What is a key disadvantage of a Time-and-Materials contract?

A key disadvantage of a Time-and-Materials contract is that it creates an increased incentive for the contractor to expend more hours than may be necessary. This type of contract involves payment for the actual time spent on project tasks, along with the cost of materials used. Since the contractor gets paid for each hour worked, there may be a tendency to inflate hours to maximize revenue. This can lead to inefficiencies and higher overall costs for the contracting agency, as there is less motivation for the contractor to complete the work quickly and cost-effectively.

In contrast, fixed profit margins, higher upfront costs, and strict pricing terms do not directly relate to the inherent structure of Time-and-Materials contracts in the same way. Such contracts typically lack fixed profit margins, which can lead to unpredictability in costs. Additionally, while there might be higher upfront expenses associated with project initiation, this doesn't necessarily reflect the ongoing nature of a Time-and-Materials structure. Strict pricing terms usually pertain to fixed-price contracts rather than Time-and-Materials, where the emphasis is on labor hours and material costs.