What is the difference between a fixed price bid and a time and materials bid?

Remember to provide a simple comparison between the two models within your answer. Offering a proper application of the concepts to real world examples will demonstrate understanding and give you an opportunity to establish your ability to clearly and easily explain the differences between the two bid styles to future clients.

"A fixed price bid is given up front in a project and a client is offered a number that represents their total cost. Sometimes the bid shows the breakdown between labor and materials, other times it is presented as a lump sum. A time and materials bid typically gives an estimate for the labor involved and an estimate for the materials. These estimates are often given in ranges as various factors that change the cost may arise over the course of a project.

For example, an electrician may give a fixed price bid to install a new light fixture in a home. The work is fairly straight forward, and there are a limited set of variables that will change the expected profit margin. Conversely, a contractor may give a time and materials bid for a new bathroom buildout project. In this case, the labor and materials estimates may shift depending on unforeseen challenges and the homeowner's material selections. The bid represents an estimate as opposed to a fixed price and the customer is expected to understand the final cost may vary."