials Change Order?

A time and materials change order is a written, signed agreement to perform changed work where the final price isn't fixed upfront. Instead, the client agrees to pay for:

• Labor at stated hourly rates (by trade or crew classification)
• Materials at documented cost, usually plus a markup percentage
• Equipment at stated rental or hourly rates
• Overhead and profit as an agreed markup on the above

The key word is agreement. T&M is not a license to work first and negotiate later. The rates, the markup, and ideally a cap all get signed before the changed work starts — same as any properly written change order. The only thing left open is the quantity of hours and materials, and you document those daily as you go.

When to Use T&M (and When to Stick With Fixed Price)

Fixed-price change orders are cleaner for everyone when the scope is knowable. Reach for T&M when it isn't:

• Concealed conditions. Rot behind siding, corroded pipe in a slab, undocumented wiring. You don't know the extent until you're in it.
• Exploratory or diagnostic work. Finding the source of a leak, tracing a circuit, potholing utilities.
• Emergency work. No time to estimate — the water is coming in now.
• Owner-directed work with a moving target. "Just keep the crew on it while we decide" is T&M by definition. Put it in writing.

If you can define the scope well enough to estimate it within 10–15%, quote it fixed. Clients prefer certainty, and a fixed price with healthy contingency usually beats arguing over timesheets. For everything else, T&M with a not-to-exceed cap is the honest answer.

What Goes in a Time and Materials Change Order

Before anyone swings a hammer, the signed T&M change order should state:

1. Scope description — what triggered the change and what work is authorized. Be specific about the boundary: "remove and replace rotted rim joist and subfloor in the northeast bathroom" beats "repair rot as needed."
2. Labor rates by classification — e.g., journeyman carpenter $95/hr, laborer $60/hr, foreman $110/hr. State whether rates are straight-time only and what overtime costs if the client wants weekend work.
3. Materials basis — documented invoice cost plus your markup (15–20% is common). Say receipts will be attached.
4. Equipment rates — rentals at invoice plus markup; owned equipment at a stated hourly or daily rate.
5. Markup for overhead and profit — a single clear percentage on labor and materials. Don't bury it.
6. A not-to-exceed (NTE) cap — the maximum the client authorizes without a further signature. This is the line that gets nervous clients to sign.
7. Documentation and billing terms — daily tickets, weekly summaries, payment due dates.
8. Schedule impact — added days, or a note that duration will be tracked with the hours.
9. Signatures — yours and the client's, dated, before work starts.

If you're currently doing this in a Word doc, a free change order tool will build the document, email it, and capture the client's signature from their phone — which matters on T&M work, because speed of signature is the whole game when a crew is standing by.

Daily T&M Tickets: The Habit That Gets You Paid

The signed change order authorizes the work. The daily ticket proves it. Every day the T&M work runs:

1. Record the day's labor — each worker, classification, hours, and a one-line description of what they did.
2. Log materials and equipment used — quantities and where they went.
3. Take photos — especially of anything that gets covered up. The rotted joist you replaced is invisible once the subfloor goes back down.
4. Get the ticket acknowledged same day — a signature or an email reply from the owner, super, or GC rep. Acknowledged means "we agree these hours happened," which kills the classic month-later dispute: "I'm not paying for 60 hours, my guy says it took 40."
5. Track the running total against the NTE cap — and flag the client in writing when you hit about 75% of it, so a new authorization is signed before you're forced to stop.

What a good ticket line looks like

Tue 6/30 — J. Alvarez (carpenter) 8 hrs, M. Chen (laborer) 8 hrs: demo'd NE bathroom subfloor, removed rotted rim joist section (photos 12–18), sistered new 2x10, treated adjacent framing. Materials: (2) 2x10x12 PT, borate treatment, fasteners — receipts attached. Running total: $2,340 of $6,000 NTE.

Thirty seconds to write. Worth thousands when the invoice lands.

Markup on a Time and Materials Change Order

T&M markup follows the same logic as any change order pricing: your rates must carry overhead and profit, not just wages. A $45/hr carpenter costs you $60+ with burden before you've paid for the truck, the insurance, or yourself. Typical structures are loaded labor rates plus 15–20% on materials, or bare-cost everything plus a single 20–35% markup on the total. Either works — what matters is that it's stated in the signed change order, not improvised on the invoice. For the full math on rates and margin, see how to price a change order so you actually get paid.

Four T&M Mistakes That Get Invoices Kicked Back

• Starting work on a verbal OK. "Go ahead, we'll sort out the paperwork" is how contractors donate labor. A T&M authorization takes five minutes to send and sign — there's no schedule so tight it can't wait for that. (More on why in verbal change orders: why a handshake costs you money.)
• No cap. An uncapped T&M ticket makes clients feel like the meter is running with no ceiling, and it invites a fight when the number surprises them. The NTE cap is your friend: it gets the signature faster and forces a check-in before costs run away.
• Weekly (or worse, end-of-job) time reporting. Memories diverge fast. Daily tickets, acknowledged daily, keep both sides honest while the details are fresh.
• Vague scope boundaries. If the T&M change order says "repair water damage," you'll argue about where the repair ends. Define the boundary, and write a second change order if the work grows past it.

Keep the Paper Fast, or It Won't Happen

Every step above is basic. The reason crews skip it is friction: nobody wants to draft documents in a truck at 4pm. That's the problem ChangeOrdersPro exists to remove — fill in the scope, rates, and cap, hit send, and the client signs from their phone in minutes. It's 100% free, no catch, no card. If you'd rather stay in spreadsheets, grab the free Excel change order template and adapt it for T&M — just don't let the paperwork lag the work. And for more on fixed-price changes, approvals, and pricing, the blog has you covered.

Frequently asked questions

What is the difference between a T&M change order and a fixed-price change order?

A fixed-price change order states one agreed amount for the changed work before it starts. A time and materials change order states agreed labor rates, material markup, and usually a not-to-exceed cap, then bills the actual hours and materials used. Use fixed price when you can estimate the scope; use T&M when the extent of the work is unknown, such as concealed damage or exploratory work.

Should a time and materials change order have a cap?

Almost always, yes. A not-to-exceed (NTE) cap sets the maximum the client authorizes without a further signature. It makes clients far more comfortable signing quickly, and it forces a written check-in before costs run past expectations. Flag the client in writing when you reach about 75% of the cap so a new authorization is in place before you hit it.

What markup is typical on T&M work?

Common structures are loaded labor rates (with overhead and profit built in) plus 15–20% on materials at documented cost, or bare costs plus a single 20–35% overhead-and-profit markup on the total. There is no single right number — what matters is that the markup is stated clearly in the signed change order before work starts, not introduced on the invoice.

Do daily T&M tickets really need a signature?

Get them acknowledged daily if you can — a signature or even a same-day email reply from the owner or GC rep. An acknowledged ticket means both sides agreed the hours and materials happened while memories were fresh, which prevents the most common T&M dispute: the client contesting the hour count weeks later at invoice time.

Daisy Porter

Co-Founder, ChangeOrdersPro

Daisy writes about the unglamorous side of running a build — the paperwork, the change orders, and the conversations that keep a job profitable. ChangeOrdersPro is the free tool her team built so contractors can send a professional change order and get it signed from a phone in about 30 seconds.