A Time and Materials (T&M) Contract allows the contractor to bill for materials used on the project, plus an hourly or daily labour rate. This type of contract is commonly used when the project scope is uncertain or difficult to define at the outset.

How T&M Contracts Help with Flexibility

T&M contracts offer greater flexibility for both the client and contractor, as they allow for changes in the project scope as it progresses. The contractor is compensated for actual costs, making this contract suitable for projects where the duration or amount of materials needed is difficult to estimate. However, clients need to monitor spending carefully to avoid cost escalation. ## Best Practices for Managing T&M Contracts Clear documentation of labour hours and materials used is essential to ensure transparency and prevent disputes. Contractors should regularly update the client on costs to keep the project within budget. It’s also advisable to set a not-to-exceed limit to protect the client from runaway costs. Related Terms: Cost-plus Contract, Supplier

FAQs

What are the advantages of a Time and Materials contract?

A: T&M contracts provide flexibility for projects with uncertain scopes, as the contractor is paid based on actual work done and materials used.

How can clients avoid cost overruns with T&M contracts?

A: Clients can set a not-to-exceed limit in the contract, capping the total costs to prevent budget overruns.

Time and Materials (T&M) Contract Definition

How T&M Contracts Help with Flexibility

FAQs

What are the advantages of a Time and Materials contract?

How can clients avoid cost overruns with T&M contracts?

Just upload your starting project budget, and follow the financial progress in real-time