What is a fixed-price contract?

Fixed-price contract — is an agreement where the cost of completing the project or service is agreed upon in advance and does not change during the course of work. The customer and the contractor agree on a specific amount that the customer will pay for the entire scope of work.

Advantages:

• The customer knows the project budget exactly.
• The contractor bears the risks of overrun in time or resources.

Disadvantages:

• Less flexibility when requirements change.
• Conflicts may arise if the scope of work was misestimated.

This type of contract is suitable for projects with clearly defined requirements and deadlines, where the scope of work is understood in advance.