The verdict in three sentences
Fixed price suits a frozen, documented scope, but you pay a 15 to 30% risk margin plus change orders that add an average of 20% to the budget. Time and materials at EUR 550 to 750 per day is more honest for a product that evolves, provided you track remaining work every week. For a London SME, the best compromise in 2026 is phased fixed price: a paid discovery, then 4 to 8 week phases priced one at a time.
Fixed price, T&M, hybrid: what you are really buying
The contract changes more than the payment method. It allocates risk between you and the vendor, and that risk has a price.
| Criterion | Fixed price | Time and materials | Phased hybrid |
|---|---|---|---|
| Who carries overrun risk | The vendor (priced in) | The client | Shared, phase by phase |
| Built-in risk margin | 15 to 30% | 0% | 5 to 10% per phase |
| 2026 reference price | Firm global price | EUR 550 to 750 per day (about GBP 470 to 640) | Discovery EUR 4,000 to 12,000, then firm phases |
| Average change orders observed | +20% of initial budget | Not applicable | +5 to 10% |
| Scope flexibility | Low, each change is negotiated | Total | Good between phases |
| Client-side management effort | 1 to 2 h per week | 3 to 5 h per week | 2 to 3 h per week |
| Best for | Stable scope, detailed specification | Product in discovery, embedded team | Most SME business applications |
The classic trap: a low fixed price obtained on a vague specification. The vendor then compensates through change orders. A EUR 80,000 fixed price that ends at EUR 104,000 costs more than well-managed T&M at EUR 95,000.
Comparing two quotes on the same basis
To compare fairly, bring both offers back to a probable total cost, not the headline price. Example for a site management application estimated at 140 days of work.
| Item | Quote A: fixed price | Quote B: T&M at EUR 650 per day |
|---|---|---|
| Headline price | EUR 98,000 | EUR 91,000 (140 days estimated) |
| Probable estimate variance | Change orders +20%: EUR 19,600 | Drift of 10 to 25%: EUR 9,100 to 22,750 |
| Probable total cost | EUR 117,600 | EUR 100,100 to 113,750 |
| Warranty | 3 months included | To negotiate, often 1 to 3 months |
| Late delivery penalties | 0.5 to 1% per week, capped at 10% | Rare, replaced by best-efforts commitment |
| Intellectual property | Assignment on delivery, to check | Assignment as work progresses, to check |
T&M is only cheaper if you can make trade-offs. Without an available product owner on the client side, drift quickly exceeds 30% and fixed price becomes competitive again.
Clauses to check before signing
- Intellectual property assignment: it must be written and explicit (reproduction, adaptation, exploitation), worldwide and for the full legal term. Without it, the code may legally remain the vendor's.
- Source code access: a Git repository owned by your company from day one, not at delivery.
- Penalties and cap: 0.5 to 1% of the phase per week of delay, capped at 10%, with clear exemptions.
- Acceptance procedure: duration (10 to 15 working days), acceptance criteria, blocking versus minor defects.
- Reversibility: technical documentation and knowledge transfer priced upfront, usually 3 to 8 days.
- Day rate locked for 12 to 24 months for future changes, under either model.
Mini case study
Isabelle, managing director of a 60-employee industrial maintenance SME in London, receives two proposals for her field intervention app: EUR 98,000 fixed price, or 140 days of T&M at EUR 650. Her team has no internal project lead available for more than 2 h per week.
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She picks the hybrid: a 3-week discovery at EUR 9,000, which brings the estimate down to 120 days and splits the project into three firm phases of EUR 26,000, 31,000 and 24,000, or EUR 81,000. With 7% adjustments, the final cost reaches EUR 95,700 including discovery, versus a probable EUR 117,600 for fixed price. Saving: about EUR 21,900, plus the option to stop after phase 2 if usage feedback justifies it.
FAQ
Does fixed price really protect against overruns?
It protects the written scope, not changes. In practice, 20% change orders is the average observed in 2026, and up to 40% when the specification is under 20 pages.
What day rate is reasonable in London in 2026?
Expect EUR 550 to 650 per day for an experienced agency developer, EUR 650 to 750 for a senior profile or architect. Below EUR 450, check actual seniority and subcontracting.
Can you switch from fixed price to T&M mid-project?
Yes, by contract amendment, often after the first release. Plan a 2 to 5 day review to close the fixed-price portion and lock the day rate.
Who owns the code if the contract is silent?
In most jurisdictions, including the UK for contractors, the author keeps the rights without a written assignment. An explicit assignment clause is essential under any contract model.
How much does discovery cost before phased fixed price?
Between EUR 4,000 and 12,000 for 2 to 4 weeks, or 5 to 10% of the total budget. It reduces estimate variance from 30% to about 10%.
Let's scope your project. Send us your two quotes or your requirements: we propose a discovery, a breakdown into priced phases and clear intellectual property clauses. Detailed quote within 48 h. WhatsApp +221 77 596 93 33.
Mohamed Bah
Fondateur, Kolonell
Passionate about digital and entrepreneurship in Africa, Mohamed has been helping Sénégalese businesses with their digital transformation since 2020. Founder of Kolonell, he believes every SME deserves a professional and accessible online présence.
