What does "Time and Materials" mean?

In general, for most of the work I do, I work for either a fixed price or on a "time and materials" basis.  

With a fixed price, a client shows me the job, and I tell him or her exactly what I will charge to do the work.  Simple.  No risk to anyone but me.

Sometimes, however, I just can't give a fixed price.  If I'm digging into something that I have no way of knowing what I'll find when I open it up, or if the scope of work is general, I may need to work on a "time and materials" basis.  

What this means is that I charge the client for every hour I spend on the job, and for all of the materials, subcontractors and any other job expenses that apply (trash removal, for example).  To those charges, I add a markup, or fee, which is generally a percentage of the total costs.

You'd think "time and materials" would work out great for the contractor, right?  Well, in one way, it does.  There is little risk to me, since I haven't given a fixed price.  At this point, the risk is on the client.  Perfectly fair, and certainly understandable, but here's the rub.

Clients are usually a happy campers when they know, to the penny, what their project is going to cost.  When they don't know, anxiety can set in.  You can guess who the anxiety gets taken out on, can't you?

Now, you should know that I do my best to estimate what the work will cost.  I've been at it for a long while now, and have a good sense of what things will take.  I'm going to share that expertise with you, and I'm generally pretty good, but here's a nugget of truth.......I DON'T HAVE X-RAY VISION, AND I'M NOT CARNAC THE MAGNIFICENT!

So, despite the fact that I consider myself honest and ethical, despite the fact that I'll tell you verbally and in writing that things could end up costing more.....a lot more, despite your assurances of "I understand", despite all of that, I will....when I present you that invoice that is twice what I thought it MIGHT cost, when I see the look in your eyes that says "How could you?!"....I will feel awful.  I will feel like a thief. I will feel like I have let you down.

I hate that feeling.

I don't know if most contractors feel this way, but I know that a lot of us do.  So, the next time you and your trusty contractor happen to be talking about what the best way to go about things might be, consider the above.  It might make sense to pay your contractor by the hour for just long enough to discover what the true extent of the work is going to be, and to then have him or her give you a fixed price to complete the work.  

You'll be happy because you know what things are going to cost, and your contractor will be happy because he knows he has given you an accurate cost; one that will let him make some money and not feel like a grifter at the end of the day.  Win-win.