Why time-and-materials debris contracts need a ceiling

After a storm, it can be tempting to pay debris crews by the hour until the scope is clear. Federal rules allow that, but only with limits.

What the rules say

• Under 2 CFR 200.318(j), a time-and-materials (T&M) contract may be used only when no other contract type is suitable.
• The contract must include a ceiling price that the contractor exceeds at its own risk.
• The agency must keep a high degree of oversight to make sure the contractor is working efficiently.
• FEMA’s Public Assistance Program and Policy Guide expects T&M to be used only for a limited time, until the scope can be defined and a unit-price or lump-sum contract is in place.

Why it matters

Hourly work without a ceiling, or left in place too long, is one of the issues federal auditors look for. Costs that do not meet the rules can be reduced or denied.

What to do

• Put a not-to-exceed amount in any T&M contract or task order.
• Log equipment and labor hours daily, and pay only for active work hours.
• Move to unit-price or lump-sum pricing as soon as the scope is known.

General information only, not legal advice. FEMA decides eligibility. See also our FEMA documentation page.