Time and Materials Contract

What Is a Time and Materials Contract?

A Time and Materials (T&M) Contract is a type of contract commonly used in projects where the full scope of work is not known upfront. Under a T&M contract, clients agree to pay the contractor based on the actual time spent on the project and the materials used. This contract type is often used in construction, consulting, and IT projects, providing flexibility to adjust the work scope as the project progresses.

Key Features of Time and Materials Contract

  • Flexibility: Allows for adjustments in the project scope and requirements without renegotiating the entire contract.
  • Transparency: Clients can see exactly how their money is being spent on labor and materials.
  • Hourly Rates: Contractors are paid based on pre-agreed hourly or daily rates for labor.
  • Material Costs: Includes the cost of materials used in the project, often with a markup.

How Does a Time and Materials Contract Work?

  1. Agreement on Rates: The client and contractor agree on hourly or daily rates for labor and a markup for materials.
  2. Documentation of Work: The contractor tracks time spent and materials used, providing regular updates to the client.
  3. Billing: Clients are invoiced periodically for the work completed and materials purchased during that billing period.
  4. Review and Adjustment: The scope of work can be reviewed and adjusted as needed, with client approval.

Best Practices for Time and Materials Contract

  • Clear Rate Structure: Clearly define labor rates and material markups in the contract.
  • Regular Updates: Provide regular, detailed reports of time spent and materials used to maintain transparency.
  • Cap or Not-to-Exceed Clause: Consider including a cap or not-to-exceed clause to give clients budgeting security.
  • Documentation: Keep detailed records of all work and materials as evidence of expenses.


It's preferable when the project scope is not clearly defined or is expected to change.

By setting a not-to-exceed clause, requiring regular updates, and verifying billed work and materials.

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