Fixed Bid vs Time & Materials. Why Technology Projects Fail?
Hint…
It’s because of fixed bid pricing.
Why?
Because the facts around requirements, scope, and time are critically important.
And with fixed bid pricing, it’s near impossible to get these right.
Really, at best, the facts you have are really just vague ideas of future expectations.
And that creates a lot of risk to the project.
What type of risks?
In today’s 2 minute episode, I outline 3 BIG ones you’ll need to mitigate.
– Risk is the default on day one.
– Everyone becomes defensive and takes a stand.
– Both sides fight momentum.
Over the past decade, I've helped dozens of companies better understand Adobe technology and project delivery. Along the way I've had the opportunity to see a lot of what works and a lot of what doesn't. My goal is simply to share with YOU what I've learned. And I hope that gives you back a little sanity in your day.
💡 What do you think? Share your thoughts in the comments and let's have a conversation about it.
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Transcript:
Fixed bid versus time and materials. Why technology projects fail?
Okay, so this is a big one fixed bid or time and materials.
Even though both pricing models has their pros and cons. Today. We're just going to talk about fixed bid and why that as a high risk to project failure.
Imagine this. You're asked to build a house. It has three bedrooms, two baths, and it's open concept. How much is this going to cost?
Even in this oversimplified example unless you have super clear blueprints some 3d models of what the interior would look like and a realistic timeline it's impossible to accurately get this right.
Why?. Because the facts around requirement's scope and time are critically important. And with a fixed bid project the facts in that process are really vague ideas of future expectations.
And this is the challenge with fixed bid pricing.
So here are three things you can expect to encounter that you need to mitigate for risk.
One, risk is the default. Since you didn't have the right facts at the start, the project already at day one has a huge amount of risk in terms of delivering the right future expectations. Within the guesstimated timeline that now everyone must adhere to.
Two, everyone becomes defensive and takes a stand. The professional services company spends its time trying to fight scope and minimize this feature request. And the company now realizing certain things need to be done but unfortunately were missed in the fixed bid force it into the scope of the project.
Three, both sides, fight momentum. For the professional services company, time is money. So getting answers to questions and decisions is the top priority. However the company is it motivated by time, rather time is a measure of making the right decisions, so now discovery takes longer because they realize, say new integration is wanted and that means having to bring in new stakeholders to talk about "the future".
As you can see these three challenges that need to be mitigated represents a lot of risk at the onset of a project.
And the whole goal of any project is always to mitigate risk.
So, what are your thoughts? Leave a comment and let's talk about it