Time and materials contract
A time and materials (T&M) contract pays the contractor for labor hours at agreed hourly rates, which already include overhead and profit, plus the cost of materials, sometimes with a markup.
Updated November 9, 2026 · 1 min read
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When it fits
Repairs and service work where nobody knows the scope until the wall is open: a leak with no obvious source, an old panel that may need rewiring, storm damage. Federal rules capture the idea well. FAR 16.601 allows T&M only when the extent or duration of the work can't be estimated accurately up front, and requires a ceiling price the contractor exceeds at its own risk.
What protects both sides
- A not-to-exceed amount the contractor can't pass without written approval.
- The hourly rate for each kind of worker, and any overtime or emergency rate.
- How materials are billed: at cost, or at cost plus a stated markup.
- Daily time records and receipts the customer can see.
An example
A homeowner's ceiling is stained but the roof looks fine. The roofer agrees an hourly rate, materials at cost plus a set percent, and a not-to-exceed figure. The leak turns out to be a cracked boot on a vent pipe, so the bill comes in well under the cap.
SignMaster's roof repair agreement and plumbing service agreement templates both offer a time and materials option with an hourly rate and a not-to-exceed amount the contractor won't pass without the customer's written approval.
Sources
- Federal Acquisition Regulation 16.601, time-and-materials contracts · acquisition.gov