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Every IT project starts with the same question: Will the contract model be open or closed scope? The choice of the ideal model is decisive for the success of the project and it is beneficial for all parties involved.

But do you know why it is so decisive before the project kickoff? This decision impacts project budget, deadlines and it also helps defining what will be delivered to the client, aligning the expectations with the results.

The definition between an open or a closed scope also establishes how much freedom the client will have to change requirements during the course of the project. If you have already worked with technology in the past, you should know that often what is envisioned as a solution at the beginning of the partnership can become unworkable throughout the journey.

This is especially true for long-term projects when there is no certainty about the problem to be solved in the beginning of process, or about the perfect solution to it. Often, certainties will only arise when the project is already running – and you will want to have the freedom to change the course of action, even if it means uncertainty about the total project costs.

In this article, you will understand when to opt for an open or a closed scope contract. Before diving into more details, however, it is necessary to understand the main differences between these two contract models.

What is the difference between an open and a closed scope contract? 

A closed-scope contract, when it comes to IT projects, is the one in which the customer defines exactly what will be delivered, the project deadline and how much it will cost.

This type of contract safeguards the company that hires the services, because there is no risk of exceeding the budget, and the company is assured that it will receive exactly what it has contracted.

The problem is that the company won’t be able to request design changes during the course of the project. This is precisely why this contract is called closed scope: it is closed to changes and it must be fully complied with by all parties involved.

So what happens if the client finds out, a few months after the project kickoff, that new features must be added to the final product?

There is no way out. It will be necessary to create another closed scope project with new guidelines. Is it clear to see how this ends up plastering the work of teams in an ecosystem that is mutable in nature, right?

In order to resolve this impasse, the open-scope contract model emerged.

In an open scope model, the company presents the problem and the solution is idealized by the parties involved. To get there, however, there is no rigidly designed path. Processes can be tailored along the journey by discovering new things and adjusting to it with each small delivery.

There is uncertainty about deadlines and costs since, in an open scope contract, these details are not defined before the project kickoff. However, at the same time, there is always the certainty that the client will only be charged for the actual hours invested in development.

In addition, the company has the freedom to make change requests, add functionalities, test hypotheses, change the course of action, and adjust the process during the discovery phase.

When this freedom exists, it is much easier to come up with the perfect solution – which is beneficial to all parties involved.

When to opt for a closed scope contract

We recommend you choose the closed-scope contract when you have clarity of the problem you want to solve and the solution you want to implement..

Generally, it is suitable for those who already have experience in the subject and on similar projects. It is a good option for when there is not too much room for mistakes or changes.

In this case, you will have a set amount of budget in hand, and you can require the project to be delivered within the agreed deadline. There is no risk of going over budget or missing the deadline. At the same time, you will receive exactly what you have contracted.

When to opt for an open scope contract

Do you consider making changes along project lifetime? Do you have an idea for a solution, but aren’t sure if it is the ideal one? Do you want to closely monitor development and correct errors along the way? Do you want the perfect solution for the project, even if it is not the one initially conceived?

If you answered “yes” to any of the questions above, the open scope contract model is ideal for your company. This contract type will guarantee you the freedom to make changes in order to arrive at the perfect solution. It will allow you to closely monitor the progress in each project phase and intervene at any time. In this contract model the service provider is also required to adapt to changes when necessary.

Did you find this blog post helpful?

We hope you have been able to understand the differences between the open and closed scope contract models.

Please feel free to contact us if you have any questions of if you would like to know more details about these contract models. We’ll be happy to help you find the best solution for your business.

See you soon!