How Contractors Lose 40% of T&M Revenue — And How to Stop the Bleed

Time-and-Materials (T&M) work should be straightforward: perform approved extra work, record hours, materials, and equipment, then get paid. In reality, contractors routinely leak significant revenue on T&M, sometimes up to 40%, because documentation is late, scope is vague, signatures are missing, and the audit trail is incomplete. The upside is clear: with field-first capture and standardized controls, most of this loss is recoverable.

This guide breaks down where the money disappears, how to plug the leaks, and how to quantify the upside immediately with a T&M ROI Calculator.

The 7 Most Common Ways T&M Revenue Disappears

1. Work starts before formal authorization

The reality: Crews mobilize to avoid delaying the critical path, but written authorization lags behind verbal directives.

The risk: Later, owners dispute scope and price because there’s no contemporaneous directive.

The fix: Standardize a one-page, mobile-friendly directive form that captures who requested the work, where, when, and why. A documented directive, even brief, shifts negotiations in your favor.

Perspective on governance and controls: KPMG Global Construction Survey insights: kpmg.com

2. Incomplete or late field documentation

The reality: Paper tags go missing. Quantities are reconstructed after the fact. Photos live on a personal phone, not in the ticket.

The risk: Reviewers discount or disallow charges that lack evidence.

The fix: Capture hours, materials, equipment, photos, and locations at the point of work. Require same-day ticket creation and attachment of photos.

Reference: COAA’s change-management best practices emphasize timely documentation: coaa.org

3. Weak scope narratives that invite debate

The reality: Entries like “repair unforeseen condition” lack precise location, cause, or drawing references.

The risk: Reviewers argue your T&M covers base-scope rework.

The fix: Train forepersons to include root cause, exact location, tie-ins to RFIs/ASIs, and drawing references. A crisp narrative reduces back-and-forth and denials.

4. Missed markups and misapplied rates

The reality: Field teams capture time, but overhead, small tools, per diem, and correct equipment rates are missed.

The risk: You recover costs but leave margin on the table.

The fix: Preload approved rate sheets and markups so they apply automatically. Include standard policies for small tools and consumables by default.

Resource: AACE guidance on pricing completeness and change-order structure: aacei.org

5. No contemporaneous sign-off

The reality: Owners promise to sign later.

The risk: Two months on, they dispute the quantities or whether the work occurred.

The fix: Treat daily or per-shift sign-off as non-negotiable. Use digital signatures with name, title, and timestamp. Document refusal to sign and alert the PM immediately.

Insight: FMI research highlights costs of administrative lag and rework: fminet.com

6. Slow submittals and aging receivables

The reality: Teams batch tickets into monthly packages, delaying cash.

The risk: Longer DSO, strained working capital, higher write-off risk.

The fix: Submit continuously. Bundle tickets with evidence and route for PM approval within 24 hours. Tie tickets to cost codes and locations to speed reviewer confidence.

Perspective: Deloitte’s E&C outlooks on risk and cash dynamics: deloitte.com

7. Owner audit readiness gaps

The reality: Reconstructing proof across dailies, RFIs, photos, rate sheets, and invoices becomes a scramble.

The risk: Auditors trim or deny charges for lack of traceability.

The fix: Maintain a single source of truth linking directive, ticket, photos, labor, materials, equipment, and signatures. Export in the owner’s preferred format on demand.

Why “Up to 40%” Isn’t Far-Fetched

Leakage compounds across small misses. A few undocumented equipment hours here. A missing small-tools markup there. A day’s worth of photos not attached. A couple of unsigned tickets per month. None of these sink a project alone, but across dozens of tickets and multi-month jobs, the losses stack quickly. 

Industry research on change management, claims, rework, and cash cycles consistently shows that poor documentation and process lag translate into significant revenue erosion. The core problem isn’t the work you performed, it’s proving it quickly, completely, and undeniably.

Field-First Controls That Recover T&M Revenue

• Standardize directives: Create a one-page digital directive form and make it the first step for any extra work. Capture who, what, where, when, and why, plus related drawings and RFIs.
• Capture everything at the point of work: Require photos, quantities, location keys, and cost codes in the same-day ticket. If it isn’t captured in the field, it’s at risk.
• Preload the commercial backbone: Load approved rate sheets and markups so the field can’t “forget” them. Include small tools, consumables, and per diem rules.
• Require contemporaneous signatures: Daily sign-off by the owner or GC field rep. If refused, record the attempt and reason, and escalate instantly.
• Automate packaging and submittals: Auto-bundle tickets with attachments, then route for PM review and continuous submittals. Avoid month-end batching.
• Build the audit trail as you go: Link each ticket to directives, RFIs/ASIs, timecards, invoices, photos, and signatures. Make exports sortable by ticket, date range, cost code, and location.

Quantify Your Gain: T&M ROI Calculator

Knowing you have a leak is one thing; knowing its dollar impact is another. Use the T&M ROI Calculator to estimate how much revenue you can recover by tightening T&M processes, documentation, and approvals. In minutes, you’ll see a realistic projection of reclaimed revenue and margin.

• Try it now: T&M ROI Calculator

30-Day Implementation Blueprint

Week 1: Assess and align

• Inventory current T&M sources, rate sheets, and approval workflows.
• Identify the top three leak points on your last project.
• Set non-negotiables: same-day capture, correct rates by default, daily signatures.

Week 2: Digitize the capture

• Roll out a mobile T&M ticket with required fields for scope, quantities, photos, and signatures.
• Preload rate sheets and markups.
• Pilot with one crew and one owner’s rep committed to daily sign-off.

Week 3: Connect the back office

• Map tickets to job cost codes and WBS.
• Auto-generate submittal packages with all attachments.
• Establish SLAs: PM review same day, submit within 24–48 hours.

Week 4: Audit readiness and scale

• Create export templates by owner preference.
• Train forepersons on scope narratives and photo evidence habits.
• Expand from pilot to all T&M workstreams and measure cycle times.

What “Good” Looks Like

• Every T&M ticket is created in the field the day of work, with photos and a specific scope narrative.
• Rates and markups are correct by default, with documented exceptions.
• Owner reps sign daily, or refusal is logged and escalated.
• PMs approve within 24 hours; submittals flow continuously, not monthly.
• A single system links directive, ticket, time, materials, equipment, photos, and signatures, exportable on demand.
• Audit requests are answered in hours with a single export, not weeks of reconstruction.

Additional Resources

• KPMG Global Construction Survey on controls and delivery risk: kpmg.com
• Construction Owners Association of America (COAA) change-process best practices: coaa.org
• AACE International resources on change orders and pricing structure: aacei.org
• FMI insights on performance, rework, and process maturity: fminet.com
• Deloitte outlooks for Engineering & Construction risk and cash flow themes: deloitte.com

T&M shouldn’t be a margin mystery. The factors that cause contractors to lose up to 40%, late documentation, missing signatures, weak scope narratives, and incomplete pricing, are fixable with field-first capture and standardized approvals. Tighten the workflow, and the revenue follows. 

To see what that looks like in dollars on your projects, run the numbers with the T&M ROI Calculator.