How to succeed with fixed price projects

via GIPHY

Bidding on projects is an art as much as a science. Exciting a customer, around skills and past successes is as important as being able to see details that haven’t yet materialized.

Join 38,000 others and follow Sean Hull on twitter @hullsean.

So how does one approach this challenge. One way is to steer towards time and materials, and let things evolve in their own way. But that may not always work.

Here are my thoughts on how to navigate a fixed-fee project.

Overhead costs

When thinking about costing of projects, there are a lot of hidden costs. For fulltime folks, there is the cost of overhead around office space, supplies, training, liability & health insurance, retirement, time off and even severance in some cases.

There is also the cost of time, to hire the right team, manage them, and bring all the pieces together to success product out the door.

Lots of intangibles.

Related: Can progress reports help you achieve successful engagements?

Evolving scope

When looking at a project, to come up with a realistic fixed bid, the scope must be carefully considered. If the bridge has two spans at either end and you decide to add one in the middle, does that mean a project of twice the size?

Both the vendor and manager must together attempt to break down the full scope into smaller pieces. Inevitably there will be some amount of emergent tasks and the scope will change and evolve.

Both consultant and customer must be realistic about this. You can call them product features or in the agile universe stories, but at the end of the day when you have many pieces surprises will happen.

The devil is surely in the details!

Related: How best to do discovery in cloud and devops engagements?

Horse Trading Skills

Given that we know things will change, the customer and vendor should plan for change.

If both parties have a realistic perspective, there is the possibility of exchanging original scoped items for emergent or evolving scoped surprises.

That is both need to be comfortable doing some sort of horse trading, to keep the levels balanced. The client then gets some leeway, as does the consultant in deliverables.

It’s not easily, but truly necessary in a fixed priced project. Because a scope never really sits still.

Related: Why do people leave consulting?

Underbidding

Another approach that may work is underbidding to win the project. Here your scope is expected to change, and it becomes a painful process each time. If you are strong on sales, this may work, but you’re sure to get an endless stream of change orders, and many many scrapes and bruises.

Related: Why I ask for a deposit

Get more. Grab our exclusive monthly Scalable Startups. We share tips and special content. Our latest Why I don’t work with recruiters


Also published on Medium.