When we quote a fixed price for a project we are essentially taking on all of the risk. In order to make sure we deliver exactly what our client requires we define scope very clearly and map the delivery to a timeline. Payment can be made on a monthly basis, or we can divide the cost up into milestone payments tied to specific delivery elements, such as the completion of the design phase or the development phase.
What elements do we consider when defining the price for a fixed price project?
A clear elemental component to a fixed price project is the scope of work. Clarity is not only desired it’s a must. This is an element we will collaborate on so that expectations on both sides can be met.
While some complexity can be reflected in the scope of work, highly complex projects with many interdependencies can consume more resources and hence require a weighting factor.
Projects often have a natural timeline that fits well with the scope of work. On occasion external factors can cause a timeline to be compressed. Aggressive timelines can also cause a fixed price to be weighted more heavily, and the same can be said for long timeframes that are telescoped beyond the natural length implied by the scope.
The experience level of the resources from both customer and service provider are also a factor to be considered when fixing a price for a project. Naturally more experienced resources produce work product more rapidly and therefore can impact project timelines favorable and the converse is true for lesser experienced resources.