[zdragnar]

There are two common cost structures: estimated time and fixed bid.

Fixed bid is relatively simple: company says project will cost X dollars, and takes on the risk of that amount ending up being too low. As a consequence, these projects tend to be very rigid; if a client wants any changes made to the plan or outcome, typically that involves another charge (unless certain revisions were allowed for up front).

Estimated cost is just that- firm offers a guesstimate of the total project cost, but only actually charges for the total number of human-hours worked. These contracts can be a bit more flexible- sales may tweak the hourly rate to keep clients happy, changes can be incorporated if the client is willing to sign off on a new estimate, etc.

One newer and slightly less common variation during initial development is capacity based- again, a very rough outline for project timeline may be put together up front (businesses like plans) but the company bills a flat rate to provide hours per week, rather than progress towards a dedicated plan. This allows for a more "agile" workflow, and is also happens to be a common arrangement for maintenance phases where a client may choose whether to add new features or work out existing kinks without needing to sign a new agreement for every little feature. It offers the most flexibility for clients while also putting most of the risk on them as the development shop hasnt agreed to any specific outcomes.

[gadders]

Normally on a fixed bid project, the consultancy hopes for change requests. That is where they make a lot of their margin.

At that stage, you have the client company over a bit of a barrel. Unless they want to throw the consultancy out and start the bid process again.

[zdragnar]

Smaller consultancies rely on good relationships for recurring projects and / or referrals, so I haven't seen this behavior as much from them. That said, I do not think it is uncommon for a consultancy to try to make up losses on the original fixed bid with higher margins on changes or future work. It really depends on the people running the show, especially on the sales side of things.