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"Time and materials contracts are typically used in construction and product development when the size of the project or potential changes cannot be estimated. Contrary to fixed price contracts, time and materials contracts involve payment for both time spent and materials used. Detailed under Federal Acquisition Regulation subpart 16.6, these contracts are based on direct labor hours at fixed hourly rates, encompassing wages, overhead, expenses, and profit. They are suitable when uncertainties about project scope exist."
