What Is a Fixed-Price Contract?

A fixed-price contract is an agreement to purchase goods or services for a set price that cannot be adjusted after initial signing. However, in the world of business, most contracts include provisions for adjustments to be made depending on numerous factors. These include unexpected costs incurred upon by the supplier or fluctuations in delivery timeframes.

What is the opposite of a fixed-price contract?

The opposite of a fixed price contract is a contract that allows for adjustments to be made to the final price. When selling products or services, there will usually be a fixed element involved, like a ceiling price. When working on a commissioned project, you may instead use hourly billing. With hourly contracts, you’ll bill your clients based on the amount it costs your business to deliver the project in payroll.

What is the advantage of a fixed-price contract?

If you’re the party purchasing products or services, you won’t have to worry about price fluctuations that could cause your project to go over budget. If you’re the delivering party, on the other hand, you simply won’t need to provide proof of work for hourly billing. However, setting up work tracking with a high-quality time tracker is effortless and can eliminate this inconvenience.