What type of risk level do utilities face with time and material contracts?

Utilities face a high risk level with time and material contracts primarily due to the nature of these agreements, which often lack a defined total cost. In a time and material contract, the utility agrees to pay for the actual time spent by workers and the materials used, which can lead to unpredictable expenses. As a result, utilities may end up incurring costs that significantly exceed initial estimates, especially if the project encounters unforeseen complications or delays.

Additionally, these contracts can encourage inefficiencies since the contractor is paid for the time they spend on the job, possibly leading to prolonged work periods. This situation increases financial exposure for utilities, making it crucial for them to monitor and manage these contracts closely to mitigate the associated risks effectively. Consequently, the combination of uncertain costs and potential inefficiencies contributes to a high risk level in this type of contracting scenario.