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What You Should Know about Time and Material Contracts for the PMP Certification Exam

You should know some basics about time and material contracts for the PMP Certification Exam. Time and material (T&M) contracts are generally used for smaller contracts when there is not a firm scope of work or the work is for an indefinite period.

Hourly labor rates and material rates are agreed to upfront (this is the fixed part of the contract), but the amount of time and material are subject to the needs of the job or the buyer. Generally, expenses are reimbursed at cost. Many times, this type of contract is used until the scope of work can be well defined. It may include a not-to-exceed amount.

Time and material (T&M) contract. A type of contract that’s a hybrid contractual arrangement containing aspects of both cost-reimbursable and fixed price contracts. Time and material contracts resemble cost-reimbursable type arrangements in that they have no definitive end because the full value of the arrangement is not defined at the time of the award.

Thus, time and material contracts can grow in contract value as if they were cost-reimbursable–type arrangements. Conversely, time and material arrangements can also resemble fixed price arrangements. For example, the buyer and seller preset the unit rates, when both parties agree on the rates for the category of senior engineers.

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