A fixed cost pricing model is a model that guarantees a fixed budget for the project, regardless of the time and expense. The main advantage of a fixed price model is that it allows the client to plan and set an exact budget. Fixed cost pricing model approach is best suitable for projects with a strictly defined scope and requirements that won’t change. Any changes will require additional estimation and additional contract. So, one of the main requirements of using the fixed cost pricing model is to precisely define the scope and technical requirements up front.
- Precise and transparent requirements, and well-planned milestones
- Minimum customer supervision is required
- The price fixed project will be completed within established budget and terms
- Low risk for clients, that’s why a fixed price model works best for a small trial projects
Every aspect of the development process, project management, quality monitoring and assurance are on the service provider.
The pitfall of a fixed price contract is that if underestimated, the vendor may start managing costs and cut down expenses severely, which ultimately results in a poor-quality work.
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