Fixed Price vs Time & Materials: Which to Choose
The contract model shapes behaviour on both sides of a software project. Pick the wrong one and you pay for it in change-request fights or in an open-ended bill. Here is how to choose.
- Published
Side by side
| Fixed price | Time & materials | |
|---|---|---|
| Who carries overrun risk | The studio | You |
| Flexibility to change scope | Low — changes need a change request | High — reprioritise any week |
| Budget certainty | High | Low unless capped |
| Best for | Well-defined scope, first builds | Evolving products, R&D, AI experimentation |
| Hidden risk | Studio pads the quote or cuts corners | No incentive to finish |
When fixed price works
Fixed price works when the scope can be written down: screens, flows, integrations and acceptance criteria. That is why we run a short discovery phase first — it turns an idea into a scope that can be priced honestly, without padding.
When time & materials works
Time and materials suits work where the answer is unknown up front: tuning an AI agent to hit an accuracy target, exploring a new market, or ongoing product development after launch. It needs trust and visibility — weekly demos and a burn report.
The hybrid most good projects use
- Paid discovery at a fixed price: one to two weeks, producing a scope, architecture and plan.
- Build at a fixed price per milestone: each milestone has a demo and acceptance criteria.
- Post-launch iteration on a capped monthly retainer.
This gives you budget certainty where it matters and flexibility where it is useful.
Frequently asked questions
Which model do you use?
Fixed-price milestones after a discovery phase for builds; capped retainers for ongoing work and AI tuning.
What happens if the scope changes mid-build?
We estimate the change, you approve it or swap it for something of equal size, and the milestone plan updates.
Is T&M always more expensive?
Not necessarily — fixed quotes include a risk margin. T&M with a disciplined team can cost less, but carries more budget risk.
