Time and material or fixed price, which cooperation model is better?

Time and material or fixed price, which cooperation model is better?
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AutorDaniel ParzychLipiec, 2022

The success of a project depends on the quality of cooperation with the team. A well-chosen cooperation model can not only successfully bring a project to completion, but also save it in case of unexpected problems. Market reality has contributed to the emergence of two models of cooperation between the service provider and the client. 

Time and material or fixed price, which cooperation model is better?

Why is the cooperation model so important for a project?

Working with the team implementing the outsourced project takes place in a completely different way depending on the chosen cooperation model. We are not just talking about communication and billing, but also about:

  • planning the work of the team,
  • the way functions and scopes are carried out,
  • influencing changes in the project.

Before starting work, think about the purpose of the project and ask yourself…

What is the priority of the project?

Consider what aspect of your project defines its success. Also think about those elements of your idea that have no right to change. This will make it easier for you to choose a cooperation model.

Fixed price model

If the budget of your project is predetermined and impossible to exceed, the only way out of the situation will be to freeze the price at the beginning of the arrangements. 

The Fixed Price model will provide you with such an opportunity.

A detailed description of the project and documented scope and functionality will be necessary. The initial stage of implementation is extremely important in this case, as the entire project depends on it.

It is a good idea to participate in design workshops. During them you will create an accurate vision of the project and its detailed documentation. The work done during the workshop will allow you to more accurately determine the price for implementation. What's more, with a design workshop you will minimize the risk of unexpected situations during implementation.

What if the pricing exceeds your financial capabilities? Then develop an MVP. The application in a minimum usable version will allow you to realize the project in its basic scope. This will also open up the possibility of developing the project in the future.

Fixed scope

The success of your project depends on creating a certain functionality? Sometimes the success criteria of a project is a list of must-have features for an application. That's when good documentation that indicates the scope of implementation in the project comes in handy.

For products with a functional scope defined in advance, both models of cooperation will work. Ultimately, you will get an application with the features you care about. Consider whether there is a risk of changes during application development. If such a situation is likely, it is better to opt for cooperation in the Time and Material model.

Fixed time

It is common that your project needs to be built by a certain deadline. Such a situation requires quick action, well-prepared project documentation, and a smooth cooperation model.

Creating a project within a certain time frame combines perfectly with the Time and Material model. This will give you flexibility:

  • making changes,
  • managing the size of the team,
  • changing the workload.

Differences in cooperation models

The final result you want is a successful application. However, the creation and development process can be accomplished in different ways. By knowing the available options, you will make the right decision.

Fixed Price

Once the design workshop has been completed, you already have the functional and technical scope in the form of documents, it's time for pricing. In the Fixed Price model, you agree in advance on a certain rate for the completion of the entire development work.

Such a model of cooperation is convenient because you know in advance the cost of developing the application. The only thing you should do is to stay in touch with the team during the course of the work and pick up the finished project.

However, the choice of this cooperation model has limitations. The quotation covers a specific scope of work. Very limited are the possibilities to interfere with the project during its production. To change the scope or add features, you need to stop the process and re-price.

Time and Material

This is definitely a more flexible model of working with a contractor. It allows you to make changes at almost any stage of the process. Here, the project documentation is the reference point that sets the pace and direction for all work.

This model requires you to be more involved in the emergence of the project. You will need to communicate regularly with your team and establish the next steps. 

In the Time and Material model, you agree with the contractor on:

  • Time - i.e. the rate for the specialists' time,
  • Material - that is, for example, the cost of additional licenses.

Flexibility of interference in the project is the biggest advantage of this model of cooperation. However, pay regular attention to the costs, because at the end you may find that your budget has been exceeded.

Time and material vs. fixed price

Determining the single best model for working with a contractor is difficult. However, you can determine the best model for your project. A thoughtful decision can determine the final shape of your project.

 

 

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