See also Agile
The Agile fixed price is a contractual model agreed upon by suppliers and customers of IT projects that develop software using Agile methods. The model introduces an initial test phase after which budget, due date, and the way of steering the scope within the framework is agreed upon.
This differs from traditional fixed-price contracts in that fixed-price contracts usually require a detailed and exact description of the subject matter of the contract in advance. Fixed price contracts aim at minimizing the potential risk caused by unpredictable, later changes. In contrast, Agile fixed price contracts simply require a broad description of the entire project instead of a detailed one.
In Agile contracts, the supplier and the customer collaboratively define their common assumptions regarding business value, implementation risks, expenses (effort), and costs. Based on these assumptions, they agree on an indicative fixed price scope, which is not yet contractually binding. This is followed by the test phase (checkpoint phase), where the actual implementation begins. At the end of this phase, both parties compare the empirical findings with their initial assumptions. Together, they then decide on the implementation of the entire project and establish the conditions under which changes are permitted.
Further aspects of an Agile contract are risk share (both parties divide the additional expenses for unexpected changes equally amongst themselves) or the option of either party leaving the contract at any stage (exit points).