Is a labor hour contract a cost type contract?

Asked By: Tyrone Ruesca | Last Updated: 2nd April, 2020
Category: business and finance government business
4.7/5 (221 Views . 34 Votes)
Labor hour contract is another form of “time and material contract” in which the required materials are neither included in the contract nor supplied by the contractor. The owner of the contract supplies the materials, and pays a fixed price which includes overhead and profit for a negotiated number of labor hours.

Click to see full answer


Also, what is a time and materials contract How is it different from a labor hour contract?

(2) Actual cost for materials (except as provided for in 31.205-26(e) and (f)). NOT A FIXED TYPE CONTRACT. A labor-hour contract is a variation of the time-and-materials contract, differing only in that materials are not supplied by the contractor.

One may also ask, what type of contract shifts the risk of cost overruns to the contractor? Contract Types Shifts risk of cost overruns, to a certain degree, to the Government because the actual costs is unknown so the contractor will be compensated based on the costs incurred.

Also to know is, what is a cost type contract?

A cost-plus contract, also termed a cost plus contract, is a contract where a contractor is paid for all of its allowed expenses, plus additional payment to allow for a profit.

Is T&M considered a cost type contract?

T&M contracts are a hybrid of fixed-price and cost-reimbursement contracts.

39 Related Question Answers Found

What are the 3 types of contracts?

There are 3 basic Types of Contract:
  • Fixed Price (FP) Contracts.
  • Cost Reimbursable (CR) Contracts – This is also called Cost Plus (CP) Contracts.
  • Time and Material (T&M) Contracts.

What are the 4 types of contracts?

What are the Different Types of Contract?
  • Contract Types Overview.
  • Express and Implied Contracts.
  • Unilateral and Bilateral Contracts.
  • Unconscionable Contracts.
  • Adhesion Contracts.
  • Aleatory Contracts.
  • Option Contracts.
  • Fixed Price Contracts.

When should a time and materials contract be used?

A time-and-materials contract may be used only when it is not possible at the time of placing the contract to estimate accurately the extent or duration of the work or to anticipate costs with any reasonable degree of confidence. See 12.207(b) for the use of time-and-material contracts for certain commercial services.

What are the characteristics of a time and materials T&M contract?

time and materials (T&M) contract. An arrangement under which a contractor is paid on the basis of (1) actual cost of direct labor, usually at specified hourly rates, (2) actual cost of materials and equipment usage, and (3) agreed upon fixed add-on to cover the contractor's overheads and profit.

What is a requirements contract and when is it appropriate to use one?


(1) A requirements contract may be appropriate for acquiring any supplies or services when the Government anticipates recurring requirements but cannot predetermine the precise quantities of supplies or services that designated Government activities will need during a definite period.

What is a definitive contract?

A Definitive Contract is a mutually binding legal relationship obligating the seller to furnish the supplies or services (including construction) and the buyer to pay for them.

How do time and materials contracts work?

Time and materials (aka T&M) is a standard phrase in a contract for construction, product development or any other piece of work in which the employer agrees to pay the contractor based upon the time spent by the contractor's employees and subcontractors employees to perform the work, and for materials used in the

What is the least preferred government contract type?

Generally, a firm fixed price type contract is the most preferred and cost reimbursement type contracts the least preferred.

What are the 2 types of contracts?

Federal government contracts are commonly divided into two main types, fixed-price and cost-reimbursement. Other contract types include incentive contracts, time-and-materials, labor-hour contracts, indefinite-delivery contracts, and letter contracts.

What are the types of cost reimbursement contracts?


Cost-reimbursement contracts come in several different forms:
  • Cost Contracts. Only the actual costs of completing the contract are covered; the contractor receives no additional fee.
  • Cost-Sharing Contracts.
  • Cost-Plus-Fixed-Fee (CPFF) Contracts.
  • Cost-Plus-Incentive-Fee (CPIF) Contracts.
  • Cost-Plus-Award-Fee (CPAF) Contracts.

What are the types of procurement contract?

Procurement contracts are categorized into the following types and subtypes:
  • Fixed price contracts. Firm fixed price. Fixed price plus incentive. Fixed price with economic price adjustment.
  • Cost-reimbursable. Cost plus fixed fee. Cost plus award. Cost plus incentive.
  • Time and materials.

What are the four types of cost reimbursable contracts?

You can divide Cost Reimbursable contracts into four categories:
  • Cost Plus Fixed Fee (CPFF)
  • Cost Plus Incentive Fee (CPIF)
  • Cost Plus Award Fee (CPAF)
  • Cost Plus Percentage of Cost (CPPC)

What does cost plus 10 percent mean?

In the business/ retail world, this generally means the price that someone is charged for the product is 10% greater than what was originally paid for it. To illustrate, imagine a company buys a "Gizmo" that has a cost of $10. They then sell it to you for "cost plus 10%" which would bring the price to $11.

What are different type of contracts?


Types of Contracts On the basis of Validity
On this base Contracts can be classified into 5 groups. namely Valid, Void, Voidable, Illegal and Unenforceable Contracts. Valid: The Contracts which are enforceable in a court of law are called Valid Contracts.

What is cost reimbursement?

A cost-reimbursement contract is a contract where a contractor is paid for all of its allowed expenses to a set limit, plus additional payment to allow for a profit. Cost- reimbursement contracts contrast with a fixed-price contract, in which the contractor is paid a negotiated amount regardless of incurred expenses.

What is a fixed fee contract?

From Wikipedia, the free encyclopedia. A fixed-price contract is a type of contract where the payment amount does not depend on resources used or time expended. This is opposed to a cost-plus contract, which is intended to cover the costs with additional profit made.