Time and Materials Contract
A hybrid contract paying for labor at set rates plus materials, used for staff augmentation or unclear scope.
A time and materials (T&M) contract pays the seller pre-negotiated hourly or daily labor rates plus the actual cost of materials, making it a hybrid of fixed-price and cost-reimbursable contracts. It suits work that cannot be fully scoped upfront, such as staff augmentation or short consulting engagements. The key exam nuance is cost control: without a Not-to-Exceed (NTE) ceiling, total cost is unbounded, placing most financial risk on the buyer. T&M must be closely monitored to prevent runaway costs, contrasting with firm-fixed-price, which shifts that risk to the seller.
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