I'm interested to know how you manage the risk inherent in project-based billing.

In my experience it is simply unworkable: the client will provide the vaguest of specifications and providing them with a set-in-stone price raises unrealistic expectations. The requirements are simply too fuzzy at the outset of a project to be able to price it accurately.

Of course the solution only becomes more concrete as the project progresses and requirements change and crystallize based on feedback. This is expected behaviour of course, but I've never been able to reconcile it with project-based billing.

Do you simply allow a certain buffer zone and take the good with the bad?