PMI Scheduling Professional Certification (PMI-SP) Practice Exam

What is a key feature of a Time and Materials contract?

1. The payment amount is fully fixed

2. Cost varies based on the time spent and material used

3. It is only applicable for short projects

4. Payment depends solely on the materials used

The correct answer is: Cost varies based on the time spent and material used

A Time and Materials contract is characterized by its flexibility in terms of payment, which is based on the actual costs incurred for labor and materials. This means that the total payment to the contractor varies depending on two main elements: the amount of time spent on the project and the quantity of materials utilized. This structure allows for adaptability in projects where the scope may not be clearly defined or where changes in work scope could occur. The client pays for the actual hours worked at agreed-upon rates (for labor), plus the cost of materials that are directly related to the project. This contrasts with fixed-price contracts, where the payment is predetermined and does not change regardless of the actual time or material used. The variability in costs helps in situations where there is uncertainty about project requirements or challenges that may arise during execution. Therefore, the essence of a Time and Materials contract is its dynamic pricing model, which allows for adjustments as the project evolves.