Time and Material (T&M) contracts offer flexibility, but they come with a significant challenge: payment disputes. According to Arcadis’s 2023 Construction Disputes Report, the average value of disputes in North America increased by 42% from 2021 to 2022 and remains at historically high levels.
The problem is straightforward. Contractors submit invoices based on hours worked. Clients question those hours. Without bulletproof documentation, contractors either absorb the cost or damage client relationships fighting for payment they’ve already earned.
The stakes are high. A concrete contractor working on a $2 million project with 30% of the work billed T&M stands to lose six figures if even 10% of their hours get disputed and rejected.
Why T&M Disputes Happen
Most T&M disputes aren’t about fraud. They stem from three fundamental issues that undermine trust between contractors and clients.
Lack of Real-Time Documentation
Clients don’t trust timesheet data submitted weeks after the work was completed. By the time invoices arrive, they have no way to verify what actually happened on-site. Memory fades. Details blur. Disputes begin.
The American Institute of Architects notes that payment disputes often arise from delays, scope changes, and disagreements over when and how payments should be made. When time documentation is submitted after the fact, it becomes nearly impossible to verify accuracy.
Manual Time Tracking Creates Doubt
Paper timesheets and foreman-entered crew time are inherently questionable. When a superintendent submits a timesheet showing 15 workers at 10 hours each, clients rightfully ask: Were they really all there? The entire time? Doing what?
The U.S. Department of Labor requires employers to maintain accurate records of hours worked, including when employees started and stopped work each day. Handwritten timesheets rarely meet this standard under scrutiny.
Misaligned Incentives
The contractor wants to bill for every hour worked. The client wants to minimize costs. Without objective data, every invoice becomes a negotiation. Some clients routinely reduce invoices by 5-10% regardless of accuracy, knowing many contractors will accept it rather than fight.
The Documentation Gap
Traditional time tracking methods fail under pressure.
Foreman-Entered Time
When one person enters time for an entire crew, that data can’t survive client scrutiny. Clients know foremen have incentives to inflate hours. They know mistakes happen. They know workers who left early might still show full days.
This approach creates a single point of failure. The foreman becomes the bottleneck and the liability. If they miss a detail or make an error, the entire crew’s time becomes questionable.
Mobile Apps Without Verification
Time tracking apps that rely on workers self-reporting provide little proof. Workers can clock in from anywhere. Buddy punching remains possible. Clients reject this data routinely.
An app-only approach assumes perfect behavior from workers and perfect cell coverage in the field – neither assumption holds up on real jobsites.
Photo Capture Systems
Taking photos at clock-in provides some verification, but photos alone don’t prove much. Was that worker there all day? Did they leave early? Photos from 7 AM don’t document a full shift.
What Actually Works: Verification-First Systems
Contractors winning T&M disputes share a common approach: they’ve replaced trust-based systems with verification-based systems.
The shift requires time tracking that provides four critical elements.
Biometric Verification at Every Clock Event
Each clock-in and clock-out must be verified, not just recorded. Modern best-in-class jobsite time clocks use facial verification technology to confirm worker identity at every transaction, creating a documented chain of evidence that clients can’t reasonably dispute.
Unlike fingerprint systems that fail with welded hands or gloves, facial verification works in any condition. The technology compares each clock event photo to previous photos, creating a pattern of verification that’s nearly impossible to fake.
Timestamp + Location Data
Verification means nothing without proving the worker was physically on-site. GPS geo-fencing combined with stationary time clocks provides location certainty. Workers can’t clock in from home or from their truck in the parking lot.
For contractors billing T&M, this combination eliminates the most common client objection: “How do I know they were really there?”
Real-Time Data Flow
Documentation captured in real-time and automatically synced prevents retroactive changes. When time data flows immediately from the field to the office, there’s no window for manipulation or “adjustment.”
Real-time data also enables proactive management. Project managers can see hours accumulating against budget throughout the week, not after payroll has already been processed.
Automatic Integration
When time data flows automatically to job costing and invoicing systems, the entire chain of custody becomes auditable. Clients can trace every billed hour back to specific clock events with timestamps and verification records.
This eliminates the manual data entry errors that plague traditional systems and give clients legitimate reasons to question invoices.
Building Your Documentation Strategy
Contractors protecting their T&M revenue follow a systematic approach.
Step 1: Choose Verification Over Trust
Replace any system that requires trusting someone’s word. Paper timesheets fail here. Foreman-entered time fails here. Apps without verification fail here.
The test is simple: if a client disputes an invoice, could the contractor prove in court that every hour was legitimately worked? If not, the system is inadequate.
Step 2: Implement Before Contract Signing
Don’t wait until disputes arise. Deploy verification systems during mobilization. Train workers before they start billing time. Make it clear to clients that verified time tracking is standard practice.
Some contractors include language in T&M contracts specifying that time will be tracked via biometric verification systems. This sets expectations upfront and reduces friction when invoices arrive.
