Fixed price vs. hourly web sites

A company that can’t manage a fixed price contract profitably will not succeed on an hourly billing system either. Instead of losing money, they will lose clients.

Clients need to know how much they will pay for a product or service, how long it will take to do the work, and they should be protected from mismanagement, mistakes, and scope creep - whether they caused them or not. A fixed price contract must be clearly detailed for both the provider and recipient, and then both parties must adhere to the agreement. It is much more difficult to ensure a project with hourly billing actually delivers what was sold, because the provider’s goal is to get paid for work - whether it is in the customer’s best interest or not.

This isn’t to say the providers are exclusively self-serving, but that they need to pay for the work done. If a client calls with a request that really should not be granted - the provider is likely to say ‘it is their money’. On a fixed price contract, a good provider will probably say, ‘that’s outside of the scope, it will cost extra’. The same is true for time - if a task exceeds the time allocated, but the client is still paying, the provider may continue to pursue it, although the deadline may slip.

If the client doesn’t understand the requirements well enough, they should clarify them or a subset, to allow a manageable project.

Maintenance is well-suited for hourly contracts, retainers or allowances, which allow the client to purchase enough service to address their needs, and then pay hourly for additional work.

The point is: if you have a well-defined set of requirements, and a company refuses to offer you a fixed-price contract, you should definitely talk to more companies.

An hourly contract is a financial vehicle that says, “we can do it, just give us money,” but doesn’t agree to ever finish it.