T&M Question......Ethics....

[Rewire]

iwire, i find myself doing this...even when i bid a job with a flat price, i never find myself cutting corners, i go the extra mile and add this or do this, i end up killing my profit margin!

After I hired an office mananger I stopped doing the billing and sinse I was no longer tweaking the bottom line our profitability went up.

 

[Mule]

Exactly, but that is different then always doing it as a 'nice gesture'.



Never said it does not happen or that the companies I have worked for have not done it when it was all part of a contract.

But when I hear T&M I think of regular run of the mill service calls that have no contract. The customer signs a rate sheet and we start.

I guess this day and age, its a luxury to work on a hand shake, or a man's word. I admit, I wouldnt function well in a different environment. 90% of our work is only verbal upfront. Of course with the exception that larger sums of money, are written proposals....

 

[NolaTigaBait]

After I hired an office mananger I stopped doing the billing and sinse I was no longer tweaking the bottom line our profitability went up.

funny how that works....you kinda need to be cold-hearted...you can't let your emotions get involved, you want to go the extra mile, but at the end of the day, you screw yourself

 

[don_resqcapt19]

How would you respond to "Okay, then, I'll supply the materials. Just give me a list."

I don't have an issue with that. On our T&M projects there is very little profit on the material...it is all in the labor rate. However I would make sure that the owner knows that he will be paying the labor rate while we are waiting for his material to get on sight and that there will be no guarantee on any of the material. Any service calls where the trouble cause is determined to be the owner supplied material will be billed at the normal service call rate.

 

[don_resqcapt19]

But when I hear T&M I think of regular run of the mill service calls that have no contract. The customer signs a rate sheet and we start.

A lot of our work is long term onsite work for industrial clients. Most of it is T&M with a set markup and set labor rates. Some times the yearly billing will exceed a million dollars for these clients.

 

[charlietuna]

Trust between the customer and the contractor grows with time and i'm sure a customer tests our compitition from time to time! One of the last T&M jobs we did was a $385K printing pressroom. The owner has us remote locate,outside the pressroom, all the supporting equipment to operate his presses! A great job and very interesting. Everyone was happy-the owner, the press installers, the press operators, and us, we made a nice profit. No bickering over extra work or things that required changing as the press sections were assembled. As we were finishing up the press manufacturer's rep called and asked us if we would consider installing one of their presses for another print shop that was to arrive in six months? We told him "no problem". About a month before the arrival date his customer called us for a price, we told him it would be T&M like our customer's! The guy had a fit and couldn't believe our customer hired out this job T&M and actually called our customer to varify it! We didn't do the job -- they demanded a set price and at the time we were too busy............. It takes trust and trust takes time!

 

[weressl]

First off, I know some of you dont like T&M, for several reasons......FWIW, I am starting to SOMEWHAT agree with you.....that is another topic.....

Case in point, I have some T&M going now, for a very good contractor (tele/data). We have our contract and agreement, no problem there at all.....

I have noticed that between my supply houses that there is a QUITE NOTICABLE difference on some items.....

Say I order x amount of conduit at supplier a, and they only have half of the amount I need, and I get the rest from supplier b. Supplier B price is 35% less than supplier a. How would you bill this???? List sepreate, or use supplier a price for both, and make a little extra????
I guess it is more of a ethics question....surely someone has been through this before....????

You are correct, it is an ethics issue. So what does YOUR conscience tells you to do? Why would you let your conscience influenced by other's 'opinion'?

This was a VERY enlightening excercise. Some people have no problem 'sticking it to' the customer, but holler to high heaven that the Big Boxes or Companies trying to screw the little man, even when they just engage in open and competitive marketing and pricing.

Capitalism and free market without ethics will doom society. We are just about there.

This was a shameful exhibit of it.

Kudos tot he ones who exhibited moral fortitude and even more to those who actually practice it.:smile:

 

[Rewire]

You are correct, it is an ethics issue. So what does YOUR conscience tells you to do? Why would you let your conscience influenced by other's 'opinion'?

This was a VERY enlightening excercise. Some people have no problem 'sticking it to' the customer, but holler to high heaven that the Big Boxes or Companies trying to screw the little man, even when they just engage in open and competitive marketing and pricing.

Capitalism and free market without ethics will doom society. We are just about there.

This was a shameful exhibit of it.

Kudos tot he ones who exhibited moral fortitude and even more to those who actually practice it.:smile:

its a contract issue and not an ethics issue.If you have a contract that says you mark up at a set % above purchase price then your answer is clear.If your contract calls for a price set by you on material ,then you have your answer.If your contract calls for purchase price then you have your answer.If you have a contract then the only question in ethics is are you following it

 

[weressl]

its a contract issue and not an ethics issue.If you have a contract that says you mark up at a set % above purchase price then your answer is clear.If your contract calls for a price set by you on material ,then you have your answer.If your contract calls for purchase price then you have your answer.If you have a contract then the only question in ethics is are you following it

You are correct. It SHOULD be a Contract issue. However OP defined it as an ethics question, as if it was undefined in the Contract. Additionaly when you review the comments, some were commenting on when they are NOT bound by Contract.

 

[petersonra]

this seems like something that should be better defined up front.

most times i have been involved in T&M deals it is labor at a certain rate and parts at actual cost plus 15% (typically).

