Fixed Price

As the name itself implies, this is a Price based.This is the most mature of models. In this model, a fixed amount of money is guaranteed delivering a piece of work subject to mutually agreed scope.

Features

  • Fixed Price model demands that the scope of work, the milestones and the final deliverables are clearly defined and agreed between the parties.
  • Project requirements are very clearly defined at the start of the project.
  • Regular and periodic reviews and focus meetings.
  • Billing is done in phases or stages. A standard phased approach is as below as a guide only*:
  • 40% on project initiation
  • 20% User Acceptance Testing Initiation
  • 30% on completion of User Acceptance Testing (UAT)
  • 10% on production and go-live.
 

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 Pros

  • This is arguably the only model that will provide an accurate forecast of budgets. As it is a fixed price project, it will enable the client organization to get the best return on investment if the estimates have been drawn accurately. Strategic investments can be made into our own technology practices as well as into client relationship management.
 

 Cons

  • The fixed price model increases the responsibility on the part of the client to select the best-fit outsourcing provider. Inaccurate requirements, scope and estimates will result in change request, higher cost, delayed project implementation. The risk increases as the value of the project increases. The model is not flexible as changes midway will be subject to change control procedures, and more often a lot of management time is lost in such exercises.Change control procedures by itself should be well defined and documented prior to the award of the contract.
*only applies to custom web development project.

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