I mean a contractor that works for a private company under contract to provide a good/service to the government. It is the second one. However what you say about not paid by the government is untrue. It depends on the terms of the contract. Some T&M contracts require receipts sent to the gov't for reimbursement. Assume in this case that I am referring to the second one where the government per diem rates are the maximum amount reimbursed from the gov't