A time-and-materials contract bills the owner for actual labor hours and materials used, typically at agreed hourly and markup rates, without setting a total price up front.
Contractors and owners use this structure for repair work or projects where scope can’t be reasonably estimated in advance.
What Does a Time-and-Materials Contract Include?
- Agreed hourly labor rates
- Material cost plus markup
- Detailed time tracking and invoicing
- No predetermined total price
Why Are Time-and-Materials Contracts Important?
A plumber called to find an intermittent leak might work time-and-materials, since the scope depends entirely on what they find once they start investigating. The tradeoff for owners is less cost certainty compared to a fixed-price contract, since the final bill depends on how much time the work actually takes.
Time-and-Materials Contract vs. Fixed-Price Contract
A fixed-price contract sets one total cost up front for a defined scope; a time-and-materials contract bills based on actual hours and materials, with no cap unless one is negotiated separately.