Fixed price puts the estimating risk on the builder, who therefore prices in a buffer and resists changes, since every change threatens the fixed number. It works best when everyone truly knows what's being built and it won't shift.
Time-and-materials fits agile, exploratory work where you'll learn and adjust as you go. It requires trust and good communication, since you're paying for effort, but it avoids the padding and change-order friction of fixed bids. Many projects use a hybrid: a fixed discovery, then flexible delivery.
Updated July 2026
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