Timeandmaterials

Time and materials, often abbreviated as T&M, is a contract pricing model in which a client pays for actual time spent by the contractor’s personnel and for materials used to complete the work, rather than a fixed total price. Payment typically relies on a predefined rate card for labor categories (for example, software engineer, tester, or project manager) and the actual cost of materials, plus any included overhead, travel, or equipment charges. Some agreements include a not-to-exceed cap or a target price, and may specify rate escalations over time.

This approach is commonly used when project scope is uncertain or likely to evolve, when a quick start is needed, or during prototyping, maintenance, or exploratory work. T&M contracts are prevalent in software development, engineering, professional services, and research projects, where requirements can shift as work progresses.

Advantages include flexibility to accommodate changes, earlier initiation of work, and transparent visibility into resource usage. For clients, T&M can simplify starting a project without detailed re-bidding. For contractors, the model aligns pay with actual effort and materials delivered.

Disadvantages include less cost predictability and potential for budget overruns, requiring effective timekeeping, expense tracking, and strict scope management. Governance practices such as clear rate cards, regular reporting, change-control procedures, and, when appropriate, a not-to-exceed cap help manage risk.

Compared with fixed-price contracts, T&M shifts more scope risk to the client but offers greater adaptability; fixed-price transfers more risk to the contractor but emphasizes price certainty.