“T&M” (time and materials) is often used as a phrase to describe how work performed will be charged for, meaning a [rate for time] * [time taken], plus direct costs for materials (and other expenses) . There are in fact several factors to consider in describing how work is performed and charged for and “T&M” sometimes gets used as a sloppy shorthand without being clear which ones actually apply.
Basis of pricing
As described above – a rate time a duration, plus expenses. This could in principle be open-ended, so usually there are some constraints placed on what can be done without explicit approval.
Even with a T&M basis, there can be different rates for different skillsets and experience, or a blended rate (same rate for all resources).
Basis of supervision
Consider the case where multiple resources (people) are provided by a consulting firm to address a client need:
If the client manages the day to day workload of each person, this is indicative of a T&M relationship. If the day to day activities of the consultants are managed by leaders of the consultancy, this is indicative of something other than a T&M relationship.
Although these are indications – it is possible to have team-management included in an otherwise T&M basis[1]
Basis of completion criteria
T&M may be the completion criteria: you provide 10 person-days of effort and then you will have completed your obligation.
Duration of commitment
T&M may refer to an open-ended arrangement – while you keep working you charge for your time.
Responsibility for determining the team
Also where there are multiple team members, someone decides who is suitable to be in the team. Generally for fixed price / specified outcome the consultancy takes the lead in defining the team. Generally for a T&M relationship, the client takes the lead in selecting the team. Again, this is indicative – there will be times when the client will not accept a team member and times when the client allows the consultancy to put forward a T&M priced team.
Certain combinations ought to ring alarm bells:
If a consultancy is accountable for achieving specific outcomes for a fixed price, then I would normally expect the consultancy to determine the composition of its own team.
If a consultancy is proposing a fixed price, I would expect there to be agreed conditions of satisfaction and no obligation to share a rate card and time spent by each individual[2].
Heritage: There have been many occasions where the phrase “T&M” has been used and understood differently by each party (an example of equivocation)
[1] Perhaps as an additional cost, or bundled as a “free” item.
[2] Procurement departments typically insist on having rates and durations as well as outcomes specified and are often in a position to insist. But almost never in a position to effectively manage and monitor.