Reply to: Charging by deliverables (start to finish) model ...

[vetran]

I did fixed price for a few websites and roll outs. problem is that customers think fixed price means movable deliverables. You spend most of the time telling them it will be extra even though they signed the contract.

Did fixed price on some other stuff and made a mint.

6p's are your friend!

[vetran]

Wrong thread or is this the perils of fixed price work?

I posted a new thread, maybe vbulletin was fixed price?

[GazCol]

BBC News - Women 'held as slaves for 30 years'




poor sods.

Wrong thread or is this the perils of fixed price work?

[vetran]

Another set of nutters

BBC News - Women 'held as slaves for 30 years'

Three women have been "rescued" from a south London house as police investigate claims they were held as slaves for about 30 years.

poor sods.

[doodab]

development work often involves so much interaction with clients, iterative working, company politics and uncertainties that it's perhaps not wise for a small business to work this way for a huge organisation.

Even big consultancies will tend to push for T&M where extensive customisation, bespoke development or integration work is involved. It tends to be pretty risky otherwise. Another thing I've seen is consultancies writing watertight fixed price contracts and then billing huge quantities of changes on a T&M basis. So the client loses flexibility and ends up paying more or getting something they don't want. Many a white elephant has come into the world that way.

[Mich the Tester]

I work in BI and analytics though, not too sure how well this model would translate to IT development or if it’s even feasible.

I think it's rather risky in development; testing can be run this way if it's done with timeboxes (awful buzzword alert) and charged per round of testing, in BI or statistics it can work where a clearly defined set of reports is required, or training can work, but development work often involves so much interaction with clients, iterative working, company politics and uncertainties that it's perhaps not wise for a small business to work this way for a huge organisation.

[NotAllThere]

I've been charging for deliverables for a few years now for a couple of clients. The number of billed days is not connected to the number of days worked. We agree up front how many "days" it will take. It helps the client as they then don't have to tax the tiny minds of the purchasing department.

[GazCol]

This is almost exclusively the way that I work now – granted I have had to take a day rate contract a couple of times a year when things have been a bit dryer. The cost benefit to the client is that it should cost no more than paying somebody a day rate as there’s no extra amount to pay if the contract overruns (obviously as a result of the contractors actions, rather than client delaying on delivery) which, as a result, leads to a project being delivered on time more often than not.

Although there’s potentially no immediate tangible rewards from my perspective, there is: finishing a project early lets me fully focus on the next one; some clients are open to providing financial rewards for completion of a project early or for including extra functionality that was not thought of during the scoping process, you’ve got, more or less, total direction and control over the way that you work and where you work from, and, as sas mentioned, there’s the peace of mind that you’re as far removed from IR35 as possible.

The only thing I find unsettling is the prospect of causing an almighty error that means a 6 month project takes 12 to complete but I only get paid for 6. Great from an IR35 perspective, but that doesn’t pay the bills.

I work in BI and analytics though, not too sure how well this model would translate to IT development or if it’s even feasible.

[d000hg]

...i.e. proper consultancy, as opposed to bum on seat, "time and materials", daily rate is so much more lucrative - not to mention non-IR35 since (1) the "right to substitution" is implied and (2) it's easy to have multiple contracts at the same time and (3) you work from your own premises.
Basically you are expected to bill like the big boys: since I was new to this game I was a bit tentative, but I distinctly get the impression from my clients that I'm good value (i.e. undercharging)
That is going to change.

Just because you're a consultancy or real company doesn't mean you have to charge on this basis, many still charge on a time & materials basis or have a monthly/yearly budget.

Pure deliverable-based pricing is more for big companies doing tenders, isn't it?

[sasguru]

I've done this a few times, once for a small usability design company who needed more functional test knowledge in a fixed price project and sometimes for firms that want testing training; quite lucrative but short term. But I also have a good mate who's done a fixed price project as PM at a multinational and says he'll never do that again because he found himself working silly hours and treating those around him like tulip to try and get it done reasonably within his own budget, and eventually found himself discussing contracts and various legalese sub-paragraphs with corporate lawyers from his clientco; if you end up in that position as a small consultancy then you don't stand much chance because the business relationship is so heavily skewed in their favour.

