Project delivery models generally fall into two broad categories: Fixed Price (FP) and Time & Material (T&M). Each comes with its own way of defining work, managing risk, tracking progress, and invoicing. Understanding the differences helps organizations choose the right model depending on project’s nature, the certainty of requirements, and desired flexibility.
| Category | Fixed Price (FP) | Time & Material (T&M) |
|---|---|---|
| Scope Definition | Detailed, fixed, and defined upfront | Flexible, evolving, high-level |
| Contract Focus | Deliverables & outcomes | Services, skills & effort |
| Requirement Changes | Controlled through Change Requests | Accepted as part of the model |
| Pricing Model | Fixed total cost | Hourly/daily rate, pay-as-you-go |
| Invoicing | Milestone-based | Monthly, based on timesheets |
| Financial Risk | Vendor carries delivery & cost risk | Client carries scope & direction risk |
| Project Management Style | Predictive, structured, waterfall/hybrid | Adaptive, iterative, Agile-friendly |
| Accounting Treatment | Typically CAPEX | Typically OPEX |
| Best Use Cases | Stable, well-defined scope | Evolving scope, long-term enhancements |