Time and Material Contract (T&M)

Time and material contract (T&M) is an agreement where a client pays for actual work scope that has been done for the specified amount of hours. It is usually based on rates per hour. Per hour cost includes the cost of labor, equipment usage, and materials needed to fulfill the work scope mentioned in the contact. 

T&M is more flexible than a fixed-price contract. It fits long-term projects when the project scope is not defined completely or requirements could be changed.