Time and Materials. Top 5 features of the contract
Sometimes, it is quite complicated to accurately assess the cost of the efforts that will be taken on software development. In this event, IT outsourcer and customer may resort to Time and Materials approach, which does not provide one of them with unfair advantages.
| Time and Materials (also T&M) is a pricing model that calculates and charges the time spent by each specialist of the software development team. |
However, this approach to work requires close attention to detail within the software development agreement drafting. The contract allows ensuring that each party has the same understanding of the cooperation terms and conditions. You may avoid any misunderstandings or conflicts in the future regard to writing agreement.
So, what contract will bring peace and harmony to the relationship between the customer and the contractor?
5 Features You Should Know About T&M Contracts
- Time and Materials is about flexibility. All provisions of the agreement must be flexible as the T&M approach is. You shall stipulate in the contract convenient procedures for coordinating tasks and estimating that meet your real business processes.
For example, parties agree on the main list of tasks every 2-4 weeks, and optionally, they have the right to make minor adjustments through email or task-manager.
Otherwise, the contract will increase workload.
- Scrum as a pal of T&M. The software development team has specific tasks for short sprint periods. However, work on a long-term job exceeds one sprint. Therefore, it is not entirely clear when the services are considered to be delivered on time and accurately. If such a gap in services delivery appears, the developer may get into a vicious circle of iterations and corrections from the customer.
A good T&M contract determines the moment when the customer accepts the services. Common way: the signing by the parties of the certificate of completion at the end of each calendar month or the fact of payment indicates service acceptance.
- Parties approve how hours spent. A useful contract tool is to uphold the estimated hours per sprint. Also, we recommend a clause under which the contractor is obliged to notify the customer if the limit for N hours per sprint is exceeded.
- Leave the opportunity to exit long-term cooperation. Time and Materials are usually resorted to in lengthy projects. Plan your activities in a year or two at the stage of signing the contract. It is essential in the agreement to establish a way to terminate it unilaterally.
Without such an exit point for the contractor, there are risks of falling into bondage. Unilateral termination will allow the customer, if necessary, to freeze the project or change the development team.
- T&M needs a simplified price review process. The price per hour of work can be changed over time. The price list shall be in the appendix to the agreement to avoid making permanent amendments to the contract.
As a result, Time and Materials is a convenient pricing model that, under certain conditions, can be mutually beneficial for each of the parties. A balanced approach and thinking through all the clauses of the contract will ensure the proper protection of the rights and interests of each party without burdening the processes of services performing.
Holod Oleksandr
Team lead of IT lawyers