T&M

A Time and Materials contract pays the contractor based on actual labor hours at fixed hourly rates plus actual costs of materials at cost (or with an agreed markup). T&M contracts are used when it is not possible to estimate the extent or duration of work or anticipate costs with reasonable certainty.

T&M contracts require government surveillance to ensure efficient performance because the contractor has less financial incentive to control costs. Contracts must include a ceiling price that the contractor cannot exceed without authorization. T&M is common for professional services, maintenance, and support work where scope may evolve based on discovered issues.