What is a Fixed-Price Contract?


A fixed-price contract is a contract where the agreed-upon price for the job is unchanged throughout the project. It doesn’t matter if more time, materials or labor must be used than first estimated, the price stays the same.

Therefore, the scope of work developed by C&C Global, Inc with Clients must be very accurate. Once the final estimate is determined, it is shared with the Client. If the customer agrees with the price for the work, it is cemented as final and no change in man-hours or cost of materials can be considered.

The fixed-price contract will have similar components to any contract that outlines the work and payment. In general, expect a fixed-price contract to include the following basic elements: contracting parties, scope of work, milestones and due dates, payment terms and timelines, accurate description of deliverables. 

A price-fixed contract is one of several different types of contracts, and as in any contract used for an agreement between parties, there are pros and cons. Before making a decision on which to use, think about these advantages and disadvantages of a fixed-price contract:

  • They’re easy to understand, as the cost of the project is clearly stated and will not change. This helps customer and contractor alike. The former knows how much the project will cost, and the latter knows how much they can spend. Since everything is understood, there are likely fewer disagreements.
  • There can still be changes made during the execution of the project, which will take time and could be costly. These changes usually are the result of unseen circumstances, but they still add an extra step which isn’t covered in the contract.
  • Market prices change, and that can impact the project for good and ill. Supplies can become scarce or expensive. Of course, they can also go lower. Then there’s the usual risk when starting any project. 
Source: Project Manager

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