XL EagleT&M (Time and Materials)
T&M stands for Time and Materials. A time and materials contract pays fixed hourly rates for labor and the actual cost of materials, up to a ceiling price. The hourly rate already includes wages, overhead, G&A and profit. A labor hour contract is the same idea without the materials piece.
The government sees T&M as the least preferred type because there is no built-in reason to work fast. It is used when the amount of work cannot be known ahead of time, like emergency repairs. It needs a written finding that no other type fits.
Why it matters to a small contractor
T&M is common for on-call repairs and service calls. Your hourly rates must be fully loaded, because you cannot add overhead later. Keep clean timesheets and material receipts; they will be checked.
Example
An on-call plumbing contract pays $95 per hour for a journeyman and material at cost, with a $40,000 ceiling. A burst pipe takes 12 hours and $1,800 in parts, so the bill is $2,940.
T&M: common questions
What happens when I hit the ceiling?
You stop. The government does not have to pay for work beyond the ceiling unless the contracting officer raises it in writing first.
What is the difference between T&M and labor hour?
Labor hour pays only hourly rates. T&M pays hourly rates plus materials.
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