Time-and-materials (T&M) contract
Also called: T&M, time and materials, labor hour contract, LH
A time-and-materials contract pays fixed hourly rates by labor category for the hours actually worked, plus materials at cost, up to a ceiling; a labor-hour contract is the same without materials.
T&M is FAR 16.601 and labor-hour is FAR 16.602. FAR 16.601(c) only allows T&M when no other type is suitable and the CO writes a determination, and FAR 12.207(b) sets extra conditions for commercial services. Payment follows FAR 52.232-7: you invoice hours by category at the contract rate, with the hourly rate carrying wages, indirect costs and profit, and you bear the risk that the ceiling is reached before the work is finished.
What to check: the labor category qualifications (an unqualified person billed at a category rate is a false claim), the ceiling and the notification clause when you approach it, timekeeping records that will survive an audit, and whether the rates are fixed for the full period or escalate by option year. Schedule orders and many IT support task orders run this way.
What it is not: cost reimbursement. The rates are fixed; only the hours vary.
See also: Labor category, Wrap rate, Firm fixed price (FFP) contract, Cost-reimbursement (cost-plus) contract
Questions that use this term
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