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Mention a T&M contract to most buyers and you'll see their face frozen in dismay. You can just hear the words "blank check" and "license to steal" going through their minds. Time and material contracts are a complex method of contracting with potential for abuse. You are paying for direct labor at a fixed hourly rate (which includes direct and indirect labor, overhead and profit) and materials at cost or at a previously agreed-upon material cost markup. The most common types of T&M contracts are repair or service contracts. Each one has special needs and requirements, and the buyer, contract administrator and vendor each have important roles to play if the contract is to be successful.
It's up to the buyer to research the particular pricing structure and labor rates of the categories that will be performing on their contract. I have previously written here about repair contracts (Government Procurement, June 2008) and how one can structure estimated hours to effect a repair. A journeyman mechanic is priced...