You need a web or software project, but you’re living in a world of unknowns. You’re not sure about how it will develop and what exact features will be necessary. If that’s the case, then a fixed priced contract is not the right choice. Billing on a time and material basis is.
In software development, rarely are all the features and functionality of an application known beforehand.
Even if you spend weeks on your RFP (Request For Proposal), you won’t include every necessary piece of information. For all the RFP’s we’ve received we’ve asked follow-up questions. Sometimes, the list of questions has been as long (or even longer) than the RFP itself.
Our billing strategy is evolving constantly, and over the past six years, we have found that the time and material method is the most flexible (and also ethical!) way of dealing with most projects. In contrast to a fixed price contract, you know exactly what you’re paying for.
With a fixed price project, any change in a feature set requires changing the order. Frequently, the price goes up.