Time and Materials (T&M)

A billing structure where the customer pays the actual cost of labor and materials plus a markup or fixed margin.

T&M is the opposite of fixed-price. The contractor tracks every hour worked and every material item used, then invoices that plus an agreed-on margin or hourly rate.

Pros: contractor's not on the hook for unknowns (the customer is). Cons: the customer has no ceiling, so most T&M contracts include a not-to-exceed cap.

Common on repair, service, and unknown-scope work — exposing a wall, finding rot, then quoting the rest fixed-price.

Related

• Fixed-Price (Lump-Sum) Contract — A contract where the contractor agrees to a single total price for the defined scope, taking the risk on cost overruns.
• Cost-Plus Contract — A contract where the customer pays actual costs plus a fee — either a fixed dollar amount or a percentage of costs.
• Markup vs. Margin — Two different ways to express the difference between cost and price — and they're not the same number.
• Compare contractor CRMs — FieldKrew against Jobber, Housecall Pro and ServiceTitan
• Retainage — A percentage of each progress payment (typically 5-10%) that the owner or GC withholds until the job is fully complete and accepted.
• Draw Schedule — A pre-agreed payment schedule for a construction project, tied to milestones or percentage of completion.