[consulting] Estimation-Blowout case-studies wanted

[Elvis McNeely]

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That is an interesting angle Andrew. Worth thinking over and adding to 
the process.

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Elvis McNeely
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Andrew R. Kelly wrote:
> One strategy a friend has pursued with some success is to put a client 
> friendly hour cap on fixed rate work. Most clients are willing to be 
> fair (tho often not generous) about compensation, so if you spend a 
> little time explaining the issues involved in estimating hours (new 
> requirements coming up, guessing how much time will be wasted by 
> communications snafus, weird bugs in 3rd party code, etc.), they're 
> often cool with putting a max hourly cap on work. Particularly if you 
> mention you usually charge $x an hour for hourly work and skew max hours 
> in their favor, it feels like they're getting a discount.
> 
> I used to work at IBM Global Services and we called this type of 
> contract “Fixed Price – Best Estimate”.  Lots of people raise their 
> eyebrows when I say we successfully convinced clients to go with this 
> structure, but Gwen hit on the strategy points that lead to winning that 
> battle.
> 
> A bit of wording that may help – during negotiation focus your 
> conversations on project risk mitigation.  You feel the brunt of the 
> risk but in reality, your client has risk as well, if you fail they may 
> have other things relying on this project that will fail.  If you think 
> in this manner you’re working as a team to mitigate risk.  The model 
> above allows your effort estimates and rates to reflect your risk-free 
> “best estimate”, but allows for sharing of risk should things not go as 
> planned.  If they want zero risk on their end, then you can offer a firm 
> fixed price contract with a hefty risk premium.  The reality of business 
> is that with risk a client can accept it (via pure T&M model), mitigate 
> it (via the above contract model) or deflect it (via a firm fixed price 
> model).  Tweaking your explicity/implicit hourly rate to map to these 
> models will help both sides arrive at the right model. 
> 
> Andrew  
> 
>  
> 
> 
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