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Definition

fixed price

Contributor(s): Matthew Haughn

A fixed price is a non-negotiable sum charged for a product, service or piece of work.

The most common reason for a fixed price for a product is control or mandate by some external entity. A regulatory organization might set a fixed price for some commodity, for example. Fixed price contracts and services are an alternative to other models.

In procurement and project management, fixed price contracts stipulate what will be provided and what will be charged for it. Such contracts are not ordinarily open for adjustments or changes, although the contract may also include circumstances under which something may be changed and stipulate requirements for such a change, such as additional charges. Change requests may be required for anything outside of the scope of the original agreement. 

It can be a challenge to foresee how long a given project or piece of work will take and the resources that will be required. As such, it is inadvisable for an organization without extensive and relevant experience doing similar work to agree to a fixed price contract.

The term fixed pricing is used sometimes to refer to a system in which prices are relatively stable. For example, a product price on a website might be set and not changed for months or years. In this context, the term contrasts with dynamic pricing, a model in which online prices update automatically in response to various conditions.

This was last updated in April 2016

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