When looking for a partner for a web development project, you may get different kinds of proposals. Most frequently these proposals fall into two categories: fixed price or time and materials. Choosing the right model for your next project can be tricky – as it often depends on your goals and your organization’s day-to-day operating procedures. What are the main differences between these two pricing models, and how do you know which is the right fit for your project?
A fixed price model is a lump-sum agreement that establishes the scope and deliverables for the project before the engagement starts. This pricing model may be a good choice for organizations with very clear requirements and strict or limited budgets who don’t require much flexibility.
While the fixed price model provides transparency and is easy to manage, it may not always yield the best possible result. Building something EXACTLY like it was initially planned is usually not the best course of action. Through the course of your project, you should learn more about what your users actually want/need or get data reinforcing what is or isn’t working on your site. If you’re fixed scope, you’re stuck unless you find additional budget for pesky change orders. Also, entering into the project with a fixed scope limits the development team’s ability to suggest modifications and enhancements to the plan that could be highly beneficial. Placing this limitation on the team decreases the value you’ll get from their experience and expertise.
Time and Materials
Unlike a fixed price model, a time and materials contract is not billed by scope or requirements, but by purchasing periods of time. Buying time allows you to apply new information and ideas and adapt them in the best interest of your organization and the project’s success. A time and materials model is extremely valuable for long-term projects with dynamic requirements. You’re not beholden to an idea or feature discussed before you had a real understanding of the project or your users, and you can continue working until the project is complete in its best form. But, you’ll need to have a flexible budget (or at least some extra room in the budget), because the cost could exceed initial expectations.
Our Preferred Hybrid Approach: Fixed Time, Fixed Cost, Flexible Scope
At 352, our development projects follow a hybrid approach. At the beginning of a project, we agree to a set amount of time (typically a number of weeks) and a set cost for that amount of time. But, instead of locking down scope and features early on, you’ll be matched with a development team devoted to your project and your project alone. Together, you will use a flexible agile framework to drive towards accomplishing your project’s goals. Using scrum and agile methodologies, you and your team will develop ideas for new features and solutions throughout the project, rather than all upfront. Unlike with a fixed price project, features can be added or changed as you get user feedback or analyze user behaviors. In order to maintain the fixed time and fixed cost, as new concepts and features are introduced, other features will have to be deprioritized and not get completed in the project build. Scope therefore becomes the variable instead of time or cost.
Before choosing an agency or development team for your next project, weigh your options and assess how each proposal fits your specific needs. Building a digital product or website that delivers ultimate value to both your users and your business can be a difficult process – but choosing the right framework will set you on the best path.