Is Fixed-Price Really Safer? Why Time and Materials Could Be the Smarter Bet for Software Development Projects

When kicking off a custom software development project, one of the most important decisions you’ll make with your technology partner is how the work will be billed. Many new clients come to us assuming that a fixed-cost contract is the safest way to protect their investment, but we’re here to tell you that’s not always the case.

Throughout our 25 years in business, we’ve worked under a variety of billing models. And while fixed-price contracts may offer the allure of a predictable cost, we’ve found that time and materials (T&M) consistently delivers more value, greater flexibility, and better outcomes in the long run.

In this post, we’ll explore why time and materials contracts are well-suited for software development, especially in complex or evolving projects.

1. Software Is Inherently Iterative

Building custom software isn’t like ordering off a menu, it’s more like designing a tailored suit. You may start with a vision, but as ideas evolve, users give feedback, and technical constraints come into play, the shape of the project often changes (and that’s a good thing!). A T&M contract supports this natural iteration. With T&M, you’re not locked into a rigid spec. You can pivot as needed, refine priorities, or incorporate new user insights without renegotiating the entire contract.

2. Faster Start, Less Red Tape

Fixed-price contracts often require weeks (sometimes months) of detailed scoping before work even begins. Every feature needs to be well-documented and estimated up front, and when that’s done, you’re locked in. Forget something? You’ll need to renegotiate the entire contract or live without it. In contrast, T&M allows the team to start solving problems right away. You still estimate and prioritize work, but without the pressure to predict every little detail upfront. This accelerates time-to-value and keeps momentum strong.

3. Transparency and Trust

A well-run T&M project includes regular check-ins, reporting, and budget updates. This transparency helps build trust and keeps everyone aligned on progress and priorities.

With fixed-price, there’s often a temptation for vendors to cut corners, limit scope, or charge for change orders when things shift. T&M fosters a more collaborative, honest working relationship focused on delivering real value.

4. More Flexibility to Prioritize Value

In software development, not all features are created equal. T&M allows you to invest more time in what matters most, and spend less on what doesn’t. As the project unfolds, you can reallocate the budget toward high-priority features, adjust timelines based on what’s working, or deprioritize lower impact ideas. This leads to smarter decisions and better ROI.

5. Shared Risk and Realistic Expectations

With T&M, both the client and development team share responsibility for keeping the project on track. You have a say in how time is being spent and what’s being prioritized. It also creates space for the team to raise concerns early if requirements shift or risks arise.

Fixed-price often creates a false sense of certainty, and when things go sideways, the cost can be scope creep, delays, or strained relationships. T&M acknowledges the complexity up front and focuses on collaboration over rigid guarantees.

What to Expect When You Choose Big Room

During the proposal phase, we’ll work with you to identify key features and perform an initial scope based on the details you can provide at that time. Then we’ll provide a range of hours that we think it will take to complete them. The low end of the range is representative of the scenario where we’ve scoped everything 100% accurately up front, development goes off without a hitch, and there are no changes required. The high end of the range represents what we believe accounts for maximum iteration—maybe we create two kinds of users for your application and then you realize you actually need six. Or, you decide that you want to send users a PDF copy of a report as well as display it within your software interface. Usually, we end up somewhere in the middle of the initial range, but no matter what, we keep you up to date every step of the way so that there aren’t any unpleasant surprises  (only happy ones!).

Final Thoughts

Time and materials isn’t about giving up control or visibility, it’s about gaining flexibility, speed, and a development partner that’s aligned with your goals. TLDR, time and materials allows you to change your mind. If your software project is complex, user-driven, or likely to evolve, a T&M contract might just be the smartest path to success.

Are you ready to get started with your software project? Let’s connect! We’re happy to share more about our approach and how we structure engagements for transparency and impact.