No definite rules can be defined as to when to use a fixed-price project and when a time and material project would be the best solution. Generally the decision depends on the following considerations:

• The size of the project, that is, the amount of money involved.

• The extent of the project, that is, the period of time it will take to complete the project.

If a project contract involves much money and an extended period of time, the fixed-price project type is usually the most appropriate type.

Apart from projects where revenue and costs can be matched, the time and material project type is also applicable for projects sold at a fixed price. The time and material project type might be suited for projects when dividing the amounts involved into periods is not required. Typical situations include the following:

• Projects are invoiced in a limited period that corresponds to the accounting period of the company.

• A company runs many small projects (small with regard to the amount of money and the period involved) as an ongoing process.

In these situations the project can be set up as a time and material project with fee transactions.