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  • Fixed price or T&M - the age old question

    It seems like T&M is coming into fashion after years in the wilderness. Ever since I first started working on projects, it seems that customers have preferred the certainty of a fixed price rather than the perceived uncertainty of a rate card. There is an understandable fear that T&M is like signing a blank cheque. But of course it isn't. Recent years have seen customers having their cake and eating it by using capped fees - basically an agreed budget based on a rate card and work breakdown estimate - the supplier can't exceed the budget without prior approval. When approval is sought, they turn round and refuse approval unless there is a change of scope. And of course they don't want lots of assumptions and caveats. And they don't want the budget to include contingency (typically 25% or more on a fixed price project). T&M also gives them much greater transparency and control over the tasks that need to be performed : "we don't want you to do X - we'll do it". Ironically, it's suppliers that favour fixed price these days, on the basis that they avoid micro-management and can get on and do the job. How times change !

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