Quick answer
Fixed-price contracts: defined scope for a defined price — certainty for the buyer, risk for the vendor; they work when scope is genuinely knowable.
How they work
Scope+price fixed up front — vendor bears overruns, buyer gets certainty; the risk transfers with the price.
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When they work
Well-defined scope, proven domain, measurable acceptance — commodities and clear deliverables.
When they fail
Evolving requirements — fixed price + moving scope = change-order wars and corner-cutting.
The safeguards
Detailed SOW, acceptance criteria, milestone payments, change process — the contract structure that protects both sides.
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FAQ
Bottom line
Fixed-price contracts: defined scope for a defined price — certainty for the buyer, risk for the vendor; they work when scope is genuinely knowable.
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