Fixed price or hourly
Paying a fixed priceor paying by the hour
This is a question about who carries the risk of the estimate being wrong. Everything else in the argument follows from that one thing.
The verdict
The short answer
If the work can be described well enough to quote, a fixed price is better for you, because the risk of the estimate being wrong sits with the people who made the estimate. Time and materials is the honest model when nobody can yet say what is being built, which is genuinely the case for ongoing product work. It becomes the wrong model when it is used to avoid scoping work that could have been scoped.
Time and materials
You pay for the hours worked, at an agreed rate.
Where it wins
- Change direction at any point without renegotiating anything
- Honest when nobody can yet describe what is being built
- Suits continuous product work with no obvious finish line
- You pay for exactly what was done, no more
Where it stops
- You carry the entire risk of the estimate being wrong
- Budget is unknown until the work is finished
- Slower work earns more, which is the wrong incentive to build in
- Needs somebody on your side able to judge whether progress is real
Fixed price
An agreed scope, an agreed price, agreed before work starts.
Where it wins
- You know the number before you commit, and can plan around it
- The risk of underestimating sits with us, where it belongs
- Forces the scope to be thought through before anybody writes code
- Simple to approve, because there is one number to approve
Where it stops
- Changing scope means agreeing a change, not just asking
- Needs real work up front before a number can be given
- A badly scoped fixed price is worse than a well run hourly one
Side by side
Time and materials against Fixed price
| Time and materials | Fixed price | |
|---|---|---|
| Who carries estimate risk | You | Us |
| Budget certainty | None until finished | Known before starting |
| Changing your mind | Easy at any point | Agreed as a change |
| Scoping effort up front | Minimal | Real, and before the quote |
| Incentive it creates | More hours earns more | Finishing well earns more |
| Oversight you need | Ongoing and technical | At agreed checkpoints |
| Suits | Open ended product work | A defined project with a finish line |
Which one is yours
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Choose time and materials when
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Where we come in
We quote a fixed price and a fixed date, agreed before anything starts. That means we do the scoping work first and carry the risk of getting it wrong, which is the arrangement we would want if we were buying.
- Scoped properly first, then quoted, then agreed, then built
- Changes are priced and agreed rather than absorbed quietly or argued about
- If the work turns out not to be worth doing, we tell you before you commit
Questions
Questions people actually ask
Want a number before you commit?
Tell us what you need built. We will scope it properly and come back with a fixed price and a fixed date, or tell you honestly that it should be hourly.