Reply to: Specing up work!

[DadSoftware]

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.

Thanks for all the advice and listing your concerns.. I actually put off sending over a quote and raised a lot of the issues you have flagged with the Director. I explained that I would at least be charging 130% and would break down the work into smaller manageable chunks, over a few week and a couple of months at the very longest. He was completely on-board with this! I'm currently negotiating so don't want to go into too much detail now but will keep you all update. Again thank you for the advice... very much appreciated.

[KentDogWalker]

Well yeah.... it's a day rate, the time aspect of the rate is included by the fact it's called a days rate

How can you say/justify its double my days rate?

[dogzilla]

You mean double your days rate * time?

Well yeah.... it's a day rate, the time aspect of the rate is included by the fact it's called a days rate

[KentDogWalker]

In my experience the total price of a project is usually double the day rates but that will be because there is a business behind the quote.

You as a one man band should stay away from a fixed price contracts unless you have lots of experience designing solutions and coming up with water tight scopes as well as writing water tight contracts.

Otherwise you should simply give them a detailed scope an estimated timeline, costs will be simply based on your day rate. Anything else is madness. Let them take the risk of the over-run, if they don't like it then they need to find a consultancy who will give them a quote twice as big.

You mean double your days rate * time?

[northernladuk]

+1 to all the above.. Well the first bit that I read anyway...

[WordIsBond]

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.

[tomtomagain]

Agreed... not been contracting very long so huge learning curve for me to get over quickly!

I was thinking of something simple where I would offer one month after all the deliverables have been hit, where I address bugs, User Acceptances Testing and train their permie developers on the application for them to take over - what do you think?

You are assuming you can hit all the deliverables .... that "bugs" won't really be change requests or other out-of-scope work, that the UAT doesn't throw out any massive surprises ( such as they decide that now they see the end result, they didn't really mean they wanted that ).

You've said it's 8 months work. Are they proposing you get paid after 8 months? Or monthly? Or on some specific schedule?

For fixed price work you have to have a fixed-spec ( and for 8 months work, its' got to be detailed ) AND you have to have a "change-control" process. Agreed upfront.

Are the other "permie" developers going to have a say on the implementation? For example, is there a "Team Lead" or "architect" type of character who might decide the way you want to implement is "against company policy" and try and force you down a different route?

I am not trying to be negative. It might work out really well for you. But don't under estimate the risk you are taking on if you try this fixed-price.

If you quote them 8 months and do it in 4 ... will they pay you? How will they react?

If you quote them 8 months and it takes 12 ... will you keep doing it? Imagine this scenario ... it's 3 months late, so you've effectively worked 12 weeks for free. The final UAT user is a pain-in the butt. She's been on holiday for 2 weeks, likes to make minor changes just to prove her "power". How do you feel about completing the job? What will you do to bring it to a close? Does your contract cover you for this type of behaviour?

[Contreras]

Quoting for work takes time. For an 8-monther you could easily spend a week or more on this, after which the client with no commitment or investment in you may just sit on it. A more consultancy style approach would be to write them a 'proposal' - and bill for it as T&M.

It's part demonstrating your capability and part de-risking the future work (both for you and them) and takes as long as it needs to scope the work and present an outline design.

One output from this, crucially, needs to be an agreed list of deliverables and milestones (measures of success by which you'll be paid). If you can get to that point and feel comfortable with it then fixed price is a possibility, otherwise offer to continue with T&M and if they don't want that then be prepared to drop it.

[DadSoftware]

WTS. I've done it, but only for a 4-week piece of work and even then I had a half-way milestone where I could invoice for 50%.

Be very sure about what happens at the end. You could finish the work only to have them keep calling you back to make small changes before they approve the whole thing and pay you. By then you might be working somewhere else.

Agreed... not been contracting very long so huge learning curve for me to get over quickly!

I was thinking of something simple where I would offer one month after all the deliverables have been hit, where I address bugs, User Acceptances Testing and train their permie developers on the application for them to take over - what do you think?

[DadSoftware]

An eight month piece of work is going to contain a lot of uncertainty .... there is no way you could have accurately spec'd that piece of work.

