Time and Materials Contracts

Posted on April 20, 2009 by

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Time and Materials is one of three broad types of contracts—Fixed Price, Cost Reimbursable, and Time and Materials. Contract Types is a tool of the fourth edition PMBOK®’s Plan Procurements process.

Time and Materials contracts are useful when the full scope of the project is unknown. They resemble Fixed Price contracts in that there can be a fixed price for each unit. However, it is unknown how many units will be purchased so there is not a fixed price for the entire contract. As an example, Katy’s neighbor knows that there will be numerous times this summer that she’ll want to purchase homemade cookies from Katy. Katy’s neighbor doesn’t know exactly how many times, but she and Katy agree that each time over the summer she wants a dozen cookies she’ll pay Katy $10 for them. Although the unit price is set at $10, it is unknown how much Katy will earn in total by the time summer is over.