The Fixed-Price Contract: A Challenge for the Software Development Project

Aligning flexibility with uncertainty in software development arrangements through a contractual typology

“…Although the literature focuses on two types of contracts, fixed-price and time-and-materials 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 (Gopal et al, 2003), practitioners are aware of the limitations of the dichotomy (Gaebert, 2015) and find nuanced approaches to narrow this gap (i.e., to align flexibility with uncertainty). The second objective was to analyze the theoretical mechanisms underlying these nuanced approaches, as identified by contract theory (Bolton and Dewatripont, 2005;Hart and Holmstrom, 1985).…”

“…The first objective was to address the gap between the various needs for business adaptability and the limitations of formal contracts in the practice of software engineering. Although the literature focuses on two types of contracts, fixed-price (FP) and time-and-materials (T&M) (Gopal et al , 2003), practitioners are aware of the limitations of the dichotomy (Gaebert, 2015) and find nuanced approaches to narrow this gap (i.e. to align flexibility with uncertainty).…”