{"head":{"title":"What Is a Time and Materials (T&M) Contract? | OceanLab","description":"Under time and materials you pay for the hours actually worked at agreed rates. When it suits a software project, how to control it and common mistakes.","canonical":"https://oceanlab.in/glossary/time-and-materials"},"crumbs":[{"name":"Home","path":"/"},{"name":"Glossary","path":"/glossary"},{"name":"time and materials","path":"/glossary/time-and-materials"}],"slug":"time-and-materials","term":"Time and materials (T&M)","aka":["T&M","hourly billing"],"category":"Buying software","short":"A contract where you pay for the hours actually worked, at agreed rates.","body":[["Under time and materials the buyer pays for the effort spent, usually as hours multiplied by an agreed rate per role, plus any agreed costs such as licences. Scope can change as you learn, without renegotiating the contract each time."],["It is the mirror of a ",{"href":"/glossary/fixed-price","text":"fixed-price contract"}," contract. With T&M the risk of overruns sits mostly with the buyer, so it works best with a budget cap, regular reporting and a working demo at the end of each sprint."]],"why":["Software requirements often change once people see the product. T&M lets the plan change without a change request for every adjustment, and you only pay for work that was done. It also suits ongoing work such as maintenance, where there is no fixed end scope."],"example":["A startup hires a team on T&M to build an internal admin tool. They set a monthly cap, review a demo every two weeks and reprioritise the backlog after each one. When they decide halfway through that reporting matters more than bulk import, the team simply switches focus."],"inBuild":null,"mistakes":[["No cap and no reporting. Without them T&M can drift for months."],["Comparing hourly rates alone. A lower rate with more hours can cost more in total."],["Not owning the backlog. On T&M the buyer steers, so someone on the buyer side must decide priorities."]],"related":[{"href":"/glossary/fixed-price","label":"Fixed-price contract","detail":"A contract where the price for an agreed scope is set up front."},{"href":"/glossary/total-cost-of-ownership","label":"Total cost of ownership (TCO)","detail":"Everything a piece of software costs over its life, not just the price to build or buy it."},{"href":"/glossary/technical-debt","label":"Technical debt","detail":"The future cost of shortcuts taken in code today."},{"href":"/glossary/clickable-prototype","label":"Clickable prototype","detail":"A set of linked screens you can click through, built to test a design before the real software exists."}],"tools":[{"href":"/tools/fixed-vs-time-materials","label":"Fixed price vs time and materials","detail":"Free tool"},{"href":"/tools/developer-rate-comparison","label":"Developer rate comparison","detail":"Free tool"},{"href":"/tools/team-size-calculator","label":"Team size calculator","detail":"Free tool"}],"links":[{"href":"/embedded-engineers","label":"Embedded engineers","detail":"OceanLab engineers working inside your team."},{"href":"/software","label":"Software by industry","detail":"Systems we build per industry, with guides and tools."}],"sources":[],"legal":false,"updatedAt":"2026-10-25"}