Milestone/deliverable based contracts

[magicbuttons]

Does anyone here have experience of finding and setting up a payment-by-milestone type of contract where invoices are based on phased deliverables, and if so how did it go?

All the listings on the usual boards are for x months at y daily rate, and if I did find a client that would go for it then is there an accepted way of divvying it up - as in x% upfront, y% at delivery of each phase and z% on completion - or a standard contract template used for this sort of thing?

I'm looking into moving towards this way of working, but I'm not too sure how to go about it and my searches haven't yielded much in the way of useful info. I'm not convinced G-Cloud/Digital Marketplace are the way to go, my work isn't generally cloud-based and I'm thinking in terms of public and private sector.

[MrMarkyMark]

Big question.

Depends on what you do and what they will have to deliver to you in the terms of dependencies for that piece.

There are some clients I wouldn't even think of working like this with given their poor track record of delivering other dependent components.

[LondonManc]

What's driving you into that way of working? Would you rather crash on with 12-hour days for 2 months to get 3 month's pay for example?

[Lance]

Big question.

Depends on what you do and what they will have to deliver to you in the terms of dependencies for that piece.

There are some clients I wouldn't even think of working like this with given their poor track record of delivering other dependent components.

This......

If you’re doing milestone payments you also need a mechanism to raise delays caused by other parties. These delays need your associated costs and the client needs to agree them.
Can you afford to not be paid for months on end?
You can agree partial payments between milestones but you could well end up spending more time negotiating than delivering.
I’ve not met many consultancy firms who do this right let alone one-man contractor companies.

[magicbuttons]

Sorry, I probably should have waited until after my holiday to post that. Had a lovely time, thanks for asking.

I cover pretty much anything to do with SQL Server, BI, ETL etc. The main driver for me would be that it would remove the daily rate ceiling, and if I could agree a price upfront for a specific piece of work then I could complete it and move on to something else more quickly than if I were just invoicing by the day. Aside from that, it should allow for more flexible hours and working arrangements, and stand me in excellent stead for any IR35 issues.

Ideally the prospect of not getting paid for months on end would be negated by setting more partial milestones - though this may be wishful thinking!

[malvolio]

If you can do it, then you can forget IR35 as a constraint. However, it is difficult to achieve unless you are dealing with the client directly. Agencies are simply not willing to break their x months at y rate model since it buggers up their bonus schemes and general business risk protecting cashflow models.

The payment thing has been mentioned, but in your skillset can you genuinely define a set deliverable? If so, that's one hurdle removed.

Stage payments aren't an answer to IR35, and taken to extreme you may as well go with the traditional payment regime, not forgetting defining a stage payment point that is time based puts you back ino I35 lalaland.

[Snarf]

Does anyone here have experience of finding and setting up a payment-by-milestone type of contract where invoices are based on phased deliverables, and if so how did it go?

All the listings on the usual boards are for x months at y daily rate, and if I did find a client that would go for it then is there an accepted way of divvying it up - as in x% upfront, y% at delivery of each phase and z% on completion - or a standard contract template used for this sort of thing?

I'm looking into moving towards this way of working, but I'm not too sure how to go about it and my searches haven't yielded much in the way of useful info. I'm not convinced G-Cloud/Digital Marketplace are the way to go, my work isn't generally cloud-based and I'm thinking in terms of public and private sector.

In the middle of one now and its a f**king nightmare.

Turns out the "spec" that I was given was more of a wish list than anything else.. of course we only found this out when the first milestone came up... So the first payment was OK but then we entered a period of doing nothing while they get their S**t together and work out what they actually need the system to do and what they are prepared to pay for.

I suppose my advice would be make sure that the milestones are clearly defined and achievable AND that the client has signed them off (by client I include all of the various people with your client who want their say! - this is easier said than done!)

[Snarf]

if I could agree a price upfront for a specific piece of work then I could complete it and move on to something else more quickly than if I were just invoicing by the day.!

This was my thinking too, a few months working from home and a big fat cheque at the end.
My reality though has been that its harder to walk away. Normally I'd be able to give 1 weeks notice and leave a client now Im two weeks into the second phase of a 6 week development and its looking like it might go tits up again (See my post above) so I can either stick with the client until the project ends and put up with periods where I CANT work and they wont pay me * or cut my losses and loose the money for the two weeks that I have been working (12 hour days 7 days a week)...

* Someone else pointed out/suggested you should have penalties for delays caused by the client - I strongly suggest you do that - thats exactly what Im missing!

[magicbuttons]

You're right there about it being difficult to achieve unless working with the client directly, malvolio, but then how do I find the clients? How did you go about it, Snarf? (I've taken the delays from other parties idea on board Lance, thanks for that!)

[vwdan]

Although great from an IR35 perspective, I always saw fixed price work as nothing but a headache. Even at the consultancy level, we would always prefer day rated work.

The problem, as I see it, is the only way to win as a consultancy with fixed price is on small, short timescale projects (Great, I can increase my 'day rate' marginally for 6 - 8 weeks or whatever) or by massively loading the cost to account for the inevitable tulipe. Because of that, most customers don't really want fixed price because they (should, at least) know that's exactly what you're doing.

Paperwork is all well and good, but now you're into a mud slinging fest and good luck if it all goes legal.