Time cost • definition

Paul Doerwald
July 15, 2020

Time cost • the opportunity cost of the time it takes to do a task

Although time cost is a fairly simple concept, it offers a bit of nuance. You can talk about the “cost” of something, but that usually refers mostly to it’s dollar cost. When you talk about the “time cost” of something, you refer specifically to the time it takes, and not how much (if anything) it costs.

“Time cost” is a particularly useful expression in a project-based pricing context. In project-based pricing, the scope of work and the fee are fixed; the only variable is the time it takes to complete the project. This is your time cost.

In project-based pricing, every additional hour of work on a project incurs a higher time cost and lower per-hour revenue. Agencies using project-based pricing want to minimize their project time cost, so they can use any surplus time elsewhere.

By contrast, in a time & materials engagement, every additional hour of work means additional revenue. In T&M engagements, time cost is often irrelevant. The next billable hour has the same value as the last regardless of project, assuming equal bill rates and urgency.