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Cost of project development are calculated based on 2 main models: Fixed price, Time&Material. This 2 models are the most common in software development, every have own benefits and limits.
This model are used in general for small and medium projects, that have defined scope. In other words customer and developer clearly understand scope of works and realise expected product increment. This model of price calculation implies that customer can’t modify the scope of project due to resource limit. Waterfall approach is used in this model: fixed scope of work for defined experts during limited time. Risk of budget over limit is covered by contractor in order to deliver product timely.
This model is recommended for middle and large projects, where requirements aren’t defined completely. Usually such projects requires preliminary estimate by experienced experts to define possible costs threshold and factors that influence that costs. It’s important for customer’s understanding of potential risks that he takes launching the project without defined scope. Using this model client receives necessary for project freedom of action and transparency. Time&material model requires agile approach that allows to work with changes in a flexible way.