One of the most demanded financial interaction models is Fixed Price.
Fixed Price is a constant price when the budget for the whole project is approved before the work begins. The model means full assessment of all necessary work due to a technical task given by a client.
In comparison with Time&Material and Dedicated Team, in Fixed Price it is necessary to have all documents and instructions for a project, and to implement a plan strictly as well.
Moreover, a performer is in charge of all risks for not implementing a plan in time. A client can be sure that their project will be done within the timeline for the certain price. It makes a model very attractive and convenient for the client.
What projects is Fixed Price used for?
Fixed price contract is mostly used for small projects with strictly limited functional, precise requirements, specifications, no changes and additions (typical corporate sites, online-shops, landing pages).
Key features of working with Fixed Price:
- fixed budget;
- fixed scope of work;
- fixed working time;
- no possibility to change or add something after contract signing;
- higher developing rates.
Positive aspects of Fixed Price:
- Precision. Accurately made instructions and requirements allow to get everything you need.
- Deadline. Development and deadline is discussed in advance, which means no deadline violation.
- Financial guarantees. Before work it is clear how many resources are needed and that there will be no extra payment.
- Conversation with developers if needed. Good specifications rid of constantly being in touch and save conversation time.
However, there are also some negative aspects of Fixed Price:
- Risks. It is hard to control risks connected with new tasks, frequent editions and implementation of the current ones.
- Control. Project is controlled by a performer, that's why it is difficult for client to check working process and understand if it satisfies their requirements.
- Flexibility. Flexibility with clients is impossible due to fixed price.
- Preparations of precise specification. To define the price and deadline it is necessary to remove all uncertainties, describe projects goals, app functionality, design, architecture etc.
- Extra payment. Fixed Price often makes outsourcing companies increase prices to escape risks at additional tasks implementation.
- Changes in the implementation. Any editions have to be accurately described and planned according to the performers' schedule and complexity of the work, documents have to be updated as well.
To sum up, it is recommended to make contract by Fixed Price if you fully understand process of project developing, see the result and don't have time to interrupt in project.
However, being experienced in a certain field we often start implementing an idea, think over and plan every step, then it can be necessary to correct something or fully change. As a result, deadline approved at the beginning is extended.
That is why everyone who plans to make a big long-termed project with further development should pay attention to Time and Materials.
We have already discussed Time and Materials, its features, benefits and drawbacks in our blog. After reading our article you can analyse and understand which model is just for you.