Glossary
Fixed-Price Contract (Software)
A fixed-price software contract sets one price for an agreed scope of work, so the vendor carries the risk of overruns within that scope. It suits well-defined projects; for evolving requirements, time-and-materials or phased fixed prices usually give better results.
Key Facts
| Suits | Clear scope, stable requirements, short to medium projects |
|---|---|
| Alternative | Time-and-materials: pay for hours used, with regular reviews |
| Common middle ground | Paid discovery, then fixed price per phase |
| Watch for | Vague scope, expensive change requests, quality cut to protect margin |
Protect yourself in either model
- A written scope with acceptance criteria.
- Milestones tied to working, tested features.
- A change-request process with rates agreed upfront.
- Code ownership and handover clauses.
See fixed price vs time and materials and how to write a software brief that gets accurate quotes.
Frequently Asked Questions
Is fixed price always cheaper?
No. Vendors add buffers for risk, and change requests can add up. It is more predictable, not necessarily cheaper.
Can we switch models mid-project?
Yes, if agreed. Many projects start fixed-price for a defined phase and move to time-and-materials for later improvements.
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