Key facts
- Fixed price: agreed cost for an agreed scope; supplier carries estimating risk
- Time and materials (T&M): pay for hours worked; client carries the risk
- Fixed price needs a clear scope, so a discovery stage usually comes first
- Change control handles new requirements in fixed-price work
- T&M suits research, open-ended support and very uncertain work
- dijitul uses fixed-price quotes, with phases for larger builds
How each model works
Fixed price means the supplier quotes a single price for a defined scope: screens, features, integrations and acceptance criteria written down. If the work takes longer than estimated, that is the supplier's problem. If you want something that was not in scope, it goes through change control with its own price.
Time and materials (T&M) means you pay for hours or days worked at an agreed rate, usually with an estimate but no cap. If the work takes longer, you pay more. If priorities change, the team simply works on the new priority. Variants include capped T&M (a ceiling on cost) and retainers (a block of time each month).
Comparison table
| Factor | Fixed price | Time and materials |
|---|---|---|
| Budget certainty | High for the agreed scope | Low: depends on hours used |
| Who carries estimating risk | Supplier | Client |
| Flexibility mid-project | Through change requests | High: change direction any time |
| Upfront work needed | Clear scope, often from a discovery stage | Less; can start quickly |
| Admin | Change control | Timesheets and budget tracking |
| Incentives | Supplier is rewarded for efficiency | Supplier is paid for time, efficient or not |
| Risk if poorly scoped | Disputes over what was included | Budget overrun |
| Best for | Defined projects, phases, integrations | Research, unclear scope, ongoing improvement |
Why we work fixed price
Business owners and finance managers need to know what a project will cost before they commit. A fixed price gives that, and it puts the estimating risk with the people best placed to manage it: the developers. It also aligns incentives. On a fixed price we are rewarded for building efficiently and getting it right first time, not for the hours spent.
To make fixed price fair to both sides, we do the work up front. After a free chat comes a discovery and scoping stage: we map the process, list the screens and data, check the APIs we will integrate with, and agree what done looks like. The quote is for that scope. See how we work.
For larger systems we phase the work. Each phase has its own fixed price, and what you learn in phase one shapes phase two. That gives you most of the flexibility of T&M without an open-ended bill.
When time and materials is the better choice
Fixed price is not always right, and a fair comparison should say so. T&M suits:
- Research and spikes, such as testing whether an undocumented API can do what you need.
- Rescue work on an unfamiliar codebase, where the first days are investigation. Even here, we prefer a fixed-price code audit first, then a fixed-price fix.
- Ongoing improvement where priorities change weekly, often run as a monthly support arrangement.
- Teams embedding a developer under their own product manager.
If a supplier offers fixed price on a vague scope, be careful: either the price includes a large risk margin, or there will be arguments later about what was included.
What makes a fixed price work in practice
A fixed price is only as good as the scope behind it. In our experience, four things make the difference between a calm fixed-price project and a contentious one.
- A written scope with examples. Not just "user management" but who the users are, what each role can see and do, and what happens when someone leaves.
- Acceptance criteria. For each feature, how both sides will know it is done. These become the test cases.
- Known unknowns named up front. If an integration depends on a third-party API we have not used before, the scope says so, and the risk is either priced or handled with a short investigation first.
- Regular demos. Showing working software every week or two means misunderstandings surface while they are cheap to fix, not at the end.
Change is normal. On a fixed-price project, a change request is not a penalty: it is a short note describing the change, its effect on timing and its price, which you approve or decline. Many clients choose to park changes for the next phase, which keeps the current release on track.
Questions to ask any supplier
- What exactly is in the scope, and what is out?
- How are changes priced and approved?
- What are the acceptance criteria for each feature?
- Who owns the code, and when does ownership transfer?
- What happens after launch: bug fixes, support, hosting?
dijitul developments answers all of these in writing before work starts. Related comparison: freelancer vs agency development.
Frequently asked questions
Is fixed price more expensive than time and materials?
Not necessarily. A fixed price includes the supplier's estimate and some risk allowance, while T&M has no ceiling. For a well-scoped project the totals are often similar, but fixed price removes the chance of an overrun landing on you.
What if we want changes during a fixed-price project?
Changes go through change control. dijitul describes the change, its effect on the timeline and its fixed price, and you decide whether to add it now, swap it for something else, or leave it for a later phase.
Why do you need a scoping stage before quoting?
A fixed price is only fair if both sides agree what is being built. Scoping turns an idea into screens, data, integrations and acceptance criteria, which protects you from surprises and lets dijitul quote with confidence.
Do you ever work on time and materials?
For defined projects, dijitul always quotes a fixed price. For open-ended support after launch, we agree a support arrangement, which can be arranged through dijitul support. We do not publish day rates.
How do phases work on a large project?
We split the system into releases that each deliver something useful, such as a portal before the full ERP. Each phase is scoped and quoted at a fixed price, and you can pause between phases.
Related
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