Time-and-Materials (T&M)
A time-and-materials (T&M) contract pays fixed hourly labor rates — wages, overhead, G&A, and profit built in — plus materials at actual cost. FAR 16.601 permits it only when the extent or duration of the work cannot be estimated accurately at award.
Each labor category carries its own fully loaded hourly rate, and the contractor bills for hours delivered; materials are reimbursed at cost. Because profit rides on every hour, the type gives the contractor no incentive for labor efficiency, and FAR 16.601(c)(1) requires appropriate government surveillance of performance for that reason.
Two guardrails attach. The contracting officer must execute a determination and findings that no other contract type is suitable, and the contract must state a ceiling price the contractor exceeds at its own risk (FAR 16.601(d)). For commercial services, FAR 12.207(b) adds competitive-procedures requirements and a D&F that also addresses how future buys will move toward fixed price.
The recurring failure is treating the ceiling as a budget. Contractors manage to the ceiling, and an order that burns through it mid-period leaves the program choosing between new funding and losing coverage.
Regulatory Reference
FAR 16.601; FAR 12.207(b)
RFO Status
The Part 16 model deviation retains T&M coverage in subpart 16.6, and section 16.104 (Executive Order 14402) pulls T&M and labor-hour awards into the written-justification and approval regime for other-than-fixed-price contracts.
Category
Contract Types & Vehicles
How AcqBot Helps
AcqBot drafts the T&M determination and findings, checks the labor-category rate table and ceiling math, and flags orders approaching their ceiling or ordering period before they surprise the program office.
Related glossary entries
Other Transaction Authority (OTA)
Other Transaction Authority (OTA) lets certain agencies enter agreements for research, prototypes, and follow-on production that are not standard procurement contracts — largely exempt from the FAR — to attract nontraditional contractors and move faster than conventional acquisition allows.
Indefinite Delivery/Indefinite Quantity (IDIQ)
An Indefinite Delivery/Indefinite Quantity (IDIQ) contract buys an unspecified quantity of supplies or services, within stated minimum and maximum limits, over a fixed period. The government buys through task or delivery orders under FAR 16.504, with a preference for multiple awards.
Firm-Fixed-Price (FFP)
A firm-fixed-price (FFP) contract sets a price that is not subject to adjustment based on the contractor's cost experience in performance. FAR 16.202 places maximum cost risk on the contractor, who absorbs every overrun and keeps every underrun.
Cost-Plus-Fixed-Fee (CPFF)
A cost-plus-fixed-fee (CPFF) contract reimburses allowable costs and pays a fee negotiated and fixed at inception. The fee does not vary with actual cost, though it may adjust when the work changes. FAR 16.306 governs; statutory caps limit the fee.