Fixed price and software cost

This topic is for the person who has to sign off the budget for a piece of software and wants a number they can rely on. The decision it covers is how to buy: what to settle before asking for a quote, whether to pay a fixed price or by the hour, and how to tell a quote that is low because the scope is small from one that is low because the scope is missing.

Where to start

• How much does it cost to develop an app in the UK? answers the question most people arrive with, including what drives the price and what a worked example looks like.
• The most costly factors of custom software development explains which parts of a project push the price up and how to measure them before you ask anyone for a figure.
• Fixed price vs time and materials sets out who carries the risk of an overrun under each model and when each one is the right fit.
• When fixed-price software development works, and what to agree first lists what both sides need to settle before a fixed price means anything.

What people get wrong

The most common mistake is asking for a price before the scope exists. Three suppliers quote, the numbers differ widely, and the buyer concludes that software pricing is arbitrary. In fact each supplier priced a different guess at what was wanted. The cure is to write down what the software must do, which systems it must connect to, which existing data it must take on, and which of its rules nobody has written down yet. The articles here on costly factors and on the request-for-proposal process both show how.

The second is hearing fixed price as a promise that the figure can never change. A fixed price is a price for an agreed scope. When the scope changes, and on a project of any length it will, the price changes with it. What a good contract fixes is how that happens: a written change with a price, and the option to swap something out rather than add to the total. A supplier who will not discuss change is not offering a fixed price, only a fixed argument.

The third is counting only the supplier’s quote. Your own staff’s time, the things the quote excludes, the upkeep after go-live and the cost of leaving the supplier later all sit outside it. The article on the hidden costs of outsourcing shows how to estimate each one.

How this connects to our work

CodeFirst builds new systems at a fixed price to an agreed scope, with the acceptance checks written down before work starts and any change quoted, swapped or deferred rather than added to the bill. Some common jobs are sold as packages with a published price, such as moving an Access database or a spreadsheet to a web application, building a customer portal or connecting two systems. A code audit is also available at a fixed price, and its fee is credited against any follow-on work. If you want a figure before you talk to anyone, the software development cost calculator gives a price range from six questions, worked out in your browser.