Time and Materials

I am seeking opinions on the way T&M contracts should be handled…please see the following – this was actually a response to an email that I penned earlier this week:

It is my opinion that just because a project is time and materials doesn’t mean we have carte blanche for billable hours until the project finishes up.

If a client signs a contract with the following verbiage:
will provide 160 hours of services toward completion of the Statements of Work described herein at a rate of $165 per hour. These services are delivered on a time and materials basis and the number of hours in this contract may not be adequate to complete the work. will be responsible for reasonable and customary business expenses incurred by in its fulfillment of this work.

I believe the client has a reasonable expectation the project costs will likely cap at $26,400.00.

Now, we do have a “this estimate may not be adequate” clause, but I still think if the project is going to exceed 20% of these costs the project manager needs to contact the account exec. They (account exec) should be informed the project is going over the contracted budget and we estimate it will take x additional hours to complete. Then it should be up to the AE to decide if he needs to contact the client regarding additional funds.

If we agree we need additional funds, I strongly feel we should have a scope change request document drafted and signed.

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I have a colleague that feels that going over an estimated value on a T&M contract does not require additional documentmentation (scope change) or approval for additional funds.

I am interested in hearing the opinion of other seasoned professionals.

Thank you.