What is time and materials (T&M)?
Time and materials (T&M) is billing for labor hours at agreed rates plus the materials used, instead of one fixed price. It is the default for repair and demand work in mechanical, fire protection and facility services, where the scope is unknown until a technician opens the equipment. Federal rules allow T&M only when the extent of the work cannot be estimated accurately, and require a ceiling price.
Why it matters to a revenue leader
T&M shifts cost risk to the customer, which is why buyers push back on it and procurement teams like caps. The federal acquisition regulation states the trade-off plainly: T&M gives the contractor no positive profit incentive for cost control or labor efficiency, so the buyer has to watch performance. For a revenue leader, T&M work can carry some of the best margins in the business and is among the hardest to forecast. It usually flows from agreement customers; the U.S. Department of Energy's O&M guide notes that repairs outside a preventive maintenance contract are often billed this way.
Example
Fictitious numbersA preventive maintenance customer's chiller trips on a hot afternoon. The repair takes 9 technician hours at $145 an hour plus $2,300 in parts, a $3,605 invoice billed on T&M under the agreement's rate sheet. The seller follows up with a fixed-price proposal for the overhaul the technician recommended.
"What share of our T&M revenue comes from agreement customers, and is that share growing?"