Why customer is not always right
Does that last sentence sound like you I didn’t think so.
Let’s take a deeper look. The paragraph above is the purest case of time and materials, where the consultant is selling you “just hours” that you are free to use as wisely or stupidly as you please. Most clients want more than that, so that the consultant takes responsibility for executing a plan and completing deliverables.
In a project of any complexity, though, the deliverables have clear dependencies on client assets, decisions and efforts. So the success of the project will depend on cooperative activities. This means that the project – and in particular the project management – is a joint responsibility. Consequently, budget, schedule, quality, performance, and feature sets are a matter of tradeoffs and negotiations. Unless you have a ton of time or money, you’re not going to get everything everybody wants. In these hybrid “T&M” projects, the bid is in the form of hourly fees with an authorized maximum, and it’s up to the twin project managers (one for the client, one for the consultant) to get the most satisfying compromise.
There are two fatal flaws in this model, both having to do with managing expectations. First, clients need to understand that they are unlikely to get every deliverable without some compromise – particularly in custom software, where nobody knows exactly what’s involved until the project is more than half done. Second, the project lead on the consultant side must actively manage expectations during every client meeting. If the project lead on the client side is weak – technically or politically – s/he will not successfully propagate the realities of prioritization and negotiation to executives in the client organization. This means the project is in trouble before it starts … and, worse, the trouble can be totally invisible to the client until it’s way too late.
[ Related: Is your vendor smarter than a 5th grader]
So let’s say you don’t want any of that: You want to write a spec, pay a price and just wait for the consultant to deliver. Can-do: It’s called fixed price.
I’ve lived in a fixed-price world, and it can actually work pretty well. But most clients don’t understand the implications of a fixed-price engagement for them.
You’re going to be paying for a lot of lunches in your project: People will be eating. The only issue is how well are the charges hidden in the bid.
By necessity, a fixed price or hybrid T&M project will have a more complicated contract and statement of work. If you want simple contracts, you’ll find them only in pure T&M projects. But no matter what form your project bid takes, make sure your lawyers read both the main agreement and the statement of work (or related attachments, no matter how they are named). The clever consultant will scatter the sneakier stipulations all over the place, hoping that the contract reviewer will doze off before connecting the dots. In the immortal words of Tom Waits, “the large print giveth and the small print taketh away.”
Want to know my firm’s top 10 sneaky contract stipulations Maybe next week. On second thought, they’re a trade secret.