The short answer
Can you specify what is being built precisely enough that both sides would agree whether it was delivered? If yes, fixed price is available and transfers risk to the supplier. If no, fixed price will produce a change request every fortnight and both sides will be unhappy.
Most product work falls into the second category, which is why augmentation and time-based models dominate it.
What each model actually buys
| Fixed price | Augmentation | |
|---|---|---|
| Who carries scope risk | Supplier | You |
| Flexibility to change direction | Low, via change requests | High |
| Cost certainty | High, for the agreed scope | Predictable rate, variable total |
| Specification effort up front | High | Lower |
| Incentive on the supplier | Finish efficiently | Be useful enough to retain |
| Suits | Defined, stable work | Evolving work |
The incentive row is worth reading carefully. Fixed price rewards finishing quickly, which is aligned with you on scope and not always on quality. Augmentation rewards staying, which is aligned on quality and not on speed. Neither is inherently better.
Where fixed price works well
- A defined integration with a documented third party
- A migration with an agreed end state
- A website or marketing site with an approved design
- A specific piece of infrastructure with clear requirements
- Anything you have done before and can describe exactly
What these share is that both sides can tell whether it is finished. That is the test, and it is more demanding than it sounds.
Where it goes wrong
Fixed price for a product still being figured out. The specification is a guess, reality intervenes, and every adjustment becomes a commercial negotiation rather than a conversation.
The visible symptom is a relationship where both sides are reading the contract. That is expensive in time and worse in goodwill, and it usually costs more than the flexible model would have.
A hybrid that works
- Fixed price for a short discovery, producing a specification and an estimate.
- Decide at that point whether the work is definable.
- If it is, fixed price the build against the specification you now have.
- If it is not, move to augmentation with the discovery as the starting point.
- Either way you have paid a small amount to remove the largest uncertainty.
This is usually the honest answer when neither side can yet say how big the work is.
The question to ask a supplier
Ask which model they would recommend and why. A supplier who always recommends the same one regardless of the work is telling you about their business model rather than about your project.
A good answer engages with how well defined your work is, and is willing to say that fixed price is not appropriate here even though it sounds more reassuring.