FAR 16.601 defines time-and-materials as direct labor hours at fixed hourly rates plus materials at cost. It permits T&M only when the extent or duration of the work or its costs cannot be estimated with reasonable confidence, and states that T&M provides no positive profit incentive for cost control or labor efficiency.
FAR 16.202-1 says a firm-fixed price is not adjusted based on the contractor’s cost experience. The contractor assumes maximum cost risk and has an incentive to control costs and perform effectively.
FAR 37.102 makes performance-based acquisition the preferred method for acquiring services and places firm-fixed-price performance-based acquisition first in its stated order of precedence.
FAR 37.602 directs agencies to describe required results rather than how the work is performed or a number of hours, and to use measurable performance standards and assessment methods.