Fixed Cost Project
A fixed-value contract is a type of agreement in project management where payment is not dependent on resources or time spent. It involves setting a predetermined cost for the product, service, or outcome specified in the contract. One can have more visibility via flow chart :
Suitability of Fixed Cost Pricing Model:
- Ideal for projects with a well-defined scope and unchanging requirements.
- Any changes require additional estimation and a new contract.
- A clear definition of scope and technical requirements upfront is crucial when using this pricing model.
Advantages of Fixed-Value Contracts:
- Provides flexibility for clients to address errors during the initial stages.
- Project objectives can encompass delivery schedule, technical performance, and anything measurable by project managers.
Disadvantages of Fixed-Value Contracts:
- Change requests can disrupt the project's flow and order.
- Sometimes may lead to client dissatisfaction.
Fixed Cost Pricing Model:
- A fixed cost pricing model guarantees a set budget for the project, regardless of time and cost factors.
- It helps clients plan and establish an accurate budget.
