Time and materials (T&M)

T&M and fixed-price are the two ends of the service-billing spectrum. T&M shifts the risk of effort onto the client: if the work takes longer than expected, the client pays more. Fixed-price shifts that risk onto the supplier: if the work blows up, the supplier eats it. Each works best in different conditions.

T&M fits when scope is genuinely uncertain. Software discovery, consulting engagements where the answer is the deliverable, design work where the client iterates extensively, and any project where requirements will evolve as the work progresses. The client pays for the actual effort needed, the supplier is not exposed to scope creep, and both sides can adjust direction without renegotiating the contract.

The risk on T&M is the open-ended invoice. Without controls, the client receives an uncomfortably surprising bill at the end. The common levers: a not-to-exceed cap (maximum total hours), weekly burn reports (client sees hours used vs remaining), and milestone check-ins (review and recommit at defined points). These keep the model honest without collapsing it back into fixed-price.