How many types of custom database software development contracts?

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After choosing a development company for your project, there are key things that you must pay attention to in order to have a perfect custom database software development contract. Both parties must agree on the way your project is delivered as well as determine each side’s responsibility in case of any dispute. In this article, you will learn about a good custom software development agreement template.

Types of contracts

Similar to any other services, the custom software development agreement template should include some common sections, including the termination conditions, governing law, dispute resolution, and more. However, the custom database software development contract should specifically include some special agreements between you and your partner.

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There are many types of agreements for your development project

Before we look into those agreements, we should know different types of contracts first: 

Time and materials

If you are looking for a development agency, you will need this type of agreement. When you sign this type of custom database software development contract, you agree to pay for the time the other party spends working on your project. It includes the number of hours and the hourly rate that you pay them.

However, there are still some important things that you need to consider when signing a time and materials contract. If you don’t calculate the time right, you will need to agree to pay more if your project lasts longer than expected. 

Obviously you can control the development progress. For example, a methodology like Agile will offer a demo of the completed features, which allows you to estimate the remaining time easily.

The time and materials agreement ensures the high quality of the development process, because your partner is not pushed to finish the project within a specific time.

It’s also easier for your project to kick off with this type of agreement because it doesn’t require a lot of preparation and planning. However, it would be good if you could prepare. 

Fixed bid

In this type of contract, the scope of work that your partner should deliver, and the fixed price that you need to pay are defined. The fixed bid contract is best suited when you need to find vendors for small tasks. With that said, it is very common on freelance platforms. The customer just needs to post the tasks and the price they are willing to pay.

However, it doesn’t mean that you can not use this type of agreement with a development company. For instance, a fixed bid contract can be signed for the test task that you want your vendor to complete. For those who don’t know, test tasks usually require building a specific feature or component, therefore, these tasks are easy to plan and budget for.

Keep in mind that this type of agreement might not work well with a larger project. Because when you need to make any changes, it becomes complicated. If you decide to make a fixed bid agreement, you will need to do a lot of detailed planning as all the little things in your project need to be taken care of. That means it takes more time for your project to get started.

Furthermore, the developers may not use the best tools or procedures so that they could stay within the budget.

Fixed budget

This type of contract includes different fixed bids. Before proceeding the project, both parties agree on the project budget, however, during the development process, you can change the scope. The key thing that this agreement implies is that the developer should stay within the agreed budget, and they can create as much as possible.

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You should know which type of contract is suitable for your project

If your project is large, this fixed budget custom database software development agreement is not a good option. For smaller projects with tight budgets, it is ideal to use this type of contract. Once the contract is signed, your partner will prioritize the scope that includes the core features, and release some expensive “bells and whistles” later. 

Capped budget with accelerated bonus

This type of custom software development agreement template includes setting a definite budget. But your developers get the bonus if they could complete and deliver the projects ahead of the schedule. That means you will be sure about how much money you will spend on your project.

However, when you sign this type of contract, your developers might sacrifice the development quality so that they could finish early. In other cases, they might be more encouraged for the work because of the bonus.

Conclusion

As you can see, the contract defines an official relationship between you and the development vendor. If you know how to prepare the agreement, you can avoid any disputes in the future. In addition, a good custom database software development contract is surely completed to the benefit of both parties. If you are looking for professional development services, contact Omatech now and we will help you choose an ideal type of agreement for your project. 

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