LEMs: The Paperwork That Runs Time & Materials Construction
Labor, Equipment, Materials, Subcontractors. On a Time & Materials construction project, these four categories show up on the document that decides whether a contractor gets paid. LEMs, T&M tickets, daily sheets, whatever a company calls them, they are the single most important piece of paperwork on the job.
Most contractors treat LEMs like an administrative chore. In reality they are a legal document, a billing invoice, and a liability shield rolled into one. This post walks through what LEMs are, why T&M contracts exist, and the specific workflow problems (scope breaks, revisions, client approvals) that chew up hours of foreman and PM time every week.
Why T&M projects exist in the first place
A construction project can be priced three ways.
Lump Sum (LS). The contractor estimates the full job, the client agrees, and that price is locked. If the contractor runs into unforeseen conditions, that is their problem. The upside is that a well priced and cleanly executed job can hit 50 to 100% margins. The downside is that if the job blows up, the contractor eats the loss.
Unit Rate. The contractor and client agree on a price per unit of measure. Move one cubic meter of clay from A to B, moisture condition it, compact it, and the contractor gets paid $X per m³. The contractor gets paid for what they actually produce.
Time & Materials (T&M). The contractor tracks every hour of labor, every hour of equipment, and every dollar of materials and subcontractors. The client pays for those inputs at agreed rates, usually with a small markup on third party costs.
T&M exists because not every job can be defined up front. Shutdowns, emergency repairs, scope changes, unforeseen site conditions, utility conflicts. These are jobs where nobody can tell the client in advance how long it will take or what it will cost. Clients would rather pay hourly and watch the work happen than accept an inflated lump sum price that tries to cover the contractor’s worst case risk.
The tradeoff is that T&M caps the contractor’s upside. Margins on T&M work are structural, usually 10 to 30% built into the rates. Contractors will make money. They will not make a killing.
This is why T&M work lives and dies on documentation. If a contractor cannot prove how many hours the crew worked, what equipment was on site, and what materials got consumed, they do not get paid. That is where the LEM comes in.
What a LEM actually tracks
A LEM is broken into four sections, one per letter of the acronym.
Labor (L). Who was on site, what position they held, how many hours they worked, at what rate. A good LEM breaks out overtime separately from straight time because OT is billed at a different rate. It also includes foreman and supervisory hours, which are chargeable too.
Equipment (E). What equipment was on the job, what unit number it was, how many hours it operated. Equipment rates usually include the operator or they do not, depending on the contract. A 336 excavator with operator might bill at $200 an hour. The same excavator rented bare might bill at $120 an hour. The LEM has to be clear about which.
Materials (M). What was consumed. Gravel, rebar, welding rod, bolts, whatever. Usually listed with a description, a unit of measure (cubic yards, tons, linear feet), a quantity, and a unit cost. Most contracts allow a markup on materials, typically 10 to 20%, to cover handling and freight.
Subcontractors (S). Any third party work. If the contractor hired a hydrovac company for 4 hours or brought in a crane, that cost flows through the LEM with the same kind of markup as materials.
Each LEM also carries header information. The project name, the date, the location on site, a day number, the relevant Purchase Order, and a scope description. Photos are increasingly expected as backup. At the bottom is a signature line for the client representative to approve the sheet.
That is the simple version. The reality on site is messier.
The foreman’s problem
Here is what a typical LEM workflow looks like on a job site.
The foreman spends the day managing crew and equipment, solving problems, coordinating with the client’s rep, keeping the guys safe. At some point, usually in the last hour of the day, in the truck cab, with the engine running and a phone on 8% battery, the foreman is expected to reconstruct the entire day from memory onto a paper form or an Excel template. That means remembering who worked what hours, what equipment was running when, what materials got delivered, and whether the client rep said anything about the rates or the scope.
Then the foreman emails the PDF to the PM, who reformats it and sends it to the client. The client holds it for a few days. Maybe signs it. Maybe sends it back with questions. Maybe forgets about it entirely.
This happens every single day on every active project.
On a small job with a crew of five, this eats 30 to 60 minutes of the foreman’s day. On a big industrial project with multiple crews and fleet equipment, it can burn two or three hours a day of supervisor time. That is before counting the PM’s time reconciling and reformatting.
Most foremen are good at construction, not great at computers. The Excel template they are using was built by the company’s office manager in 2017 and has broken formulas. Half the equipment rates are out of date. Names are spelled three different ways across tickets because nobody enforces a master list. By the time the LEM reaches the client, it is three days old and nobody remembers the context of the work.
This is the workflow construction has been running for decades. It works, but it leaks hours, money, and trust at every handoff.
Scope breaks
Here is a situation that breaks most LEM templates.
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A crew starts the morning trenching a pipe between two points on a project. That work is being billed against PO #1234, Utilities Installation. At 10 AM, the client’s site rep pulls the crew off and asks them to do emergency grading at a different pad. That work is not in the original scope. It is going against PO #5678, Earthworks Change Order. The crew spends the rest of the day grading, then comes back to close out the trench at 4 PM.
