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Wes Wilson President


ERW Custom Programming, Inc. BBB Business Review

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Fixed Price vs. Hourly

Fixed price custom programming contracts can result in a much more costly program.   On the surface, this seems like a silly statement.

Here are a few things to think about before deciding whether to seek a fixed price custom programming contract.

1. Most fixed price contracts require a large deposit. For hourly programming, the deposits are usually small.

2. Most fixed price contracts are difficult to escape.   If you are not happy with the work, you may find it expensive and time consuming to do so.  With hourly, you can simply terminate the contract if you are not happy.

3. A successful fixed price contract must have exhaustive and fixed specifications.   For any program of any significant size, you will not become aware of features you would like until the program is well on its way to completion.

4. Most fixed price contracts will not allow you to make changes once the programming is started.   Usually the customer realizes that the initial design missed any number of fields and features.   You will be charged hourly for your changes.  This can make the changes even more expensive due to the reengineering that is often needed.

5. Most fixed price contracts are priced much higher than they should be.  Programming companies must do this in order to try to cover items over which there is a dispute.

6. Fixed price contracts create real tension between the programming company and the customer.   It is not unusual for there to be disagreements over dozens or even scores of items should be charged.

7. Keep in mind that a company must charge significantly more than it thinks it will take in order to cover itself for the many misunderstandings that almost always occur.