 

[jaylectricity]

Say I order x amount of conduit at supplier a, and they only have half of the amount I need, and I get the rest from supplier b. Supplier B price is 35% less than supplier a. How would you bill this???? List sepreate, or use supplier a price for both, and make a little extra????

Return the conduit to Supplier A and buy all of it from Supplier B.

 

[aline]

Say I order x amount of conduit at supplier a, and they only have half of the amount I need, and I get the rest from supplier b. Supplier B price is 35% less than supplier a. How would you bill this???? List sepreate, or use supplier a price for both, and make a little extra????
I guess it is more of a ethics question....surely someone has been through this before....????

If you list a higher price on the invoice for the conduit purchased from supplier a, and a lower price for the conduit purchased from supplier b, isn't the customer going to question why you didn't just purchase all the conduit from supplier b?

Why not just add the costs of the conduit from supplier a to the conduit from supplier b and then add your markup percentage to that total?

Supplier a: Conduit $500/.80 = $625.00
Supplier b: Conduit $400/.80 = $500.00

Total: Conduit $900/.80 = $1125.00


If your profit is based on a set percentage of what the conduit costs you, it would seem to be in your best interest to buy your conduit from the highest priced vendor.

You could just tell supplier b that you would like him to charge you the higher amount that supplier a is charging you. That way you'll still be complying with the terms of the contract and can submit the receipts to back it up.

Supplier a: Conduit $500/.80 = $625.00
Supplier b: Conduit $500/.80 = $625.00 (After supplier b increase to match supplier a price)

Total: Conduit $1000/.80 = $1250.00

Would the customer offer to do something for you if it meant you saved money at his expense? I have my doubts.

If you get your conduit from the cheaper supplier your saving the customer money at your expense. Sure the profit margin is the same percentage but the dollar amount is less. $25 less.

 

[aline]

Return the conduit to Supplier A and buy all of it from Supplier B.

And ask Supplier B to match Supplier A's price.
This is when you want to call around and find the highest price rather than the lowest.

You're going to go through the trouble of returning conduit to Supplier A so you can save the customer some money at your expense?
Wouldn't it make more sense to just add the two amounts together and base your markup on that?

 

[Rewire]

And ask Supplier B to match Supplier A's price.
This is when you want to call around and find the highest price rather than the lowest.

You're going to go through the trouble of returning conduit to Supplier A so you can save the customer some money at your expense?
Wouldn't it make more sense to just add the two amounts together and base your markup on that?

We are on a thirty day invoice so I have time to call one supplier and have them meet the price of the other,if my supplier wants more of my business they will work with me.

 

[aline]

We are on a thirty day invoice so I have time to call one supplier and have them meet the price of the other,if my supplier wants more of my business they will work with me.

If your contract with the customer states that you'll receive 20% markup on what your material costs you, why would you want them to lower the price to match the other supplier?

Unless your talking about them raising their price to match the other supplier.

 

[Rewire]

If your contract with the customer states that you'll receive 20% markup on what your material costs you, why would you want them to lower the price to match the other supplier?

Unless your talking about them raising their price to match the other supplier.

I guess alot depends on what kind of relationship you want with this customer

If you never plan on working for them or any of their friends relatives or anyone they may have contact with then by all means nail them for every penny at every chance...but

If you would like to get more work with them have them recommend you to family and friends and provide an overall great reference to other clients then trying to save them a few dollars could well pay off in the end.

the difference in a 20% mark-up between $20.00 and $25.00 is only $1.25 thats not worth my reputation.

 

[cdslotz]

Just charge published contractor net from a pricing book. They can't argue that price.
If I bought 1/2" EMT for 13.75/C and Trade Service has it at 26.20/C, that's what I charge.

 

[Fulthrotl]

This was a VERY enlightening excercise. Some people have no problem 'sticking it to' the customer, but holler to high heaven that the Big Boxes or Companies trying to screw the little man...

like the saying says.... what goes around, comes around, about 9 am thurs....

most everything i know about being successful at most anything boils down
to..... "it is done unto you, as you believe".

so, if i am "sticking it to" any customer, or anyone for that matter, what i am
really doing is demonstrating that the only way i can have what i think i want
is at someone else's expense.

so, the sponsoring belief is that there isn't enough to go around, and i have
to steal yours to have enough.

and that is what i will have demonstrated in my experience. there isn't enough
to go around. starting with me.

the quickest way to poverty is by stealing.

 

[jaylectricity]

the quickest way to poverty is by stealing.

I don't know...it took Madoff quite a while.

 

[aline]

If you would like to get more work with them have them recommend you to family and friends and provide an overall great reference to other clients then trying to save them a few dollars could well pay off in the end..

Only if they actually know that you saved them money.
Unless you actually point it out to the customer they're not going to know that you saved them money.

Some people will actually recommend you to family and friends and provide an overall great reference to other clients because of the level of service you provided and quality of work you performed not just because you saved them a few dollars.

For some customers the level of service they receive and the quality of the work performed is far more important than whether or not you saved them a few bucks.

the difference in a 20% mark-up between $20.00 and $25.00 is only $1.25 thats not worth my reputation.

And I don't think the customer should be too worried about the difference either.

That's why I think it would be more than fair to just add the cost of the higher priced conduit to the cost of the lower priced conduit and base the markup on that. I don't think it's enough to really worry about.

I wouldn't be too concerned about calling Supplier A to get them to match supplier B's price for a T&M job.

However, I would try to use as much of the higher priced conduit on this job as possible and save the lower priced conduit for a fixed bid job.