Fixed Price Contract - How does it work?

[zonkkk]

I am looking to offer my services to my current client on a fixed price contract basis.
Contract chain is: Client -> Agency -> My LTD.

Say I have negotiated 50% upfront and 25% mid-contract based on deliverables, and 25% at the end.
How does it work from a practical perspective, in terms of payments?

Does the agency pay me when they get the money from the client? Do I specify payment dates in my contract with the Agency?

Any tips from people that have done this before, welcome.

[ladymuck]

I've done this but direct to the client, not that the mechanism would be any different.

I would expect to invoice them the agreed amounts at the agreed intervals and, on request, be prepared to supply evidence that the required deliverables were accepted by the client.

Make sure you get that before you invoice. It could be as simple as an email stating "as per the contract schedule, MyCo Ltd will be invoicing in respect of deliverables A,B,C. Please confirm these have been satisfactorily received"

This gives you opportunity to make sure any niggles are closed out rather than finding out when the invoice gets challenged.

[GhostofTarbera]

Fixed Price Contract - How does it work?

Unless you nail down the requirements with a fine tooth Combe the client will keep changing there mind as they do daily and you will never get paid

Get a proper change control process in place

Is this just just a whizzh to try to escape IR35? Where your agent will still charging Clint by the day?

Sent from my iPhone using Contractor UK Forum

[ladymuck]

Missed a bit in your post.

Whether the agency pays you when the client pays them, or they pay you on different terms will be in the contract. There will either be a clause that says "payment within X days of receipt of invoice" or "paid on X days after receipt of funds from client" or words to that effect.

[BlasterBates]

I've done fixed price projects, though working for other companies. I would advise writing an acceptance test specification, derived from the original specification before you start implementing.

Once they've signed off on that, they can't simply introduce changes, and it will resolve misunderstandings. It shouldn't take more than a couple of days. It makes implementation much easier as you have something to test against.

[zonkkk]

Unless you nail down the requirements with a fine tooth Combe the client will keep changing there mind as they do daily and you will never get paid

Get a proper change control process in place

Is this just just a whizzh to try to escape IR35? Where your agent will still charging Clint by the day?

Sent from my iPhone using Contractor UK Forum

The requirements are already nailed down. The contract will specify implementation of requirements doc. version x.
The contract will include a set amount of hours my LTD will support the client's employees to perform system testing.
As well as a set amount of hours - maximum limit - I will be able to bill for bug fixes.

The Client -> Agency contract will be changed accordingly.

I am happy that the current working practices are already outside IR35; but this is in response to the client's risk aversion with regards to IR35.
We are doing this, so that our business relationship is as far away from an inside determination as possible.

[zonkkk]

I've done fixed price projects, though working for other companies. I would advise writing an acceptance test specification, derived from the original specification before you start implementing.

That is very good advice, I haven't thought of. It will just mean I do part of my own testing work upfront!

[BlasterBates]

That is very good advice, I haven't thought of. It will just mean I do part of my own testing work upfront!

Well you will of course be testing your code anyway when you're finished with the implementation, so what it means is you define what tests you will do and what test results you expect and you can be confident the client will accept it. You can also include performance criteria, i.e. how long you expect a set of results to deliver.

Often, writing the spec. will uncover ambiguities and will clarify them, which will save you time in rework when you deliver. Requirements specifications are open to interpretation and endless arguments, test specifications aren't.

[zonkkk]

Well you will of course be testing your code anyway when you're finished with the implementation, so what it means is you define what tests you will do and what test results you expect and you can be confident the client will accept it. You can also include performance criteria, i.e. how long you expect a set of results to deliver.

Often, writing the spec. will uncover ambiguities and will clarify them, which will save you time in rework when you deliver. Requirements specifications are open to interpretation and endless arguments, test specifications aren't.

Exactly! You're the type of person I would love to work with! Clear and to the point!

[northernladuk]

Is this all just plucked from thin air at the moment or do you have a foot in and this could be a possibility. Doing fixed price via an agency isn't going to work very well I wouldn't have thought. You should be going direct to client. I'd expect the agency will still manage it via a daily rate in the background and just keep your money till you want paying or something daft.

Gotta get rid of the agency IMO. It's not helping one iota and adds a huge element of risk.