What does fixed price software development actually mean?
Short answer
Fixed price software development means you agree a written scope and one total price before work starts, and the price does not change if the work takes longer than the agency expected. The agency carries the risk of its own estimate. You carry the risk of the scope: anything not written down is not included.
By Kailesk Khumar, founder of HouseofMVPs. Last reviewed .
How it compares with the other models
| Model | What you pay for | Who carries the estimate risk | Best for |
|---|---|---|---|
| Fixed price | A defined result | The agency | A first version with a clear feature list |
| Time and materials | Hours worked | You | Open ended work where the scope is unknown |
| Retainer or dedicated team | Capacity per month | You | Continuous development on a live product |
What a real fixed price includes
- A scope document listing each feature and how it will be tested.
- An explicit list of what is out of scope.
- One total price and a delivery date.
- A payment schedule linked to delivery.
- A written process and price for changes.
How fixed price goes wrong
Fixed price fails when the scope is vague. If the document says user management, the agency and the client will each imagine a different feature, and the difference becomes an argument. The fix is precision: say that a user can sign up by email, reset a password and delete the account, and nothing else.
It also fails when it is used for research. If nobody knows whether the core technology works, nobody can price it. Run a small fixed price proof of concept first, then price the product.
How HouseofMVPs handles this
Every HouseofMVPs engagement is fixed price. The tiers are public: POC $3,999 in 7 days, MVP Validate $3,999 in 1 week, Launch $7,499 in 2 weeks, Scale from $14,999. If we misjudge the effort inside the signed scope, the overrun is ours. New ideas during the build become a written change quote that you approve first.
Get a written scope and fixed priceRelated questions
Is fixed price more expensive than hourly?
The quoted number can be higher because it includes the agency's risk. The final cost is often lower, because hourly projects tend to run past their estimates and you pay for every extra hour.
Can I change the scope in a fixed price project?
Yes, through a change request. The agency prices the change, you approve it in writing, and the price and date are adjusted. What you should not accept is changes being added to an invoice without your approval.
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