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The cost of developing the project is calculated by two main models, namely: fixed price (Fixed Price), time and materials (Time & Material). These two models are most often used in the field of software development and each of them has its advantages and limitations.
The fixed cost model of the project is used mainly for projects of small or medium size, which has a certain content. That is, the customer and the executor clearly understand the scope of work and see what the expected product will be at the end of the project. This cost model assumes that throughout the development process, the customer will not change the content of the project due to resource constraints. For the development process, the waterfall project planning methodology is used, which fixes a specific amount of work within the designated time period by designated specialists. If there is a risk of overspending the budget, it is assumed by the party of the contractor to ensure delivery of the result to the customer.
The Time & Material is recommended for medium to large projects or for projects in which the project requirements are not defined or defined. For such projects, the use of a cost model based on time and materials is recommended. Usually, for such projects, experienced specialists carry out a preliminary assessment to understand the order of magnitude of the value and affect the factors affecting the price. This is important for the customer to understand the potential risks of the project, which he takes on, initiating the project without a fixed cost. When using the model based on the time and materials spent, the customer receives the freedom of action necessary for the project and transparency in the work of the performer. Under such conditions, Agile development methodology is used, which allows you to flexibly work with changes.