Last edited 08 Aug 2018

Time and material contract (T&M)

In the United States, a time and material contract (T&M) is a type of construction contract that commits the client to pay the contractor based upon the time spent on the works, the materials used, as well as a mark-up for profit. In the UK, this type of contract is known as a cost reimbursable contract or cost plus.

This differs from a fixed price contract which commits the client to pay the contractor a lump sum fee for fulfilling the contract regardless of the amount on labour, materials, and so on used. A T&M contract is typically used on projects where it is difficult to describe the extent of the works required accurately, or where specifications and requirements are likely to change as the project progresses.

The main items that can be included in a T&M contract are:

The advantages of using a T&M contract include:

The disadvantages of using a T&M contract include:

  • It can prove more risky for the client to proceed without a clear understanding of the final cost.
  • It can increase the likelihood of disputes arising.
  • Errors or inaccurate estimates can leave them with a low profit that may not be deemed worthwhile.
  • It can necessitate more involvement from the client to ensure the contractor is motivated to progressing the works on time and within budget.

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