Even if you have a decade of experience in the domain subject ..... in fact *especially* if you are a domain expert, because as "experts" we tend to brush over the difficulties and assume everything is easy and forget the fact that most projects go off course, not because of the technology, but because of the people involved, shifting corporate priorities and politics.

For me this would have to be T&M.

However you understand the client and operating environment so it's your call.

Thought : Can you retain the IP? If so then potentially you have the opportunity to get them to pay for you to build a product that you can later resell. Then you have the chance of building a different type of business.

Thanks for the feedback and your other post - great info!

I completely understand where your coming from, and any other situation I would take that advice. This situation is slightly different (have a look at my previous post) and I think it could work for me!

Very interesting point in regards to IP.. will enquiry when I have my meeting next week - thanks again!

[DadSoftware]

In my experience the total price of a project is usually double the day rates but that will be because there is a business behind the quote.

You as a one man band should stay away from a fixed price contracts unless you have lots of experience designing solutions and coming up with water tight scopes as well as writing water tight contracts.

Otherwise you should simply give them a detailed scope an estimated timeline, costs will be simply based on your day rate. Anything else is madness. Let them take the risk of the over-run, if they don't like it then they need to find a consultancy who will give them a quote twice as big.

Thanks dogzilla... I think you're on the right track with your think here. If I'm honest I'd feel more comfortable going down this route. There's a few reason that I think it could work well for me in my current situation.
1. I proposed the changes, using technologies that I know very well.
2. The application would essentially be a standalone application, with functionality that I've demoed.
3. The architecture of the application and even the functionality is only being speced out with what I've shown them is possible.

I guess I'm trying to say that I demonstrated how things could be done differently that client hadn't even envisaged, so I would be in the driving seat with getting application functionality in. I'm also very confident of the tech we will be using and hungry with getting a really good job done!


That said, I do need to ensure I protect my interest and any contract I will get checked over legally. Thank you for highlighting the pitfalls, much appreciated and if there's anything please let me know!

[DadSoftware]

Try and find out what their budget is - you don't want to come in at 50K if they think it's going to cost 100.

Will do - cheers.

[DadSoftware]

I'd be very wary of providing a fixed price for a project unless I had undertaken and delivered this type of project myself a few times already and gotten a really good idea of what was involved.

As someone has already pointed out above, you'll need to take into account post go live support of the project and all that goes along with it, which might well stop you taking on a new gig when this one is "complete" as you may be supporting for a good few months later and taking/answering support calls in a new gig is not going to be easy.

Thanks for the advice.. I've actually been mocking out already a lot of what I have proposed to just to make sure I'm not falling in the trap of being overly optimistic

[DadSoftware]

Check out the link supplied previously, lots of good information there. As well as all the caveats mentioned, it needs to be said that it is a great opportunity, it could move you to away from being a bum-on-seat contractor into a proper b2b relationship (if that's what you want).

Thanks Antman.. I'm actually really motivated with making this a success - any more info on b2b setup you could point me towards?

[DadSoftware]

Erm.. I'd be very careful here. There is so very fundamental mistakes or oversights here. Thinking the agent might have helped is beyond naive. He'd have pulled your handcuff and scuppered the whole thing and your accountant does your books.

The director is probably looking for a price lower and quicker than your day rate as well TBH. You've offered him more with a dose of uncertainty on the top.

Work out how long it will REALLY take you first of all. Why not charge him more and do it quicker? Can you get a cheap sub in to get the costs down but keep your profit the same while you are doing something else?

I agree that the director is looking for the cheapest he can get me! He'd be hard pushed to get me any cheaper than my current day rate as not on very much right now. I do think he's trying to get me on a Fixed Price as to okay the project from the Parent Company. Since my last post he has secured R & D funding for the project that I proposed. There's a lot of internal politic with the permie developers that I cant go into but I am convinced he has as much on the line as me to make ensure the project is a success!

Get your point in regards to time schedules... but what I'm proposing, even though is 8 months, is the first stage of at least three stages and I want to focus on really getting the initial stage right so to complete more work further down the line.


I'm actually a little worried replying back to you! know how us northern lads can be very blunt