T&M

T&M contracts are authorized under FAR 16.601 and are considered a last resort — the FAR explicitly states that T&M should only be used when no other contract type is suitable. The government bears more cost risk here than under FFP because it is paying for hours worked rather than results delivered.

When agencies use T&M:

• IT services, software development, and systems integration with undefined scope
• Professional services and consulting where the level of effort is uncertain
• Repair and maintenance work where the extent of work is unknown
• Rapid response and surge support requirements

Structure of a T&M contract:

• Labor categories — each role (e.g., Senior Engineer, Program Manager) has a fixed hourly billing rate
• Material costs — reimbursed at actual cost, often with a handling fee
• Ceiling price — the not-to-exceed amount; the contractor must notify the government when 85% of ceiling is reached

Oversight requirements: T&M contracts require a Contracting Officer's Representative (COR) to actively monitor contractor hours and deliverables. The government can audit timesheets and verify labor category qualifications. Misbilling on T&M contracts is a common source of False Claims Act liability.

T&M is particularly common in IT, cybersecurity, consulting, and professional services. It is often used for task orders under IDIQ vehicles where the full scope cannot be predicted at the vehicle level.