Is fixed price ever the best option?

Yes — for small, well-specified pieces of work, or after a discovery phase has made the scope genuinely clear.

How do we avoid T&M becoming a blank cheque?

Visibility and control: your backlog, regular demos, budget versus delivered scope, a forecast and spending caps that need your approval.

Guide · Contracts

Fixed price, T&M or milestones: which one actually protects you?

“Fixed price” sounds safe; “time and materials” sounds like a blank cheque. In practice both can go wrong in predictable ways — and a third option often fits better. The right model depends on how well the scope is known and how much it will change.

By Nythrex EngineeringUpdated 24 September 2026 2 min read

Few expected changes → Many expected changes

Milestones with change requests

Time & materials with strong visibility

Fixed price

Discovery first, then milestones

Scope well known → Scope uncertain

Match the contract to how much you actually know.

The three models side by side

	Fixed price	Time & materials	Milestone-based
You pay for	An agreed scope	Time actually spent	Each delivered, accepted milestone
Who carries estimate risk	Vendor (priced in as padding)	You	Shared, per milestone
Flexibility	Low — changes need renegotiation	High	High, through priced change requests
Vendor incentive	Minimise effort per requirement	Can drift without controls	Deliver working milestones
Best when	Scope is small and clear	Ongoing product work with strong product ownership	Most product builds
Watch out for	Vague specs, “that’s out of scope” fights	No visibility of what hours produce	Milestones defined as documents, not software

The fixed-price traps

01Padding

Vendors price uncertainty in. You pay for risks that may never happen.

02The scope lawyer

Every ambiguous line in the spec becomes a negotiation. Relationships sour.

03Quiet corner-cutting

When a fixed budget runs short, tests, documentation and quality are the first casualties.

04Frozen learning

You learn things mid-project that should change the plan — and changing it costs a renegotiation.

Making time & materials safe

0/5

Why we prefer milestones

Milestone pricing makes the vendor commit to estimates while keeping room for learning. Each milestone delivers working software, is estimated up front, and changes become priced change requests you approve or decline. It’s the model we use for most end-to-end builds, with a fixed-price discovery sprint before it when the scope is still fuzzy. Details on our pricing page.

Frequently asked questions

GuideHow change requests double budgetsScope creep arrives as dozens of small “quick” changes. How to run change requests that keep budgets honest without slowing the project down.NythrexPricing & engagementHow Nythrex prices projects: fixed-price discovery, milestone-based builds and monthly teams — changes estimated before approval, no surprise invoices.GuideWho really owns your code?Paying for software doesn’t make it yours. The clauses that decide code ownership: IP assignment, background IP, open source, AI assets, exit terms.GuideWhy every estimate is wrongEstimates are forecasts under uncertainty. How to read one, spot hidden assumptions, compare vendors fairly and get forecasts that improve.Guide13 red flags your vendor is hiding problemsVague reports, shifting dates, no access to code: 13 signs your outsourced project is in trouble — and what to ask or do about each this week.

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