Scott Ambler has posted a follow-up on his previous article about fixed price software projects at http://www.ddj.com/architect/209602001.
As a quick summary, he gives five recommendations:
- Give a ranged estimate (+/- a certain percentage or amount)
- Do some upfront agile modeling (using people who will actually do the work)
- If the customer still insists on a “precise” estimate, pad the number as much as possible to account for the risks
- Fix the price, flex the scope (anything added requires removing something of equal effort)
- Stage the funding, based on real deliverables (working software)