When consulting with Dynamics SL and Dynamics GP, we often find ourselves in the position of being asked to setup certain modules on a fixed fee or fixed price basis. 

From the user’s standpoint, this is extremely understandable.  They want to know what they are going to pay.  They don’t want to pay more than what they have agreed to-kind of like a purchase order where the client is in control of how much is spent.

There are lots of good things about fixed price engagements.  They make the consultant give the higher part of the estimate-should you be doing business with someone you don’t know.  After all, if we give the client a low number, they are still going to hold us to that, so we have no incentive to do that-unless we really need work.

Another good thing about the fixed price engagement from the consultant’s standpoint is that providing fixed price quotes forces us to become better at what we do.  Efficiency is rewarded and inefficiency is punished…after all we are wasting our own time if it takes longer to complete the work within the scope.

Fixed price engagements tend to be defined much better.  This is best for both parties.  Changes are less often and smaller when the scope of what is being done is very clear.  As a consulting organization, this can be painful however as we often have to give up billable resources to define granular scope-and not get paid for this valuable work.  The client will usually consider this selling work rather than requirements definition work.

The primary issues I have with fixed price work is that usually the clients’ staff is an important part of our ability to complete the work on time.  If the client does not give me their best people to do the project and we end up training people 3 times when it should take one time, who loses?

The other thing that I don’t like about fixed price work is that it forces us to “nickel and dime” clients even with a very tight scope definition.

Most engagements have scope creep.  If I don’t have a client sign a work order for each change, I am going to be giving our time away.  If I whip out a change order each time the client has a suggestion, I become annoying and only interested in my firm’s best interests-not theirs..or so it seems.

In the end, I vote for fixed price work when we can control the definition and pace of the work and if our firm, Boyer & Associates, is completely responsible for its creation-not relying on anyone on the client’s side to be available, interested, qualified, diligent, etc. 

For work where we are relying on clients for any of the above, even very good clients, and we have a lot of them-I prefer time and materials so that we don’t charge too much or too little for valuable work from experienced people.