Quick Summary
- Fixed price feels safe but often hides risk.
- Time & material looks risky but usually reduces total cost.
- Contracts don’t control cost. Decisions do.
- The wrong model creates friction, not certainty.
- Most overruns come from scope ambiguity, not bad faith.
Why Founders Keep Asking This Question
Early in a project, almost every founder asks:
“Should we do fixed price or time & material?”
What they usually mean is:
“How do I avoid surprises and stay within budget?”
The uncomfortable truth is that software is full of unknowns, especially early.
No contract removes that uncertainty. Some contracts just hide it better.
Why Fixed Price Feels Like the Safe Choice
Fixed price promises:
- a clear number
- a defined scope
- a sense of control
For founders watching burn rate, this feels responsible.
It also feels like risk management.
The problem is that software scope is rarely fully known up front.
What Fixed Price Actually Optimizes For
Fixed price doesn’t remove uncertainty.
It relocates it.
To protect themselves, vendors will:
- pad estimates
- freeze scope aggressively
- resist change
- prioritize contract compliance over product quality
This isn’t incompetence or malice.
It’s rational behavior under a rigid contract.
The contract rewards defensiveness, not learning.
The Hidden Costs of Fixed Price
Change Becomes a Negotiation
In fixed price projects:
- small insights trigger change requests
- learning slows down
- teams avoid improving ideas
Ironically, the moment you learn something important is when change becomes expensive.
Quality Is Traded Quietly
As deadlines approach:
- testing is reduced
- edge cases are ignored
- technical debt accumulates
The product “works,” but becomes fragile.
You don’t pay this cost immediately.
You pay it later, in maintenance and rewrites.
When Fixed Price Actually Works
Fixed price can be the right model when:
- scope is frozen
- integrations are known
- requirements are stable
- risk is low
- learning is not the primary goal
This is rare for:
- MVPs
- early-stage startups
- new products
- untested ideas
If discovery is still happening, fixed price usually backfires.
Unsure whether your project is stable enough for fixed price?
Talk to an engineer before signing
Why Time & Material Gets a Bad Reputation
Time & material makes founders nervous because:
- budgets feel open-ended
- risk feels undefined
- trust is required
But most of these fears come from poor execution, not the model itself.
What Time & Material Actually Optimizes For
A healthy time & material setup rewards:
- transparency
- fast feedback
- better decisions
- adaptability
When done right:
- progress is visible weekly
- priorities can change safely
- learning reduces waste
You pay for what you learn, not just what you planned.
Want to see how a transparent build process actually works?
Schedule a call with Bear
The Real Cost Driver Isn’t the Contract
In practice, total cost is driven by:
- unclear requirements
- slow decisions
- too many stakeholders
- untested assumptions
No pricing model fixes these.
Teams that communicate well spend less under any contract.
A Side-by-Side Reality Check
Fixed Price Tends To:
- delay feedback
- discourage experimentation
- lock bad decisions in place
- create vendor–client tension
Time & Material Tends To:
- surface issues early
- encourage collaboration
- adapt to new information
- produce more resilient software
The difference isn’t accounting.
It’s behavior.
The Most Expensive Scenario of All
The worst outcome is not choosing the “wrong” model.
It’s:
- choosing fixed price
- discovering the scope was wrong
- forcing the project forward anyway
- rebuilding later
This is how teams pay twice for the same idea.
How We Run Time & Material at Bear
To keep budgets honest, we focus on:
- short planning cycles
- weekly demos of real software
- explicit priorities
- clear “out of scope” lists
- regular cost checkpoints
This keeps uncertainty visible instead of buried.
Curious how this looks in practice?
Book a strategy session
A Practical Decision Checklist
Before choosing a contract model, ask:
- Do we truly understand the problem?
- Are requirements likely to change?
- How expensive is a wrong decision?
- How fast do we need to learn?
- Who owns prioritization?
If learning matters, flexibility matters.
Final Take (Bear Version)
Founders don’t lose money because they choose time & material.
They lose money because they try to lock certainty into uncertainty.
The safest contract is not the most rigid one.
It’s the one that lets you adapt before mistakes become expensive.
Want an honest recommendation based on your project—not a sales pitch?
Schedule a call with Bear