Fixed Price vs. Time & Materials: The Right Contract Type for Your IT Project. A Miniguide

Are you looking to work with a software house? Learn the specifics of the most popular contract types: transparent and flexible Time & Materials vs. Fixed Price—a variant that works well in small IT projects with strictly defined requirements, budget, and deadline. We help you make an informed decision and choose a solution not only tailored to your needs and capabilities but above all the one that’s the most cost-effective.

After reading our miniguide, you will know:

  • How the Fixed Price and Time & Materials models work
  • What are the benefits and risks resulting from them
  • When it is best to use each variant

What Does “Fixed Price” Mean?

In the Fixed Price model, you know the total cost of the project before signing the contract. The price is usually set on the basis of predetermined requirements and the work schedule. Thanks to this, you can plan the course of all works step by step and calculate the amount of time needed to complete the project. 

In this model, you know exactly how much you will pay for the completed project and can include the specific amount in your calculations. If you have a small project, or part of a project, to implement with strictly defined expectations as to the features and appearance of the software, and the budget and deadline for its launch are fixed, then setting a “fixed price” may be a good idea.

Fixed Price—Pros and Cons

The advantage of Fixed Price is predictability because in this model you know the budget and scope of work in advance. Thanks to this, there is a limited risk that unforeseen changes will be required during the project implementation. You receive a finished product and save time that you would have to spend on participating in the team’s work.

Cons? Every responsible software house will present a price slightly exceeding the expected costs of the project. Why? The contractor must take into account a safety margin to avoid a reduction in product quality in the event of unforeseen complications and to ensure that a solution that meets the customer’s needs is provided. So the price, although known in advance, does not have to be the best for you.

Having to specify all design requirements at the very beginning may also be a disadvantage. To estimate the cost of the project before it starts, a meticulous specification is usually drawn up. Performing such a detailed analysis is time-consuming. In addition, the execution time may be affected by how efficiently you provide contractors with the necessary access or answers to follow-up questions.

It may also be that already during the implementation it will be necessary to introduce changes that were not included in the initial assumptions. Adding more features and changes means modifying the specification and, as a result, increasing the total cost. When it turns out that the price of the project significantly exceeds the assumed budget, it may be necessary to reduce the scope at the expense of significant changes. All this can unfortunately lead to a reduction in the final quality of the product or service.

Pros of Fixed Price:

  • Predictability—you know the total cost in advance
  • Easy management—you receive finished and complete product
  • Limited risk of unforeseen changes
  • Only the minimum commitment on the client’s part after the start of the project

Cons of Fixed Price:

  • Lack of flexibility
  • The need to provide the software house with exhaustive requirements
  • The time-consuming analysis required to be performed upfront by the software house
  • Extra costs generated by complications not included in the requirements or incorrect selection of the contract type

Time & Materials—What is it About?

In the Time & Materials model you pay only for the work actually performed and the resources used (e.g. the costs of the necessary licenses, expert consultations in the area of ​​software accessibility for people with disabilities, time devoted to training your team on the use of the newly created system, etc.). 

Time & Materials is most often used for demanding and complex projects where it is difficult to determine the exact size and scope of work. This model assumes cooperation based on an hourly or daily rate and incurred expenses of external services and tools. Final calculations made at the end of the contractual period are usually based on a time report.

Time & Materials—Pros and Cons

The main advantages of the Time & Materials model are flexibility and cost-effectiveness. During the implementation, the product being developed is systematically presented to you, thanks to which you can verify the progress of the software house’s work and make corrections to the project on an ongoing basis, without having to renegotiate the terms of the contract. Such action enables free control of the budget and efficient implementation of particular stages of the project, and thus—savings. 

Equally important, with swift approval of subsequent stages of the project, it can be completed ahead of the assumed finished date. Such a model will be more beneficial for you if you do not have specific project requirements or you anticipate that the initial assumptions may dynamically change during the development of the product.

Lower costs and the ability to make changes if necessary are the undoubted advantages of the Time & Materials model over Fixed Price. Can something go wrong with the Time & Materials model? Due to the greater freedom, this model is conducive to introducing too many changes, which may result in exceeding the deadline and budget expected at the beginning. It also requires involvement in the project’s execution, which can be time–consuming. In order for the Time & Materials model to be profitable, the participation of a competent person who will supervise the budget and the work of the software house is often needed.

Pros of Time & Materials:

  • Savings and costs transparency
  • The ability to monitor progress on an ongoing basis
  • Flexibility
  • Ability to react quickly

Cons of Time & Materials:

  • Time-consuming involvement on the client’s part
  • Supervision of a competent person over the work of the IT team on a daily basis
  • The risk of losing control over expenses and exceeding financial assumptions

What to Choose? Summary

The effectiveness of both models—Time & Materials and Fixed Price—depends on the nature of the project and the resources at your disposal. When you decide on a specific solution, take into account factors, such as business conditions, project specifics, internal resources of your company, and the conditions offered by a specific software house.

