Much has been about the contract types, differences between them, and their pros and cons. XB Software advised on what contract type – Time & Materials (T&M) or Fixed Price (FP)- would better suit your project and thoroughly explained why in this article. Still, T&M and FP contacts don’t appeal to all clients, although they are the most common contract types. Sometimes a client needs help to embody the idea. One needs someone who’ll put the vision into working software and won’t exceed a specific budget.

In a nutshell, there are different options for how work is be arranged depending on the timeframe, budget, and scope.

Fixed Price Contract

A client comes with a formed idea, list of requirements, and project vision. On the project start, the client gets a detailed scope – a concept, including documents that contribute to the understanding of the final product, content, and results of the project. Under the FP, the deadline and the project cost are based on estimation and fixed. Change requests lead to the revision of the value and terms of the contract.

Time and Materials Contract

A client has got a common idea. By the start of the project requirements and scope are preliminarily defined. The scope of work is divided into milestones that are split into smaller tasks. We move forward to each objective, stage by stage performing tasks one by one. Detailed specifications are worked out on each step. It’s possible to make changes to the development process on the go. They usually appear after the customer’s requirements change and depend on the market, new coming challenges, deadlines, and other factors. The client participates in the development progress. Estimation and a deadline are preliminary without any obligation. The client pays for the time spent on the work.

Budget With Float Scope

It happens that a client has got a general idea of the future product and is limited to a specific budget. One wants to develop a product and stay within the budget. These initial conditions are typical of spin-offs, startups, or clients who should stick to the allocated budget framework. In such circumstances, the best option would be the Budget With Float Scope contract type. Let’s take a closer look at how it works.

A client comes with a product idea, describes it to the vendor, and voices the implementation budget one has got. The initial request goes into processing, and the scope with the main features and 2-3 mockups are prepared to visualize the future product for both parties to understand each other. Parties agree that the product will definitely fulfill essential business tasks, and the price will not go beyond the budget.

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During the implementation, detailed specifications are written for each feature (module) taking into account current wishes. If the client insists on additional functionality, or its implementation in a more complex and time-consuming way, or a change in existing or future functions, then the specialist warns a client about increasing the cost of the project. The decision is up to the client. Whether one wants to implement it now or puts off the implementation of the additional function until the project pays off and gives profit, or refuses to develop some other feature that was planned within the budget. This approach allows implementing the idea of the project within a set budget.

The product is launched into operation, and there is an opportunity for its positioning in the market and users’ feedback. With time, as the customer gets a profit from one’s product or understands the needs of users, it’s possible to improve the product and adds functionality to better serve the market. The implementation of secondary functions at once often is not critical on the path to success. Therefore, this type of contact is ideal for startups.


Time & Materials is ideal for projects with non-defined scope, flexible deadline, and budget. It gives maximum agility for development.

Fixed Price suites best to a formed idea, requirements, project vision, and timeframe.

Budget With Float Scope allows a client to develop a product that fulfills essential business tasks, and the price is guaranteed within the budget. It’s the client who voices the budget, and it’s the vendor who puts the necessary features into the budget. Parties agree that the price won’t be exceeded if there will be no additional functionality requests from the client.