When to Use a Labor Hour Contract

These problems are due to inconsistent practices and the interpretation of the SP&P among COs with regard to the use of the maximum price and the contractually financed amount; failure to follow the process to ensure that applicable clauses have been included in contracts; inadequate contract management practices among OCs; and a finding by conscientious objectors that the retention obligation was not applicable on the basis of the services provided. The COs did not systematically manage the T&M and Labor Hour contracts in accordance with SP&P. In particular, we have identified the following exceptions: If OCs do not comply with the guidelines, there is an increased risk of cost overruns, disputes, or failure to achieve the objective or intent of this policy. In addition, OCs without applicable clauses in the contract may not be able to enforce the terms and conditions established and intended to manage the risks associated with the T&M and Labor Hour contracts. Unmet contract costs averaged $52 million for the year over the two-year period. Our audit objective was to determine whether U.S. Postal Service (CO) contract agents manage time and materials (T&M) and hours of work contracts in accordance with procurement principles and practices (SP&P). We recommended that management revise the policy to better define the maximum price and the obligation to document the maximum price on time. Align contracts with missing necessary clauses and establish a process to promote compliance and accountability of contract agents. We also recommended that management, through formal communication, focus on requirements for documenting maximum price changes and requirements, waive or formally withhold holdback payments in T&M and Labor Hour contracts. Although more than a dozen types of contracts are described in the Federal Acquisition Regulation (FAR) Part 16External, the following table highlights the types of contracts most commonly used by CDC. Description.

A working hours contract is a variation of the time and material contract that differs only in that the materials are not provided by the contractor. See 12.207(b), 16.601(c) and 16.601(d) for the application and restrictions, for time and material contracts, which also apply to hourly employment contracts. See 12.207 (b) for the use of working time contracts for certain commercial services. As of July 2017, 105 open T&M and Labor Hour contracts had been awarded in fiscal years 2006 to 2017, valued at $432 million. Our statistical sample included 70 contracts with a total volume of over $294 million. Other types of contracts include incentive contracts, time and material contracts, hourly employment contracts, open-ended supply contracts and letter contracts. This wide range of contract types is available to government and contractors to provide flexibility in the procurement of the wide variety and volume of supplies and services required by agencies. The types of contracts vary depending on: Contract type is a term used to identify differences in the structure or form of the contract, including compensation agreements and the level of risk (whether for the government or the contractor).

Federal government contracts are generally divided into two main types, the fixed price and the refund. A T&M contract is most often used when the exact work to be done cannot be predicted in advance. A working hours contract is a variant of the T&M contract that differs only in that the supplier does not supply the materials. Due to the inherent risks, these types of contracts are the least preferred because they do not promote effective cost control or work efficiency by the supplier. Therefore, the postal service requires COs to set a maximum price and communicate it to the supplier, include mandatory clauses and document the justification for maximum price increases for T&M and hourly employment contracts. Parent item: Subsection 16.6 – Time and material, Hourly contracts and letters. .