Fixed-priced

Fixed-priced, also known as a "lump-sum" or "firm-fixed-price" contract or agreement, describes an arrangement where the price for a product, service, or project is agreed upon upfront and remains constant, regardless of any changes in the scope of work, materials, or labor costs. This approach provides predictability for the buyer, knowing their total financial commitment from the outset, while the seller bears the risk of cost overruns. It's commonly utilized for projects with well-defined requirements.

Fixed-priced meaning with examples

• The homeowner opted for a fixed-priced contract with the construction company, ensuring the cost of the home renovation project was precisely $75,000. This gave them peace of mind, budgeting effectively without the worry of fluctuating material or labor costs. The company took on the risk of unforeseen expenses, like a sudden lumber price increase, and therefore factored in potential cost increases to make a profit.
• We're offering fixed-priced website design packages. Clients can choose from Bronze, Silver, or Gold, each with a predefined scope and cost. This simplifies the sales process and sets clear expectations. No hidden fees; the price advertised is the price paid. This fixed pricing streamlines the transaction, making it transparent and attractive to the client.
• The government awarded the military contract on a fixed-priced basis. The bidding companies had to submit their solutions and a set price, ensuring a level playing field. They chose the proposal which met all the specifications and had the lowest fixed price, allowing budget allocation with certainty and reducing the likelihood of cost escalation over time.
• The software development firm agreed to a fixed-priced agreement for building our new application. The contract clearly outlined all the deliverables and timelines, with no option for price increases, even if additional work was needed. This arrangement motivated the firm to work efficiently and deliver the project on time and within budget. The scope of work was precisely outlined.