Definition
A fixed-price contract sets one total price for a defined scope of work, regardless of how many hours or how much material it actually takes. The client gets cost certainty and the provider carries the risk of overruns. Fixed prices are common for websites, design projects, and construction jobs with clear plans.
Also called: Fixed fee, Flat fee, Lump sum contract, Project-based pricing
Fixed-price contract in practice
The scope of work is what makes a fixed price workable. List the deliverables, the number of revisions, what the client must supply, and what is excluded. Anything outside that scope is billed through a change order.
Fixed-price projects are usually invoiced in stages, such as a deposit at signing, payments at milestones, and a final invoice on completion, so the provider is not funding the whole project.
Track your hours even on fixed-price work. Comparing time spent with the fee shows your effective hourly rate and improves future quotes.
Example
A designer agrees a fixed price of $4,800 for a brand identity: 40 percent deposit, 30 percent on concept approval, and 30 percent on final files.
Frequently Asked Questions
What if a fixed-price project takes longer than expected?
If the scope did not change, the provider usually absorbs the extra time. If the client added or changed work, document it in a change order and bill it separately.
Should a fixed-price invoice show hours?
Not usually. Show the project or milestone and the agreed fee. Listing hours can invite the client to question the price, which was agreed for the result, not the time.
Related terms
- Scope of work A scope of work is a written description of exactly what a project includes: the deliverables, tasks, timeline, assumptions, and exclusions.
- Change order A change order is a documented agreement to modify the original scope of work, including the effect on price and timeline.
- Milestone payment A milestone payment is a payment that becomes due when a defined stage of a project is completed, such as design approval, a prototype delivery, or launch.
- Time and materials Time and materials (T&M) is a pricing arrangement in which the client pays for the actual hours worked at agreed rates plus the actual cost of materials, often with a markup.
- Deposit A deposit is a partial payment made before work begins or goods are delivered, typically 25 to 50 percent of the total.
This page is for general information only and is not legal, tax, or financial advice. Rules change and vary by location, so consult a qualified lawyer or accountant about your situation.