As a professional Phoenix custom software design and development company we often take over custom software development projects after the relationship with a fixed-price software development company has turned sour. The fixed-price pricing model for software and web application development projects may sound attractive to a customer initially, but unfortunately, both parties will most likely suffer in the end.
A fixed-price contract happens when the customer is guaranteed a fixed price to complete certain tasks and/or provide specific variables. A fixed-price contract might also have a limit for expenses, in which case the customer cannot be billed for any amount over these limits. In any arrangement of this kind, the specifications must be complete and detailed and the contract must allow adjustments to the price for any variation to the agreed-upon specifications.
The only fixed-bid software projects that have a chance of success are those which cover additional time, in the event the software development company has underestimated how long it will take to complete the project. Estimating is often the hardest part of any software development project. Estimating a project’s timeline is never an exact science, especially for custom projects which may entail unexpected needs and wants on the part of the client, leading to “scope creep”; or unforeseen technical issues that are often out of the control of the software developer, leading to spending additional time to provide a “work-around”.
In business, it can be difficult to agree ahead of time on the scope of an entire project, and determining the specific details of the software requirements and performance criteria is no different. Similar to custom building a home, the unexpected and unforeseen will often occur in the middle of the process. While software design specifications and features may be decided upon in advance, building the actual product, taking into account the high degree of detail necessary, and leaving little room for interpretation is very costly and not always a good use of the client's resources and money.
At the end of the day, the most important consideration is the final product and its overall fit and performance. When considering a fixed-bid contract, whether client or developer, ensuring a quality end product is paramount.
For the client, fully understanding project needs and outcomes, and working with a trusted company can go a long way to ensuring a successful outcome. When working with a new developer, consider starting with a smaller project, a kind of test run to ensure compatibility before delivering a larger project – especially one that may entail a fixed-price agreement.
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