Fixed price or time & material

Payment Models

Depending on project requirements, specifications, available resources, and timeframes, we offer 2 payment models: fixed-price, and time & materials.

  • A fixed-price contract is a lump sum agreement whereby we commit to implement a specific project before a set deadline and within a budget agreed-upon in advance.
  • A time and materials (T&M) agreement is completely different from a fixed-price contract in that customers are charged per hour worked and pay for all the necessary materials.

Fixed price model highlights


Fixed price model highlights

The advantages of the fixed-price model include a defined Budget, project predictability, strict deadlines, and no additional fees. However, in the real world, when it comes to software projects, these advantages should be taken with a pinch of salt.
Clients often expect to know exactly what they're paying for and how much. Based on available data, however, it's hardly ever possible to give an accurate estimate for any individual project. The fixed-price model leaves no breathing room for adjustments or improvements that fall outside of the predetermined scope of the project. If you're not prepared for unforeseen contingencies, this could lead to a domino effect with negative consequences for your business.
The expectation is that there will be no surprises with regards to extra costs or extended deadlines. The problem with that is the enormous difficulty of drawing up specifications that are detailed enough for each side to be fully informed about each nuance of the process. And this is especially true for large-scale projects. To make matters worse, changing the scope of a project that's already underway may not always be possible, resulting in products that fail to meet clients' expectations.
Contrary to the expectation that projects implemented on the basis of the fixed-price model are cheaper, the price actually includes a variety of the most likely contingencies. In the end, this makes the price much higher than the number obtained by simply multiplying the estimated project duration by the hourly rate.
It's a common belief that the fixed-price model saves time for the client because project management is taken over by the contractor. In reality, however, project success depends on the level of cooperation between us and the client. Closer cooperation makes it easier to address problems, which is precluded by the standard fixed-price model. The level of the client's involvement is defined by our approach, rather than the pricing model.
Having a fixed budget means that when the unexpected happens, we might need to reduce attention from other aspects of the project to meet our contractual obligations. In most cases, this means quality control is relaxed because it takes a lot of work to ensure compliance with the highest standards.
Fixed-price projects have to be thoroughly examined before commencing the actual work. Depending on the complexity of the project, it may take a substantial amount of time before both parties agree that all scenarios have been accounted for. Once implementation of the project has begun, the end result will most likely become apparent only after the deadline.
Time-and-Materials model

T&M model highlights

The T&M model is completely different from the fixed-price model. Software development is quite a bit different from building a house, especially if the respective solutions are custom built.
Most projects are flexible and adaptive, and deadlines are typically negotiable. For this reason, there's usually no need to add any additional layers of safety to account for any unforeseen adjustments to the price. This means that we're able to work efficiently, focus on quality and bill only for the work that's actually been done.
As mentioned before, unless your project is very small in scale, requirements are likely to change, making it next to impossible to predict all the corner cases that may come up over the lengthy period of development. Instead, we take change as a given and thereby render the project somewhat predictable.
Prior to commencing the implementation of a project, we first establish who will bear responsibility for tracking progress and monitoring the budget – Toughlex or the client. We work very hard to ensure that clients who prefer to take charge of the entire process from start to finish have all the necessary tools for doing so. At Toughlex, development is never performed as a black-box mystery.
Rest assured, the client's involvement is not a prerequisite when it comes to pricing model. Depending on the client's wishes, we can manage the entire project ourselves, leave it to the client, or reach some other type of agreement.
We work hard to ensure that we are able to meet the project requirements that have been clearly specified in advance without affecting quality in a negative way. Clients are free to decide whether they want to increase quality following a specific MVP stage or reduce it in order to speed up the completion of less important features.

Choosing the right pricing model

As we have already highlighted the advantages and disadvantages of both pricing models, you will find a short checklist below to assist you before choosing the best model for your unique project:
Choose the fixed-price model if
  • You have a small project with a limited set of requirements.
  • You're running a tight schedule.
Choose the time & materials if
  • You have a complex project.
  • Fast Time to Market is a priority.
  • Your project requires flexibility.
  • You have a long-term project.

Related approaches

You want to be involved in the process of developing a solution from start to finish. You expect us to contribute not only the development itself, but also insights, ideas, and project management or business development services.
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Get in touch and let us help you find the right pricing model for your business