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<p class=MsoNormal style='margin-bottom:12.0pt'><font size=3
face="Times New Roman"><span style='font-size:12.0pt'>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.<br>
<br>
<font color=navy><span style='color:navy'>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.</span></font><o:p></o:p></span></font></p>
<p class=MsoNormal style='margin-bottom:12.0pt'><font size=2 color=navy
face=Arial><span style='font-size:10.0pt;font-family:Arial;color:navy'>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. <o:p></o:p></span></font></p>
<p class=MsoNormal style='margin-bottom:12.0pt'><font size=2 color=navy
face=Arial><span style='font-size:10.0pt;font-family:Arial;color:navy'>Andrew <o:p></o:p></span></font></p>
<p class=MsoNormal><font size=3 face="Times New Roman"><span style='font-size:
12.0pt'><o:p> </o:p></span></font></p>
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