Fixed Price vs Time and Materials: Which to Choose

Every software contract answers one question: who pays when the work takes longer than expected? Under time and materials (T&M), you do — you pay for the hours worked. Under a fixed price, the vendor does — they deliver the agreed scope for the agreed number. Neither is always right. The choice depends on how well you can describe what you need.

How time and materials works

You pay an hourly or daily rate for the people on the project, usually invoiced monthly. The scope can change freely, which suits exploratory work. The risk is that the estimate is only an estimate: if the work grows, so does the bill, and the vendor has no financial reason to finish sooner.

How fixed price works

The vendor and you agree a written scope and a price before work starts. If the work takes longer than planned, the vendor absorbs it. New requests outside the scope are priced separately. The risk shifts to scope definition: a vague scope leads to arguments about what was included.

When each one fits

• Fixed price fits a defined deliverable: a feature, an integration, an internal tool, a migration step, a pilot
• Fixed price fits when you need a budget number before approval
• T&M fits open-ended discovery where nobody can yet say what done looks like
• T&M fits ongoing work alongside your own team, where priorities change weekly
• A hybrid fits most larger projects: a small fixed-price phase to answer the biggest unknown, then fixed-price phases for the rest

What to put in a fixed-price contract

• A one-page scope that names the deliverables and what is explicitly out of scope
• Acceptance criteria: how you will both agree a deliverable is done
• The change process: how new requests are priced and scheduled
• Who owns the code and when ownership transfers
• What is handed over: repository, deployment assets, documentation
• Payment schedule tied to milestones, not calendar months

Warning signs in either model

• A fixed price with a scope too vague to test against
• A T&M estimate with no cap or reporting on hours against plan
• A paid discovery phase before you know whether the vendor can help
• Code that stays in the vendor's repository until the final invoice

How ResoluteX prices sprints

ResoluteX Build Sprints are fixed-price. Scope is shaped in writing — usually within one business day — and the signed sprint plan is the binding number. A discounted $990 Pilot Week comes first, then a flat $1,500 per sprint week over 2–4 weeks. Payment is per sprint: a deposit to begin and the balance on delivery and handover. A missed item inside the agreed scope is ours to finish; a genuinely new request is priced and scheduled separately before anyone starts it.