Time-and-materials contract — US FAR
A time-and-materials contract under the US Federal Acquisition Regulation pays qualifying labour at specified hourly rates and materials on the applicable cost basis, subject to a ceiling.
What the rate includes
Specified labour rates include wages, overhead, general and administrative expenses, and profit. Materials are generally paid at actual cost under the applicable rules. A fixed hourly rate does not make the whole contract a fixed-price purchase.
When it is used
FAR limits this contract type to circumstances where the extent or duration of work, or its costs, cannot be estimated with sufficient confidence. Its use requires the prescribed justification, and the government must oversee performance and cost control.
Managing delivery
Check the labour categories, qualification requirements, material-cost rules and ceiling price. Hours worked are not automatically billable under any category a contractor chooses. The ceiling is a real constraint: exceeding it is at the contractor’s risk. Maintain evidence connecting the work performed and materials supplied to the contract’s payment provisions.
Sources
Reviewed: October 27, 2026
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