Fixed Price or Time & Materials?nnAs a customer, I might w…

Fixed Price or Time & Materials?

As a customer, I might want Fixed Price (FP). because I perceive that the risks can be shifted over to the Consulting Partner.
Where the project has complexity, and a lot of unknowns with many suppliers, systems and moving parts – this feels like a safer bet.
For the customer.

As a supplier, or the Consulting Partner, I want to avoid FP projects, because of the risks, and the unknown unknowns that would erode my margin.
If the client insists on a Fixed Price, I will make sure to price in all those risks, and more – into my premium.
Experience will allow me to gauge that balance – of how much risk I can price into the proposal before the customer has a heart attack when she sees the price.

I can understand why clients want certainty.

In order to provide an FP proposal, the supplier will need to spec out the whole project in minute details, so that they can design the technical solution and identify accurate estimates.
Anything else will be deemed a chargeable change order.

When I have to implement an FP project, they are generally quite high in conflict, as I will study and memorise the Statement of Work and the requirements, along with all the assumptions, constraints and details.

This is because as a Project Manager, my job is to deliver the contract and stay within the scope.

These aren’t my favourite projects.
They are stressful (for all parties), and apply unnecessary burden on the relationship, and it gets in the way of getting the job done.

I’m all for certainty, but not when it smothers the relationship.


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