Time and Materials (T&M) Contract
A contract type that pays a contractor for the actual labor hours and material costs it incurs, plus an agreed markup, rather than a fixed price agreed to in advance.
Why it matters
Lump sum, cost-plus, and unit price contracts all exist because an owner wants to know roughly what a job will cost before work starts. Time and materials is the fallback for work that's genuinely too undefined to price that way, often a small repair, an emergency fix, or a scope nobody can fully describe yet. The tradeoff is that the owner carries the cost risk instead of the contractor.
On a real project
A building owner discovers a leak behind a wall with unknown extent. Rather than asking a contractor to guess at a lump sum price for unseen damage, the owner signs a time and materials contract, paying for actual hours worked and materials used plus a fifteen percent markup, since nobody can price the repair accurately until the wall is opened up.
Who this matters most to
A Project Manager has to track time and materials work closely, since there's no fixed price holding the cost in check. A Contracts Administrator makes sure every hour and every material purchase on a T&M job is properly documented, since that documentation is what the owner is actually paying against.
Where this goes wrong
A contractor performs T&M work without requiring daily sign-off from the owner's representative on hours and materials used. By the time an invoice goes out weeks later, the owner disputes the hours, with no contemporaneous documentation to settle the argument, and payment stalls.