The Fixed Price model is worth using when your project has a deadline and a clearly defined end result. It will work well when you are able to work out a schedule and scope of work to be performed at the very beginning, and you cooperate with an experienced software house that is able to prepare a clear and fair estimation.

The Time & Materials model will work well when you are planning a non-standard, long-term project, which additionally does not have a clearly defined scope of work or completion date. Time & Materials is a good choice when you expect to introduce changes during the project and you care about a flexible approach and a quick start of the work, without lengthy arrangements and negotiations. In this case, it is worth having a competent person on your team who will communicate with the contractor on a regular basis.

Finally, the most important thing: sometimes you do not have to choose between the Time & Materials and Fixed Price models. You can try to combine both options: build the basic product in the Fixed Price model and then continue developing it using Time & Materials. 

Do you need help choosing a contract type? Call +48 22 120 17 00 and tell us about your project.

#SidnetDonations: Bartek for freeCodeCamp and the Pociecha Foundation

Bartek Tkacz has been successfully ensuring the quality of the solutions we create for over a year—initially, he performed manual tests and currently, he also includes automated tests using the Postman and Cypress platform. Being enthusiastic about his work he shows interest in new and more effective testing methods.

Knowing Bartek’s approach to learning, the choice of projects we support this month seems natural. Both February donations share a common thought: comprehensive support in learning and personal development.


An open-source interactive online learning platform powered by an engaged community from over 160 countries. The organization behind the platform offers free, practical, and theoretical courses, primarily to junior programmers. This form of learning, based on real projects, allows one to expand their portfolio and after passing tests also obtain appropriate certificates.

“This platform has contributed to my start in the IT industry and I know that some of my colleagues also use it. The courses are of high quality, completely free, and make it easy for people from all over the world to start their adventure in the IT world,” Bartek says.

The Pociecha Foundation

A non-profit foundation focusing its activities around community centers that provide children from poor and educationally inefficient families with professional care.

The community centers supported by the foundation are located in the children’s neighborhood. There, they can eat a hot meal after school, and receive learning support as well as space and tools to develop their passions. The institution also organizes summer and winter trips for children and provides school supplies and Christmas gifts.

“The activities of the foundation aim to counteract social pathologies by giving children a sense of security and a chance for better development. Every child deserves it!” emphasizes Bartek.

Do you like building LEGO? Maybe programming is just for you!

Are you thinking about a career change but you don’t know which way to go yet? The easiest way to start is to look for a path that more or less relates to your interests. If you have always enjoyed building LEGO, chances are you already have the right mindset to become a programmer.

The Danish bricks are a simple tool that helps to improve the key competences desired by future programmers.

LEGO almost unconsciously:

  • develops a creative approach because you can create different constructions from the same bricks based on the instructions or your own imagination. Such thinking promotes solving problems in non-obvious ways.
  • stimulates strategic thinking because the bricks must be properly selected and combined and at the end perform specific functions.
  • arouses curiosity and engages for long hours while practicing concentration and patience.
  • teaches determination, testing various solutions, enduring failures and … starting from scratch.
  • practices teamwork and clear communication skills when building in a group.

Having these attributes and skills make the work of a programmer much easier because writing code is also a creative activity favored by outside-the-box thinking. Logical reasoning and readiness to persistently search for optimal solutions also help in software development. Self-reliance as well as efficient teamwork are qualities appreciated and desired in the IT industry.

If you see this potential in yourself maybe it’s worth trying your way as a programmer?

photo by Marcin Tabaka

#SidnetDonations: Damian for Manjaro Linux and The Great Orchestra of Christmas Charity Foundation

Opposites attract in January, which marks both the saddest and one of the merriest days of the year. Blue Monday is considered the most dismal day out of 365. However, that gloomy mood fades away as the Great Orchestra of Christmas Charity enters the stage with its joyful Grand Finale. It is a national charity event, and with our developer Damian Bełza we have decided to support it as a part of #SidnetDonations. The second beneficiary, by Damain’s choice, is the open-source project Manjaro Linux.

Manjaro Linux

Manjaro is an alternative operating system based on Linux. The users value it for prioritizing privacy issues, no licensing fees, and no hidden ads.
The compatibility is also a great asset of Manjaro. It performs well in professional and home environments and on each device regardless the age – desktop computer, laptop, tablet, and smartphone.

