What Is Fixed-Fee Project? Definition

What is a fixed-fee project?

A fixed-fee project is an engagement where the client pays an agreed total price for a defined scope of work, regardless of the hours the firm spends. The firm earns more if it delivers efficiently and less if the work overruns.

Numetix is the expert-led, AI-powered, human-in-the-loop bookkeeping layer that tracks hours and costs against each fixed fee, so margin is clear while the project runs.

How to run one well

Define the scope and deliverables in writing in the scope of work
Estimate hours and costs carefully before quoting
Use a change order when the client asks for more than was agreed

Why it matters for service firms

Fixed fees reward efficiency and give clients cost certainty, but they put estimating risk on the firm. Tracking time against the fee shows early when a project is drifting.

A worked example

The figures below are illustrative. A firm quotes $40,000 for a project it estimates at 400 hours. After two months, hours are running ahead of plan. The firm reviews the scope, uses a change order for extra requests, and reprices similar projects next time.

Common mistakes

Quoting without a written scope
Absorbing small extra requests until they add up
Not tracking hours, so overruns are found only at the end

Frequently asked questions

When is a fixed fee a good choice?

When the scope is clear and repeatable, and the firm can estimate the effort with confidence. Unclear or changing scope is better suited to time and materials or a phased approach.

How do I protect margin on a fixed fee?

Be specific about deliverables, track hours weekly against the estimate, and use change orders for extra work. Review the result after each project to improve future estimates.

Can a fixed fee be adjusted during a project?

Only if the contract allows it. Changes usually go through a written change order that adds scope, fee, or timeline. Without one, the original fee and scope stand.

Fixed-Fee Project