One day. One crew. One foreman. But the day has three pieces, and each piece has to be billed against a different bucket of money on the client’s side. If everything gets thrown on one LEM, the client’s accounting team will not know how to allocate it and will bounce the ticket back. If the day gets split into three separate LEMs, the foreman now has three times the paperwork and the crew’s hours get fragmented across tickets.
The solution construction has landed on is called a scope break. A single LEM gets divided into sub sections, each tagged with the relevant PO or line item, and the hours, equipment, and materials are attributed to the right bucket within one sheet. The foreman fills out one ticket. The client receives one ticket. The money flows to the right places behind the scenes.
Scope breaks sound like a small feature. They are actually the difference between a LEM system that works in the real world and one that only works in theory. Any PM who has been on a multi PO project knows this already. Any software vendor who does not support scope breaks has never actually run a construction project.
Revisions
The other reality most LEM workflows ignore is that the ticket submitted today is probably not the ticket that gets paid.
Here is why.
The foreman forgot that Mike took an hour for lunch and over billed his hours. The client rep remembers the excavator being on site for 6 hours, not 8. The equipment unit number on the ticket is wrong because it was swapped mid day. The rate used for the welder’s helper does not match what was agreed in the contract. The material quantity was logged in tons but the contract priced it in cubic yards.
Any of these things, and ten more we have not listed, trigger a revision. The client sends the ticket back. The foreman or PM has to correct it. Then it gets resubmitted.
On paper, revisions are a nightmare. Three versions of the same LEM end up floating around. The original, the corrected one, the one that actually got signed. Nobody knows which is authoritative. A year later, when someone in accounting is reconciling the project, they find tickets that do not match the invoices and there is nobody left on the project to explain why.
A real revision system solves this by tracking the change history on the ticket itself. The audit trail shows that the excavator hours were changed from 8 to 6 on a specific date, by a specific person, with a reason attached. The original values are preserved for audit. There is no confusion about which version is final because there is only one ticket with a transparent change log.
This is the kind of thing that sounds boring until a contractor is in a contract dispute two years after the project closed and needs to prove what actually happened.
Client approval
The last mile of the LEM process is client approval, and on most projects it is a disaster.
Here is what it usually looks like.
The foreman fills out the LEM at the end of the day and sends it to the PM as a PDF or Excel. The PM cleans it up and emails it to the client’s site rep. The client’s site rep reviews it, or does not, then either signs it, sends questions back, or ignores it. The PM chases the approval via phone, text, and email for the next few days. Eventually the signed LEM makes its way back into the PM’s inbox, gets filed in a project folder, and when billing time comes around, gets attached to an invoice.
Every one of those steps is a potential failure point. Signed LEMs get lost in email chains. Clients go on vacation and tickets pile up for two weeks. Site reps change mid project and the incoming rep refuses to approve sheets they did not witness. PMs submit invoices with missing backup because they cannot find the signed version.
The financial impact is real. On a T&M project with $50,000 a week in billings, a two week approval backlog is $100,000 sitting in limbo. Across multiple active projects, the contractor is financing the client’s work out of their own cash flow.
A proper digital approval workflow closes this loop. The foreman submits the LEM from the field. The client’s site rep gets a notification, opens it on their phone, reviews the hours and equipment against what they witnessed, and signs with a touchscreen signature. The ticket is locked, timestamped, and attached to the project record. No lost emails. No forgotten sheets. No two week chase.
This is not a futuristic concept. It is how most industries outside construction have operated for a decade. Construction is late to the party, but the party is starting.
Why this matters
T&M work is supposed to guarantee a contractor 10 to 30% margin on the job. The industry justifies this margin partly on risk sharing, where the client pays for unforeseen conditions, and partly on execution, where contractors track hours honestly and efficiently. The contract assumes the paperwork works.
When the paperwork does not work, the margin gets eaten by unbilled hours where the foreman forgot or the ticket got lost. It gets eaten by delayed billing and the cash flow cost of financing work the client has not paid for yet. It gets eaten by admin overhead where PMs spend half their day reformatting tickets and chasing signatures instead of running the project. And it gets eaten by trust erosion, because clients who get messy paperwork assume the contractor is disorganized on the actual work too. The next contract goes to somebody else.
The LEM is the document at the center of all of this. Get it right and T&M projects are profitable, predictable, and repeatable. Get it wrong and the contractor is working for free.
Closing thoughts
LEMs are the intersection between the field and the office. Everything that matters, labor, equipment, materials, scope, money, trust, gets recorded on that one sheet, every day, on every active T&M project.
For a long time this has been a manual, paper based, Excel adjacent workflow. It works, in the same way that a 2003 pickup with 400,000 km on it works. The industry is finally starting to digitize it. LEMs are moving into apps where the foreman can enter them from the field, scope breaks get handled natively, revisions are tracked automatically, and clients can approve from their phone.
SubTrack is building in this space. The underlying truth is simple. Contractors who run T&M projects and take the LEM workflow seriously bill faster, get paid sooner, win repeat work, and keep more of their margin. The ones who treat it like a chore leak money every day they are in the field.
Learn more at subtrackfield.com.
