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What dollar amount should I list on prelims for Time & Materials jobs?

CaliforniaPreliminary Notice

The majority of the work we do is T&M (time and material billing on each order/section). The work is issued in a variety of ways. 1. Customer calls in orders as they need rebar (we have no idea of how much rebar we will supply to the job) a. They may place orders daily, weekly, monthly or somewhere in between b. Order size varies – could be hundred dollar or several thousand dollars per order c. We’ve had jobs were the initial order is a few hundred dollars, and the final job amounts reach over $100,000 2. Customers drop off a set of plans and ask us to detail (determine the amount of rebar they need) the job for them a. They may have us do one section of the job and never ask for the remaining rebar on the job b. They may have us do a few sections over time c. They may have us do the entire job i. In all of the above cases, we are not guaranteed to do the work until they release it, so we detail the job as they request a new section 3. In either of the cases above, a customer may also ask us to send out a crew to install the rebar at an hourly rate In some cases, it is virtually impossible to come up with a realistic dollar amount to put on the prelim. Can we list T&M instead of a dollar amount and still be within the legality of the prelim? If not, what is the best way to address this issue while still maintaining the integrity of the prelim along with protecting our lien rights?

1 reply

May 18, 2020
California Civil Code section 8202 (2) requires that preliminary notice include “an estimate of the total price of the work provided and to be provided.” Thus, you must list an actual dollar amount. But all that is required is a good faith estimate. Even if that estimate turns out to be wrong, it is sufficient that the estimate was made in good faith based on the information available at the time. The best way to get this estimate is to ask your customer for an estimate as they likely have a lot more information on the scope of the project than you. Your customer should be motivated to provide a ball park estimate, as they will not want the owner getting a preliminary notice with a exaggerated amount. Alternatively, you can generate your estimate based on your experience with your customer and projects of similar size. Or you can estimate based on the preliminary order. As long as your estimate is made in good faith, based on the information you have within 20 days of the start of work, you will be in compliance even if the contract ends up being for substantially more. -Peter Ryan Hunt Ortmann For a free consultation email me at ryan@huntortmann.com
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