Honestly, you are scaring me. You sound like you really want to do this, and it is just possible it could go well for you, but....
In permie days, we often did fixed cost work. I've probably bid out more than 1000 fixed price jobs, from 2 day jobs to 6 months. On anything longer than a month, we almost always took a beating. It was worth it because of the nature of our business, these were jobs for long-term clients and we were making a lot of money off the relationship even if the fixed cost job lost money -- a drop of water in the ocean.
Unless there are compelling business reasons (you can't get other work, you retain the IP, it's going to make for a hugely profitable long term relationship, etc), I wouldn't touch a fixed cost job for eight months (or anything over three months, really). I just wouldn't do it. Yeah, I'm in a position to turn down work and not everyone is. I get that.
If you can split it into pieces, then it becomes more tolerable. You have a two month and a one month and a three month and a two month piece, say. You bid the first two month job and give an >estimate<, not a fixed cost, for each of the succeeding pieces. If you break even on the first, then you can turn your estimate on the second into a firm quote. If you make a killing, you can even reduce your quote on the second. If you lose money, you increase it. And then after the second, you can fix the cost on the third piece, and so on.
You don't know what you are doing on this. You are not experienced in fixed cost jobs. You don't know the UAT pitfalls. I don't know if you have a plan for if it turns from 8 months into 12, or 16. Will you starve if that happens? Will the client say you've failed to deliver and refuse to pay you at all? Have you discussed how they'll respond to delays? What happens if you get ill, or have an accident, and can't work for 2-3 months?
You probably haven't talked to the client about what happens if you deliver early -- will they be glad with the early delivery, or will they be upset that you got rich off of them? If you deliver in six months, will they expect you to take a cut on the next piece, or will they just accept that you've taken the risk and you've come out good this time, and next time could be different?
I like these jobs, but none that big, and I've got some experience on bidding jobs. Like I said on that other thread, you are selling the client insurance against the risk when you fixed a price. They need to pay for it. My policy is that for a one month job, that insurance is 25% of the contract. I nail down my estimate, and add 25%. If I am really, really confident, I might shave it to 20%, if I'm nervous it might be 35%. For an eight month contract, I probably wouldn't do it at all, but if I did, the premium would be at least 50% (so I'm covered if the thing runs 12 months), and I'd probably want 75%.
I took on a 3 month contract last year, because it gave me a great opportunity to take on a new employee and see how things went. That was different. I had a sound business reason that justified taking a loss. I only took a 10% insurance premium on it because I wanted the job. I lost some money on it. At 25%, I'd have been ok. But I've probably put together 25-30 3 month bids in my career. You don't sound like you've done anything like that.
But you do want the job, that's pretty clear. And that MAY justify reducing the premium. Your lack of experience in bidding jobs calls for a larger premium. So does the length of this job. If you want the job, at least put a big risk premium on it, and tell your client that is what you are doing. Maybe, if the first two pieces go well, you can give him a rebate on the cost of the third, but that would be a surprise.
Good luck with it.
In permie days, we often did fixed cost work. I've probably bid out more than 1000 fixed price jobs, from 2 day jobs to 6 months. On anything longer than a month, we almost always took a beating. It was worth it because of the nature of our business, these were jobs for long-term clients and we were making a lot of money off the relationship even if the fixed cost job lost money -- a drop of water in the ocean.
Unless there are compelling business reasons (you can't get other work, you retain the IP, it's going to make for a hugely profitable long term relationship, etc), I wouldn't touch a fixed cost job for eight months (or anything over three months, really). I just wouldn't do it. Yeah, I'm in a position to turn down work and not everyone is. I get that.
If you can split it into pieces, then it becomes more tolerable. You have a two month and a one month and a three month and a two month piece, say. You bid the first two month job and give an >estimate<, not a fixed cost, for each of the succeeding pieces. If you break even on the first, then you can turn your estimate on the second into a firm quote. If you make a killing, you can even reduce your quote on the second. If you lose money, you increase it. And then after the second, you can fix the cost on the third piece, and so on.
You don't know what you are doing on this. You are not experienced in fixed cost jobs. You don't know the UAT pitfalls. I don't know if you have a plan for if it turns from 8 months into 12, or 16. Will you starve if that happens? Will the client say you've failed to deliver and refuse to pay you at all? Have you discussed how they'll respond to delays? What happens if you get ill, or have an accident, and can't work for 2-3 months?
You probably haven't talked to the client about what happens if you deliver early -- will they be glad with the early delivery, or will they be upset that you got rich off of them? If you deliver in six months, will they expect you to take a cut on the next piece, or will they just accept that you've taken the risk and you've come out good this time, and next time could be different?
I like these jobs, but none that big, and I've got some experience on bidding jobs. Like I said on that other thread, you are selling the client insurance against the risk when you fixed a price. They need to pay for it. My policy is that for a one month job, that insurance is 25% of the contract. I nail down my estimate, and add 25%. If I am really, really confident, I might shave it to 20%, if I'm nervous it might be 35%. For an eight month contract, I probably wouldn't do it at all, but if I did, the premium would be at least 50% (so I'm covered if the thing runs 12 months), and I'd probably want 75%.
I took on a 3 month contract last year, because it gave me a great opportunity to take on a new employee and see how things went. That was different. I had a sound business reason that justified taking a loss. I only took a 10% insurance premium on it because I wanted the job. I lost some money on it. At 25%, I'd have been ok. But I've probably put together 25-30 3 month bids in my career. You don't sound like you've done anything like that.
But you do want the job, that's pretty clear. And that MAY justify reducing the premium. Your lack of experience in bidding jobs calls for a larger premium. So does the length of this job. If you want the job, at least put a big risk premium on it, and tell your client that is what you are doing. Maybe, if the first two pieces go well, you can give him a rebate on the cost of the third, but that would be a surprise.
Good luck with it.
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