In a T&M contract, the Postal Service and supplier agree on an hourly fixed rate for each labor category which includes overhead and profit. Materials are supplied at cost, if appropriate, and material-handling costs may be included with the material costs.
A T&M contract is most commonly used when the exact work to be done cannot be predicted in advance, such as in repair or warranty work or in the case of a long-term services contract.
T&M contracts may be used only if no other type of contract will do. The contract must establish a ceiling price that the supplier exceeds at its own risk. The CO must document the contract file to show the basis for any change in the ceiling.
A labor-hour contract is a variant of the time-and-materials contract, differing only in that materials are not supplied by the supplier. T&M and labor-hour contracts must include Clause 2-38: Payment (Time-and-Materials and Labor-Hour Contracts).
