Why We Work at a Fixed Price — and What That Changes for You

The symptom

Anyone in the mid-market who has bought consulting knows the structure. A day rate, an estimated number of days, and a proposal carrying the phrase "effort as actually incurred". The estimated scope is a forecast, not a promise.

What follows from it is equally familiar. Two-thirds of the way through the planned days, the analysis has grown broader than expected, because further topics surfaced along the way. There's a variation order. The variation is usually justified on the facts — the topics are real. The client is nonetheless in an uncomfortable position: stopping means largely writing off what has already been paid.

The real issue isn't the cost overrun. It's who carries the risk that a project takes longer than anyone thought.

The mechanism

A day-rate model has a structural property that operates independently of anyone's integrity: more days are better for the provider and worse for the client. This makes nobody a fraud. It does create a quiet, persistent tilt in one direction.

That tilt shows up less as invented days than as thoroughness in the wrong places. When care is remunerated, work becomes careful — including where a rough answer would have been enough. Analyses get more complete, presentations more extensive, workshops more numerous. Every individual step is defensible. In aggregate, you get a project costing more time than the decision it was meant to inform was worth.

The second effect concerns the timing of uncertainty. On a day rate, the client learns the actual cost at the end. That is precisely when their negotiating position is weakest, because the project is nearly finished.

A fixed price reverses both. Uncertainty about effort sits with the provider, and it sits before the start — at the moment they describe the scope and name the price. That forces a precision the day-rate model never requires: what exactly is in scope, what is explicitly not, and how will anyone recognise that it's finished?

The cost

There is a downside, and it deserves to be named honestly. A fixed price isn't a gift — it contains a risk premium. Purely arithmetically, a fixed-price project that runs smoothly is more expensive than the same project on time and materials. Look only at the ideal case and you are paying over the odds for the fixed price.

The comparison is still worth making, because the ideal case is rare. In our experience, effort on mid-market analysis projects routinely exceeds the first estimate — not through poor planning, but because a process only reveals where it leads once you start measuring it. That is exactly the risk the fixed price prices in.

The second item is harder to quantify and usually larger: predictability. A managing director who knows a project costs €18,400 decides differently from one who knows it costs "roughly 15 to 25 days". Above all, they decide faster, and they don't have to make the decision a second time mid-flight.

And a third, frequently overlooked effect: a fixed scope also protects the client from themselves. Almost every project throws up interesting new questions along the way. Without a clear boundary they migrate into the running engagement. With one, they get noted and decided separately — and quite often it turns out they weren't that important after all.

The fix

For a fixed price to work, the definition has to come before the contract rather than after it. For us that means three things.

Fixed scope. One named process, from a defined start point to a defined end point. Not "order processing" but "from receipt of the customer order to the dispatch notification". Everything outside those boundaries is explicitly not in scope — and says so in the proposal.

Fixed duration. An end date, not a window. Analysis projects that stretch lose their effect: the figures age, participants lose interest, and the results land in a business that has since moved on.

Fixed price. Named before the start, independent of actual effort. If it takes more work than expected, that's our problem. That is precisely the point.

Alongside this runs a rule that matters just as much: new topics surfacing during the project get documented and presented at the end — as a proposal for a possible next step, not as a variation to the current one. The decision stays with you, at a point when you can make it freely.

That's exactly how our process analysis is cut: one core process, measured end to end, with a prioritised list of measures. Fixed scope, fixed duration, fixed price.

The next step

If you're holding a time-and-materials proposal right now, ask what happens if the estimated effort is exceeded. The answer to that single question tells you more about the project than the first ten pages of methodology.