How the two contracts move risk
| Fixed price | Time and materials | |
|---|---|---|
| You pay | The agreed amount for the agreed scope | Time actually spent, plus materials |
| Who carries the cost risk | The vendor | You |
| Suits | Scope that is written down and agreed | Work whose extent cannot yet be estimated |
| What protects you | A detailed scope, a list of what is not included, priced changes | A ceiling price, regular reporting, the right to stop |
| Typical failure | The scope was vague, so every gap becomes a change request | No ceiling, so the budget follows the work |
What a neutral rulebook says
The US federal acquisition rules are not written for start-ups, but they are a useful neutral description of both contract types:
- A firm fixed price “provides for a price that is not subject to any adjustment on the basis of the contractor’s cost experience” and “places upon the contractor maximum risk and full responsibility for all costs and resulting profit or loss” (FAR 16.202-1).
- It suits work where “performance uncertainties can be identified and reasonable estimates of their cost impact can be made” (FAR 16.202-2).
- Time and materials “may be used only when it is not possible at the time of placing the contract to estimate accurately the extent or duration of the work”, must include “a ceiling price that the contractor exceeds at its own risk”, and “provides no positive profit incentive to the contractor for cost control or labor efficiency” (FAR 16.601).
Checked 5 October 2026.
When fixed price fits
- The specification is written down and you have agreed it
- What is not included is listed, not implied
- The assumptions behind the price are stated — users, platforms, integrations, who supplies content
- Changes are priced before you approve them
If those four are in place, a fixed price is the clearer deal for both sides.
When time and materials fits
- Diagnosing a problem nobody understands yet
- Research or a proof of concept where the answer decides the next step
- Ongoing maintenance with no fixed list of work
Ask for a ceiling, a regular report of time against it, and the right to stop.
The mismatch is where projects go wrong
A fixed price agreed before anyone has written the scope down is not really fixed: the gaps come back as change requests. Time and materials with no ceiling is not really flexible: it is an open budget. The protection under either contract is the same — a written scope, a written list of what is excluded, and stated assumptions.
How Pricient prices
The specification comes first. We never print certainty the specification does not have: where scope is firm, the price is fixed; where it is not, the quote says so in writing. Every quote comes in three tiers with blended totals, a Not in this release list, an assumptions register, QA and security in every tier, review by a person, and a 14-day price lock. Changes are priced before you approve them.