Time and materials

A contract paid by the hours or days worked at agreed rates, plus costs. Common for IT staffing, support and agile development where the scope will change.

Also called: T&M, Per diem, Day rate

Related terms

Fixed price

A contract where the supplier agrees one price for the whole job or each milestone, and carries the risk if it takes longer. Common for websites and well-defined builds.

Ceiling price

The most a buyer will pay under a contract, even when work is paid by the hour. Work past the ceiling needs a contract amendment.