Time and materials (T&M)

Paying for the hours actually worked; scope can change, cost and timeline move with it.

T&M fits work where learning changes the plan, which is most product work. The risk sits with the client, so it needs visibility: weekly demos, hours against progress, a cap. A popular middle ground is a fixed budget with flexible scope, essentially T&M with a not-to-exceed limit.

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Related terms

Fixed price: A contract where scope and price are agreed up front and the vendor carries the risk.
Scope creep: Small additions that each seem reasonable and together blow the budget and the date.

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