Which statement about time and material contracts is true?

Time and material contracts are typically structured to cover the actual costs of labor and materials used on a project, plus a fee for profit. This arrangement means that utilities assume more risk because they are responsible for the total costs incurred by the contractor during the project, without a fixed budget cap. Consequently, if a project takes longer than expected or involves more materials, the utility will end up paying more than initially anticipated.

On the other hand, contractors benefit from this type of contract since they are compensated for all hours worked and materials used, which minimizes their financial risk. They do not need to worry about adhering to a strict project budget set before the work begins, as they are paid for every hour worked and all materials supplied. This dynamic places the burden of project cost control predominantly on the utilities, confirming that time and material contracts are viewed as high risk for utilities and low risk for contractors.