Fixed-Price Contract
A fixed-price contract sets a single agreed price for a defined scope of work, regardless of how many hours or resources it actually takes to deliver.
In short
- One agreed price for a defined scope -- the vendor bears the risk if it takes longer than estimated.
- Only works when the scope is precise enough to price accurately upfront.
- Out-of-scope work needs its own defined rate or change-order process, since the fixed price doesn't cover it.
- Puts more pressure on tight deliverable and acceptance-criteria language than T&M does.
When it makes sense
Fixed price suits well-understood, well-scoped work where both sides can estimate effort with confidence -- a defined website build, a known data migration. It gives the client budget certainty, and shifts execution-efficiency risk onto the vendor.
Where it breaks down
If the scope is vague or the requirements are still evolving, a fixed price forces one side to absorb the mismatch: the vendor eats the cost of extra work, or the client gets a rushed, cut-corners result. This is why fixed-price SOWs need the tightest deliverable definitions and the clearest out-of-scope pricing of any pricing model.
How ScopeWise checks this
ScopeWise's Commercial agent extracts the pricing model (fixed price, time-and-materials, or hybrid) from every SOW, and cross-checks fixed-price engagements specifically for whether out-of-scope work has its own defined rate -- since a fixed price with no defined overage rate is a common source of unbilled scope creep.