Agile Development Resources

fixed-price contract

A contract between a contractor (e.g., a service provider) and a client that provides for a firm price that is not subject to adjustment based on actual costs incurred by the contractor. This contract type transfers from the client to the contractor all of the cost risk. For the contractor to provide a fixed price, the client would have to specify in great detail up front what the client would like the contractor to do. Doing so would violate a core agile principle – specifying up front very detailed information when both parties have the least amount of information is most often not practical. So, as a rule, organizations that have adopted agile should avoid fixed-price contracts.