When does it make sense to set a fixed fee in a design contract?

Setting a fixed fee in a design contract is appropriate when a jurisdiction lacks skilled negotiators. In situations where negotiating expertise is minimal, a fixed fee can provide clarity and reduce the chance of disputes over variable costs. This arrangement simplifies budgeting for the public entity, as the total cost is predetermined, which helps in financial planning and decision-making.

When negotiations are not strong, uncertainties in contract terms could lead to misunderstandings and potential conflicts during the project. A fixed fee mitigates this risk by establishing a clear, unchanging cost based on the anticipated scope of work. The clear expectations set by a fixed fee help ensure that both parties understand their obligations, which is particularly beneficial for jurisdictions that may not have the experience or capacity to negotiate complex contracts effectively. Thus, a fixed fee in such contexts creates a more straightforward, manageable contracting approach.