FAR 52.232-7 — Payments under Time-and-Materials and Labor-Hour Contracts

When This Clause Applies

Required in T&M and labor-hour contracts (non-commercial). Commercial T&M uses FAR 52.212-4 Alternate I.

What This Means for Contractors

Contractors are paid the fixed labor rate × hours worked, plus actual materials cost (with limited markup under T&M). Hours must be supported by labor records. Materials must be supported by paid invoices. The 'fixed labor rate' includes wraps and profit — losses or overruns are the contractor's risk.

Common Pitfalls

• 1Inadequate timekeeping records (DCAA requires daily entries)
• 2Charging higher-cost labor categories than actually performed
• 3Marking up materials above the contract-allowed rate
• 4Treating cost overruns as billable extras instead of contractor risk

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