Time and materials
Time and materials is a pricing model where the buyer pays for hours actually worked plus any materials used, rather than a fixed price for a fixed scope. It suits work whose shape is still emerging — research, ongoing maintenance, AI features where the unknowns are larger than the knowns.
Time and materials is the honest pricing model for work that cannot be specified up front. Fixed price punishes change; time and materials accepts that the scope will move and prices the hours instead. It is the default shape for a dedicated development team or staff augmentation, where the team is on standing capacity rather than delivering one defined deliverable.
The trade-off is that the budget moves with the work. That is fair for evolving scope but harder for procurement to sign off than a single number on a statement of work. It also puts pressure on the buyer side: without an outcome to steer toward, hours can quietly drift into busywork. The rule of thumb is to pair time and materials with a small set of outcomes per quarter and a short feedback loop, so the bill reflects progress and not just attendance. For work with a known boundary — a fixed integration, a defined migration — fixed price or managed services is usually the cleaner answer.
