Time-and-Materials Contract (T&M)

Payment based on labor hours at fixed rates plus materials at cost.

Definition

T&M contracts bill fixed hourly labor category rates plus actual material costs, subject to a ceiling price the contractor exceeds at its own risk.

Why it matters

Labor category mapping determines profitability — mismatched staff to categories destroys margin.

Example

A support services task order with eight labor categories and a not-to-exceed ceiling.

Related terms

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