Damian, who specializes in PHP, Perl, and JavaScript, appreciates Manjaro for the same reasons. “The system is based on the Arch distribution and uses the Pacman package manager that ensures basic compatibility. The unofficial Arch User Repository (AUR) is also accessible, which expands the availability of the software.”

Manjaro receives bonus points from Damian for its stability, speed, and reliability, thanks to which day-to-day work with the system is a breeze.

The Great Orchestra of Christmas Charity Foundation

The Great Orchestra of Christmas Charity Foundation plays the loudest on one day in January. But in reality, it performs all year round, collecting funds to purchase modern equipment for Polish hospitals and medical facilities.

Besides its regular scope of operation, the Foundation provides support during emergencies, too. “We could count on it during the covid pandemic. Also, Ukraine received massive help during the unnecessary, bloody war”, sums up Damian. 

The Foundation operates effectively, and for this reason, the Poles subside it generously. “In 2020, the estimation was that one in every five pieces of medical equipment found in Polish hospitals was delivered by the Orchestra. Such equipment even saved the life of my family member”, says our developer

With Damian, we join the Orchestra’s 31st Grand Finale. For details on how to support the fundraiser, please visit

#SidnetDonations: Jakub for ESLint and Ukraine (via Polish Center for National Aid)

Christmas time makes us more compassionate and willing to share and care for others. In Sidnet, we grew this custom of regularly helping people in need and supporting open-source projects. We are happy to see our workmates being part of this unique tradition every month. December is no exception here, and together with Jakub Wysocki, our Full-Stack Developer, we will contribute to the ESLint project and a fundraiser for Ukraine.


ESLint is a static code analysis tool that fixes various programming or syntax errors in JavaScript and JSX code in the early stage of development work. However, its usability goes beyond the standard features of similar software. Hence, this handy plugin quickly became a toolbox staple of our Full-Stack Developer.

The rules in ESLint are easy to configure, and custom ones can be defined and loaded from external sources. ESLint supports current ECMAScript standards and experimental syntax for future releases,” says Jakub.

ESLint is an open-source project. The maintenance and development of the tool depend mainly on the community and contributors. Along with Jakub, we join the crowd to support ESLint in the December issue of the #SidnetDonations initiative.

Fundraiser for Ukraine via Polish Center for National Aid

For the seventh time this year, we donate to a humanitarian organization that helps Ukrainians suffering from the war. It is the Polish Center for National Aid and its fundraiser for Ukraine, which we are joining in December.

Winter is a challenging season. For that reason, the Ukrainian troops and citizens will need consistent support during that time. Also, having Ukrainian workmates on the team makes our engagement personal and natural,” Jakub explains his choice.

The funds raised by the organization will be spent on medical equipment and supplies for Ukrainian hospitals, humanitarian aid in the warzone, and education and support for children who took refuge in Poland from the war.

#SidnetDonations: Patryk for Thunderbird and National Fund for the Homelessness Prevention of Cats and Dogs

The common theme of our monthly charity action is animals – cats, dogs, and … Thunderbird. While dogs and cats accompany us in real life, Thunderbird is a legendary bird from American folklore that has become the logo of a popular mail client. The initiatives we will be happy to support this month were chosen by Patryk Urbański, a React Frontend Developer in our team.


Presumably, there is no single person in the IT world, who hasn’t heard of Thunderbird. It is a popular, free email and calendaring client known for its performance and high customizability for every work style and manner.  Thunderbird prioritizes users’ security, hence the number of built-in features, such as support for the ‘Do Not Track’ header, spam and remote content blocking, and phishing protection. 

Our developers, including Patryk, value this email client. “I use Thunderbird every day, and I appreciate how it boosts my work. That is why I would like to support it to keep it free and available to everyone”.

Like many other open-source projects, Thunderbirds remains independent and grows thanks to its users, who support it with know-how and donations.  

Rasowy Kundel Foundation fundraiser for the National Fund for the Homelessness Prevention of Cats and Dogs

Homelessness among dogs and cats is a huge problem caused mainly by pet owners’ irresponsibility and lack of knowledge. Rasowy Kundel Foundation, which can be translated as Pedigree Mutt Foundation, aims to prevent pet homelessness by raising funds for the second time on behalf ofthe National Fund for the Homelessness Prevention of Cats and Dogs. 

“This fundraiser helps prevent the suffering and misery of polish stray cats and dogs. Each day brings new fundraisers for all the abandoned and hurt animals.  The Fund aims to avert pet homelessness, including education, instead of just fixing the damage.” sums up Patryk.

The goal of the fundraiser is to collect one million zlotys. It will cover the costs of neutering and microchip implants for 2500 pets. The collected money will also support an educational program on pet homelessness, its causes, and prevention.