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Matt, a contracting officer, introduces the concept of time and materials contracts used in construction and product development. These contracts involve payment for time and materials used during project development. Time and materials contracts are utilized when project size or changes cannot be estimated, in contrast to fixed price contracts. Under federal regulations, these contracts cover direct labor hours at fixed hourly rates, including wages, overhead, expenses, profit, and material costs. Time and materials contracts are suitable when project uncertainties exist.
