Why Time and Materials Development Often Beats Fixed Price

At Spud Software, we’ve worked with clients of all sizes—from startups with fast-changing needs to enterprise teams executing large-scale rollouts. One question that comes up often is: Should we go with Time and Materials (T&M) or a Fixed Price approach?

While both models have their place, we’ve consistently found that Time and Materials delivers faster results, more flexibility, and often lower overall costs—especially when the project involves evolving needs or frequent changes.

The Real Cost of Fixed Price Projects

Fixed price sounds great on paper: you get a defined scope, a set price, and a deadline. But here’s the reality—fixed price work forces us (or any vendor) to build in buffer time and pricing to cover the unknowns.

Any vendor quoting fixed price has to protect against the “what ifs.” That often means padding the estimate by 20–25%, whether you need it or not.

Even worse, once the scope is signed off, any change—no matter how small—requires a formal change request. That means stopping development, reworking the proposal, getting your approval, and processing new payment. A 30-minute tweak becomes a minimum 8-hour detour just to push it through.

And we haven’t even touched on lost momentum.

Time and Materials: Built for Speed

Under T&M, we still define and sign off on a clear Design Specification before work begins. But the difference comes when things need to change—and they always do.

Let’s say you're reviewing a screen and realize a dropdown would work better than a text box. With T&M, we hop on a quick call, adjust the spec, and knock it out that same day.

Done.

With Fixed Price? You’d be looking at:

• A change request form

• A revised proposal

• Approval and PO updates

• Delays in scheduling

  
  

That’s hours of overhead for what might be a 1-hour fix.

Real-World Examples

1. During development, the client needed frequent UI tweaks based on real-time feedback from field users. Because we were working under T&M, we made updates in near real time—saving the client weeks of delays that would have occurred under Fixed Price.

2. This client initially wanted a strict scope, but quickly realized how often requirements changed during integration with third-party logistics systems. Our T&M approach let us pivot quickly, batch updates efficiently, and still deliver ahead of schedule.

3. Even though we had a clear spec to start, regulations around their processes paperwork shifted mid-project. Because of T&M, we were able to have a meeting the same day, adjust workflows, and deploy updates—without needing to halt progress for repricing and re-approvals.

Trust Is the Foundation

T&M works best when there’s trust between the client and the development partner. You’re not paying for inflated estimates “just in case.” You’re paying for actual work done, and you get to pivot when needed—without paying penalties for being agile.

Summary

Bottom Line: If you're working with a partner you trust, Time and Materials is the smarter path. It’s leaner, faster, and far more aligned with how real software gets built.