Step 3: Provide Client Access (Selectively)
Some contractors give clients view-only access to time tracking dashboards. This transparency can prevent disputes before they start. When clients can see real-time headcount and verified clock events, trust increases.
Be strategic about access. Provide enough visibility to build confidence without overwhelming clients with operational details they don’t need.
Step 4: Document Everything Beyond Time
Time verification solves most T&M disputes, but comprehensive documentation goes further. Effective construction document control captures the complete history of project activities.
Critical contextual documentation includes:
- Weather conditions (affects productivity claims)
- Site conditions (muddy, frozen, flooded)
- Equipment availability or delays
- Material delivery timing
- Change orders and scope changes
- Site access restrictions
- Utility availability
Modern daily report systems can tie this contextual information to time data, creating complete documentation of each day’s work.
Step 5: Train Your Invoicing Process
Verified time data means nothing if invoices don’t communicate that verification. Train accounting teams to reference time tracking systems in invoices. Include language like “All hours verified via biometric time tracking with geo-location verification.”
This small addition to invoices dramatically reduces disputes. Clients understand they’re not just seeing a number – they’re seeing verified, documented hours.
The ROI of Dispute Prevention
Calculate the cost of disputed hours.
A mechanical contractor running $5 million annually in T&M work typically faces disputes on 8-12% of invoiced hours. At $75/hour average loaded labor rate, that’s $30,000-$45,000 in disputed charges annually.
Most contractors recover 50-70% of disputed amounts after negotiation and compromise. The rest is written off.
The annual cost:
- $45,000 in disputes
- $13,500-$22,500 written off
- Plus 60-80 hours of PM/accounting time fighting disputes
- Plus damage to client relationships
Verified time tracking eliminates 90%+ of these disputes. The few remaining disputes involve legitimate scope or classification questions, not whether workers were present.
Beyond Disputes: Strategic Advantages
Contractors implementing verification-based time tracking discover benefits beyond dispute prevention.
Faster Payment Cycles
When clients trust time data, they process invoices faster. Instead of 45-60 day payment cycles while clients “verify” hours, verified contractors often see 30-day cycles.
This cash flow improvement can be worth more than the disputed hours saved. Better cash flow means less reliance on lines of credit and more working capital for growth.
Competitive Advantage in Bidding
On T&M projects, clients increasingly prefer contractors who can demonstrate verified time tracking. It reduces their risk and simplifies their project accounting.
Some large clients now require verification systems in their pre-qualification criteria for T&M work.
Better Project Controls
The same systems that prevent client disputes help contractors manage their own labor costs. Real-time visibility into hours worked versus budget prevents surprises and enables mid-project course corrections.
Project managers can spot overruns while there’s still time to adjust manning or accelerate work, rather than discovering problems when the project is already over budget.
Common Implementation Challenges
Worker Pushback
Some workers resist biometric time tracking, citing privacy concerns. Address this directly: facial verification doesn’t identify workers – it only verifies that the person clocking in matches previous photos of that same person.
The technology cannot identify where workers live or track them off-site. It simply confirms “This person clocking in is the same person who’s been clocking in under this name.”
Foreman Resistance
Foremen sometimes resist systems that remove their control over crew timesheets. This resistance often signals a problem worth investigating. Honest foremen welcome systems that remove the burden of timesheet responsibility from their plates.
The best approach is to frame verification systems as tools that protect foremen from accusations and free them to focus on leading crews rather than managing paperwork.
Integration Complexity
Contractors worry about integrating new systems with existing payroll and job costing software. Modern time tracking solutions offer direct integrations with major construction ERP systems, eliminating manual data transfer.
The key is choosing systems built specifically for construction workflows rather than generic time tracking platforms adapted for construction.
Making the Transition
Moving from manual or trust-based systems to verification-based tracking doesn’t happen overnight, but it doesn’t need to be complicated.
Start with one project or one crew. Demonstrate that the system works and that workers can use it without slowing down. Use that success to build internal buy-in before rolling out company-wide.
Most contractors discover that workers adapt quickly. The check-in process takes less time than finding a foreman to sign off on hours, and workers appreciate the accountability that prevents short checks and payroll errors.
The transition investment pays back quickly – often within the first month when the first T&M invoice goes through without dispute.
The Future of T&M Documentation
As technology improves and becomes more affordable, verified time tracking will shift from competitive advantage to baseline requirement. Clients will expect it. Contractors without it will lose work to competitors who can offer bulletproof documentation.
The contractors who adopt verification systems now are positioning themselves as the reliable, professional choice for T&M work. They’re building reputations for transparency and accuracy that translate into repeat business and premium pricing.
T&M disputes aren’t going away. The industry is too complex, projects are too unpredictable, and the financial stakes are too high. But contractors who invest in verification-based documentation systems can virtually eliminate these disputes and capture the revenue they’ve legitimately earned.
The question isn’t whether to implement verified time tracking. The question is whether contractors can afford not to.
