What is a T&M contract?

This type contract provides for payment for time as direct labor hours at specified fixed hourly rates and materials at cost.  These hourly rates are fully burdened rates that include wages, overhead, general and administrative expenses, and profit. The material costs can include administrative handling fees as negotiated (see FAR 16.6).

Can Virginia Tech accept T&M contracts?

Yes, but only if there is no other alternative and the PI has agreed to accept the additional administrative burden of tracking and/or converting to hourly rates. Also, the sponsor must understand that the hours billed are converted hours and not auditable to any hourly time records. These T&M contracts require billing based on hours, not percentage-of-time as is our normal practice (see DPLH for further discussion, exception language, and contract clause).

What is the difference between a T&M and a Labor-hour contract?

A labor-hour contract is a variation of a T&M contract. It has labor hours, but no materials are supplied by the contractor.