Fixed price vs time and materials: which contract fits your project?

How each model works

In a fixed price contract, the supplier quotes one price for a written scope. If the work takes longer than expected, the supplier absorbs the cost. If you ask for something outside the scope, a change request is raised and priced.

In time and materials, you pay for the hours worked at agreed rates, plus any expenses such as paid licenses. The supplier reports hours, and you decide what to work on next. The final cost is not known on day one.

A third model, the retainer, gives you a block of hours or a defined service each month. It suits ongoing work such as maintenance more than building something new.

Side-by-side comparison

A test for choosing: the uncertainty score

Answer five questions about your project. Score 1 for yes and 0 for no.

• Can you list every page or screen the first release needs?
• Do you have the content, brand assets and decisions ready?
• Is the technology well known, with few unknown integrations?
• Is one person with authority able to approve work within two working days?
• Is the deadline tied to a fixed date such as a launch or event?

A brochure site with approved copy scores a 5. An app idea with unproven features, an unfamiliar API and no content scores a 1.

A worked example: scope change under each model

Take a 40-page site with a quote-request form. Partway through, the owner decides to add a product finder. Here is how the same change plays out.

The paperwork is different, but the principle is the same: more scope means more cost or more time. Reject any supplier who says a fixed price means unlimited changes.

Contract rules by market

Clients in the USA, UK, EU and Australia usually sign a master services agreement and a statement of work per project. Whatever the model, check these points. They are prompts for your own legal adviser.

• Payment milestones. Tie fixed price payments to delivered work, not dates alone. For hourly work, agree invoice frequency and a payment term.
• Tax. VAT in the UK and EU and GST in Australia may apply to services from an overseas supplier, and the treatment differs. Ask your accountant how the invoice should be issued.
• Data protection. If the supplier will touch personal data, the contract needs processing terms that meet GDPR or the UK GDPR, and your privacy law elsewhere.
• Ownership. Code, designs and content should transfer to you on payment. Say so in the contract.
• Acceptance. Define what accepted means: a checklist, a test period, and how defects are handled.
• Exit. State how either side can end the work, and how materials and credentials are returned.

How we usually quote

Our default is a fixed quote after a short call, based on a written scope. If the scope cannot be written yet, we say so and propose a small fixed discovery step first. That produces the scope that the larger quote needs, and you decide afterwards whether to continue with us or take the plan elsewhere. Read more about MVP development and web app development if your project is a product rather than a site.

For a view of what web and AI projects cost in the market, see our website cost guide. To discuss the right model for your project, contact us.