Fixed fee vs time and materials for custom app support in London (2026)

The verdict in three sentences

For a business-critical custom application such as a claims management system, a fixed-fee support contract with priority-based SLAs protects the business better than pure time and materials at 650 to 900 GBP a day. The contract should set a P1 response within 2 hours, service credits capped around 10 % of the monthly fee and a priced exit plan. Without these three, the IT director pays for support without being able to steer it or leave it cleanly.

Fixed fee or T&M: what you are really buying

Application support covers three kinds of work: corrective (bugs), adaptive or small enhancements, and preventive (dependency updates, security patches, framework upgrades). The billing model shifts the risk.

Under time and materials you pay for hours worked: easy to start, no commitment on outcomes, and the bill grows with incidents. Under a fixed fee the supplier commits to response times and a volume of work, and absorbs the overrun if the app is poorly maintained.

A hybrid is common in 2026: a fixed fee for corrective and preventive work, plus a pool of 5 to 15 enhancement days per quarter at a negotiated day rate, carried over for no more than two quarters.

SLAs and service credits that hold up

Service levels are defined per incident priority, with a response time (the supplier triages and starts work) and a workaround or resolution time. For claims management, a blocked online claim form is P1, a wrong settlement calculation on one case is P2, a label error is P3.

Three rules prevent disputes. First, cap cumulative service credits at about 10 % of the monthly fee: under English law, credits must be a genuine pre-estimate of loss or a legitimate interest, not a penalty, and suppliers will not sign uncapped credits. Second, state whether credits are the sole remedy or leave room for damages. Third, add a termination right if P1 SLAs are missed three months running.

Reporting matters as much as the numbers: a monthly dashboard of tickets by priority, actual times and SLA compliance. Without tooled reporting, no credit can be proven.

Exit, ownership and the clauses people forget

The exit clause organises your departure: handover of source code, documentation, deployment scripts and access, plus a period supporting the incoming supplier. Price it at signature, typically 10 to 20 days of transition at the agreed day rate.

Also check IP ownership of code written under enhancements, UK GDPR compliance for claims data (which may include health data), the price review clause (indexed and capped) and the term, ideally 2 years with annual renewal.

At Kolonell, support for the applications we deliver is covered by a dedicated contract whose service level and terms are set on quote.

Mini case study

Sarah, IT director of a mid-sized insurance broker in London, currently pays T&M at 780 GBP a day. Over 12 months the supplier billed 74 days, 57,720 GBP, with no response commitment. Two P1 incidents blocked online claims for 9 hours each.

She negotiates a fixed fee of 4,300 GBP a month for corrective and preventive work with SLAs, plus a pool of 10 enhancement days per quarter at 740 GBP. Annual calculation: 4,300 × 12 = 51,600 GBP, plus 40 × 740 = 29,600 GBP if the pool is fully used, 81,200 GBP maximum. In practice the team uses 24 days: 51,600 + 17,760 = 69,360 GBP. Cost rises by 11,640 GBP, but each 9-hour P1 left about 120 claims unfiled and one hour of call-back per claim, 240 handler hours across two incidents. With resolution under 4 hours, half of those hours disappear and the budget becomes fully predictable.

FAQ

What fixed fee should I expect for a mid-sized app?

In London in 2026, roughly 1,300 to 2,600 GBP a month for a 20 to 50 screen, low-criticality app, and 3,500 to 5,200 GBP for a critical app with on-call cover. The volume of work included must be explicit.

Are service credits actually applied?

Yes, when they are measurable, capped and deducted automatically from the next invoice. A cap near 10 % of the fee is accepted by most suppliers.

Do we need weekend on-call?

Only if customers use the app outside business hours. On-call commonly adds 15 to 30 % to the fee.

What does an exit cost?

Plan 10 to 20 transition days, roughly 7,500 to 18,000 GBP at London day rates. Put the figure in the original contract.

Can we switch supplier mid-term?

Yes, if there is a termination-for-breach clause, for example three consecutive months of missed P1 SLAs, with 3 months' notice.

Let's scope your project. We audit your application, define incident priorities and propose a support contract with SLAs and an exit plan, live within 4 to 6 weeks. Detailed quote within 48 h. WhatsApp +221 77 596 93 33.