Flat-Rate or Time-and-Materials: Which Is Better for Property Managers?

Flat-rate pricing charges a fixed price for a defined repair, however long it takes. Time-and-materials (T&M) bills the hours worked plus the parts. For a property manager, flat rate is usually the better choice for routine, well-understood repairs. T&M with a written not-to-exceed amount works better when nobody can know the scope until the unit is open.

Neither model is cheaper by nature. Each one puts the risk of a job running long on a different party, and that's the thing to understand before you sign off on either.

How flat-rate pricing works

A flat-rate vendor prices each repair type in advance, often from a price book: replace a range igniter, replace a dishwasher drain pump, replace a refrigerator evaporator fan. The price covers labor and usually the part, and it doesn't change if the job takes 40 minutes or two hours.

The vendor carries the risk of a slow job. To cover that risk, flat-rate prices are set with some cushion built in. On an easy job, you pay for time that wasn't used. On a hard one, you come out ahead.

What you get in return is predictability. You can approve a repair, tell the owner the number and close the work order without waiting to see the invoice.

How time-and-materials works

Under T&M, you pay an hourly labor rate for the time on the job, plus parts, which may be billed at cost or with a markup. Some vendors also bill travel time or have a minimum charge per visit.

Here the risk sits with you. If the dishwasher comes out of the cabinet easily, the bill is low. If the mounting screws are rusted into a prewar countertop and the drain line has been patched twice, it's not.

T&M is the honest way to price work that can't be scoped in advance. It's also where invoices surprise people, because the final number isn't known until the work is done.

Flat rate vs time and materials: where each one costs you

Each model has a typical way of going wrong for a PM. Flat rate tends to overcharge quietly on simple jobs. T&M tends to surprise you on complicated ones.

The padding problem is easy to miss because each invoice looks reasonable. It shows up over a year, when you add up, say, 30 igniter and gasket jobs that each took half the time the price assumed.

The surprise problem is easy to see, and it's the one that gets a PM a call from an unhappy owner.

Routine repairs: lean toward a fixed price

For work your buildings see over and over, a fixed price per job is easier to manage. Think door gaskets, igniters, dryer belts, door switches, drain pumps on common models.

These repairs have a known scope. The technician knows how long they take, so a fixed price reflects reality and you don't pay for uncertainty that doesn't exist. Approval is faster too, because the super or the owner can approve a known number on the spot.

What you should do is check the prices on your most common repairs against one or two other vendors once a year. You don't need to shop every job. You need to know the price book isn't drifting.

Sealed-system, board and intermittent faults: T&M with a cap

Some repairs can't honestly be priced until the unit is open. A refrigerant leak might be at an accessible joint or buried in the evaporator. An intermittent control fault might be the board, a wiring harness or a sensor. A flat price on those jobs either has a large cushion in it or the vendor loses money, and vendors who lose money on a job tend to rush it.

For these, T&M is usually the fairer model, as long as you put a ceiling on it. It's also where you should pause and ask whether the repair makes sense at all. Our note on what drives an appliance repair bill ranks repairs by relative size, and a large one on an old unit is often the signal to weigh replacement instead.

There's also a middle path, and it's the one most PMs end up liking. The vendor charges a set fee to attend and diagnose, then quotes the specific repair for approval before starting. You get T&M's honesty about the unknown part and an approved number for the actual work. That's how we work: the service call is $145 and up and covers the visit and the on-site diagnosis, and the repair is quoted for your approval before anything is done.

How to write a not-to-exceed into the work order

A not-to-exceed (NTE) amount is a cap on what the vendor can bill without coming back to you first. It turns open-ended T&M into something you can approve.

1. Set the number based on what you're willing to spend before you'd rather replace the unit. For an older appliance, that's often well below the repair's worst case.
2. Put it in writing in the work order itself, not just in a phone call with the dispatcher.
3. Say what happens at the cap. The technician stops and calls for approval. They don't finish and bill the overage.
4. Say what the cap covers. Labor and parts, or labor only. Include tax if your budget includes tax.
5. Ask for the diagnosis first if the cap is likely to be hit, so you can decide with the facts in hand.

Example wording, to adapt to your own work orders:

Not to exceed $[amount] including parts and labor without written approval from [name, phone or email]. If the diagnosed repair will exceed this amount, stop after diagnosis and send the findings and a written quote.

The NTE only works if someone answers when the technician calls. If approval takes two days, the technician leaves, and the repair now needs a second visit. Name one person in the work order who can say yes or no that day.

Questions to ask on either model

Whichever way a vendor prices, a few questions tell you what you're really paying:

• Is diagnosis billed separately, and is it credited toward the repair?
• What's the parts markup on T&M work, and can you see the part number on the invoice?
• What's the minimum billing increment: 15 minutes, 30, a full hour?
• Is travel time billed, and from where?
• If the part has to be ordered, is the second visit a new service call?

The last question matters most in practice. On a T&M job that needs a return trip, the second visit can cost as much as the first. On flat rate, ask whether it's included. Either answer can be fine, as long as you know it before the first visit.

When you have a repair to scope, open a work order with the building, unit and model number, and add your approval limit if you have one. We'll diagnose it and send the quote before any work starts.