Charging by deliverables might work better if the deliverable is defined well and the scope is limited and clear, and that's why I do it when I give training or coaching seessions; basically I charge a fee per lesson and if a lesson happens to run 10 minutes longer or shorter but the content has been handled then it usually goes OK and I've found I can make a fair whack of dosh in a short time between contracts. Thing is, to keep my network and credibility I have to do the nitty gritty in longer contracts, so I don't think it's a good primary business model for me; I'm not one of the 'famous names' in the world of testing like the Bachs, Bolton, Kaner who can earn a very good living by giving courses and speeches and actually I don't want to be one of them as they seem to spend a lot of time either in aeroplanes are having heated arguments with people while I'd rather be testing. Anyway, for me it's good as a secondary income stream that occasionally adds up to quite a lot.

I guess it's horses for courses. I can see that testing could get out of control, whereas the questions my clients want answered are generally clearer.
I do take your point about managing these things carefully, it could be that I've been lucky for now and, in fact, the 2nd project I'm doing on this model is proving a little more complicated than the first.

[Mich the Tester]

I've done this a few times, once for a small usability design company who needed more functional test knowledge in a fixed price project and sometimes for firms that want testing training; quite lucrative but short term. But I also have a good mate who's done a fixed price project as PM at a multinational and says he'll never do that again because he found himself working silly hours and treating those around him like tulip to try and get it done reasonably within his own budget, and eventually found himself discussing contracts and various legalese sub-paragraphs with corporate lawyers from his clientco; if you end up in that position as a small consultancy then you don't stand much chance because the business relationship is so heavily skewed in their favour.

Charging by deliverables might work better if the deliverable is defined well and the scope is limited and clear, and that's why I do it when I give training or coaching seessions; basically I charge a fee per lesson and if a lesson happens to run 10 minutes longer or shorter but the content has been handled then it usually goes OK and I've found I can make a fair whack of dosh in a short time between contracts. Thing is, to keep my network and credibility I have to do the nitty gritty in longer contracts, so I don't think it's a good primary business model for me; I'm not one of the 'famous names' in the world of testing like the Bachs, Bolton, Kaner who can earn a very good living by giving courses and speeches and actually I don't want to be one of them as they seem to spend a lot of time either in aeroplanes are having heated arguments with people while I'd rather be testing. Anyway, for me it's good as a secondary income stream that occasionally adds up to quite a lot.

[sasguru]

The real issue is the clear deliverables. There are plenty of fixed price IT contracts but they invariably involve a fair slice of pre-sales / proof of concept / discovery work done at cost to the consultancy before an SoW can be produced. A large organisation can afford to take that on but it's proportionally riskier for a one man band as they'll struggle to do this across multiple clients.

That's an excellent point. It has proved to be a slight issue with my current client (hence my hard work and lack of posting ). In the end I persuaded them to pay for some of the initial discovery/POC work as an extra fixed-price cost.

[russell]

Yes these engagements are shorter: the two I've had this year were 3 and 4 months respectively. But that's all you need since they pay far more (more than double) than the average IT dev contract: that's both because of the charging model and the skill set.
I don't see why IT dev where there are clear deliverables couldn't do the same, but you do need some negotiation skills and the ability to present to senior staff.

This is why a lot of devs will/cannot do it, they have trouble making small talk with other humans let alone spinning to people that hold the purse strings.

[doodab]

I don't see why IT dev where there are clear deliverables couldn't do the same, but you do need some negotiation skills and the ability to present to senior staff.

The real issue is the clear deliverables. There are plenty of fixed price IT contracts but they invariably involve a fair slice of pre-sales / proof of concept / discovery work done at cost to the consultancy before an SoW can be produced. A large organisation can afford to take that on but it's proportionally riskier for a one man band as they'll struggle to do this across multiple clients.

[sasguru]

It is the way forward. Do you tend to find these engagements are typically shorter than day rate ones though?

Sometimes a long term gig on nice rate is hard to turn down.

The ultimate would be a retainer and a payment depending on the measurable uplift in profit!

Yes these engagements are shorter: the two I've had this year were 3 and 4 months respectively. But that's all you need since they pay far more (more than double) than the average IT dev contract: that's both because of the charging model and the skill set.
I don't see why IT dev where there are clear deliverables couldn't do the same, but you do need some negotiation skills and the ability to present to senior staff.