Yea sure, it is common practice that when you are putting a project out for RFP you want to narrow down the costs to a targeted flat rate whenever possible. This makes it easier to plan and coordinate the project within whatever else may depend on, compliment or enable it within your organization. I am sure we have all sat on that side of the table even if only purchasing items for our family. When you have a commodity product where you can determine your fixed costs, this is very standard and acceptable. However, when you are working with Web 2.0 technology or software integrations or if you have diverse migration needs it is very difficult to determine how long something will take or if additional features may be required to achieve your business goals and of course there are always surprises.
I see several approaches that venders take when they take on a flat bid contract. The key thing to keep in mind that since a flat bid contract is putting the risk on them and if they are going to have a chance of making this endeavor profitable they will have to compensate with a higher price tag. Flat bid contracts can also add a significant amount of overhead to handle the “Cover your butt principle” via change orders, extra logging steps and additional processes that can often be handled more efficiently through other means.
Take the money and run:
When a company is experiencing cash flow problems often they will just put out the lowest bid based on their minimum requirements and “take the money and run”. They just need to get something in the door to fill the immediate cash flow need and they really care very little about your business other than it is fixing their problem. It is the “all about me” approach. They have no intention of doing business with you after this initial project or at least are not thinking beyond it. Ask yourself is this the kind of vendor relationship I want to have?
Get um in the door and milk them later:
This happens when companies want to win the bid at all costs but know very well the project is going to cost more than this and they will tell you just about anything you want to hear just to win the contract and they intend on holding you over a barrel somehow so they can turn you into some kind of residual income stream or let you be the brunt of either having half of what you need or want thus forcing you to use them to get this finished. This often has hidden clauses in the contracts that they try to catch you on almost like a bait and switch. Ask yourself what your boss is going to say when the budget comes in way over and you do not have a justification since nothing in the contract actually changed.
Sponge and squeeze competition:
This is a challenge where the contractor is trying to give you as little as possible so they can yield the biggest margin on the project. You as the company then often are trying to scope creep and get the most time and effort for the flat rate promised. This actually puts you in competition with each other and the end loss usually sacrifices quality in the final outcome. It puts strain on both parties and can build resentment or dissatisfaction through circumstance. Ask yourself is this competition really the best approach for providing the best possible value in the long run?
The Value Builder:
The best overall approach for successful results, we have found is through effective collaboration. We call it the Value Builder Approach because it focuses on building value in the relationship and allows everyone involved to put greater emphasis on achieving efficient results. We have found it is best to bid on a project with hourly rates for the targeted service types required to execute the expected tasking. Then working with the customer through our 5 step design planning process does the following:
- Establishes clear expectations
- Builds respect for each other’s time
- Offers more efficiently leverages resource contributions
- Builds the most beneficial working relationship
- Gives client the best return on investment
- Allows vendor to focus on best advice and solutions
This methodology reduces risk for both vendor and client and creates a relationship of choice since the client always owns the technology and real value is found with the synergy built through collective teamwork.
Of course there may be variables depending on the point of entry in this process, the customer preplanning, available assets, scope of work, other stakeholders or experience in-house. And don’t get me wrong there are good vendors that can do flat bid contracts but we have found this to not be the best approach for delivering the best possible results on Web 2.0 projects with Joomla CMS dynamic web portals or our “CRBM Platform for success.”
Big red flag:
When someone comes with a rather vague project spec and says “Here is what we want, I just want you to do it” in an early client meeting this is a big red flag since in most cases they do not fully understand what has to happen in the process nor will they be able to accept the fluid changes required to have their project respond to changing customer needs over time. In the new wave of Web 2.0 and beyond for clients to expect the entire development project to be outsourced is unrealistic since there is no way they can have the subject matter expertise without an expensive process. Most small businesses just cannot afford this anyway and with purse strings needing to be tight, it is natural that they should participate.
The marketplace, with the evolution of open source projects like Joomla CMS, the landscape has changed from a very static “print esc” ecosystem to a dynamic “information is king” world of social communications. People not only want to get more involved but they expect to hear your voice in return. So if your customers are all active in the “Social Technology Boom” so must you be. What they are doing in many cases is collaborating on ideas and going in directions faster than you can go through a formal processes. Kind of like when I produced a CD Rom in the 80’s for promoting 25 bands to colleges and by the time the CD was released 10 of the bands had broken up. This is why you should get a good independent thinking, on the ball creative, socially aware and technical savvy web team and have them interact with your company folks whom understand your business inside and out as it is evolving in real time.
Scaleable web team adding value:
With a scalable web support team that can bring a broader range of skills yet have the fluid and rapid response capabilities to stay ahead of your competition; you should be able to respond with faster innovations to your customers and thus increasing customer loyalty. Much like that old play on words “forget about your teeth, they will go away” you have to be listening to your customers and responding quickly. The old way of thinking where you get a flat bid, it comes in a nice pretty box and move on are gone. With the global economy and fluctuating market you will be much better off outsourcing vs hiring in-house folks in most cases. You should however, do so with a “project management contractor model” using hourly rates and establishing a burn rate that can set a pace and comfort level which meets your goals and expectations. What I mean by “project management contractor model” is a team that has solid expertise and customer service but also leverages outsource labor resources in global markets, since if managed right this can give you the best of breed bang for your buck.
Does this mean contractors/vendors should not give you a ball park estimate on what it would cost to complete certain tasks, no, they should but often once you open up the hood to look and see what has to happen, you could just do it and be done vs creating a report and coming back to go through the whole process all over again to actually get the work done. Good rule of thumb is to break bigger projects into smaller bite size projects and compartmentalize them as they relate to your priorities. Then manage them very hands on. For smaller organizations when an effective support model, quality leadership, communication and a true collaboration across a balanced team is achieved, you will find that the return on investment and added value will be expediential.
In conclusion, I recommend that you choose a project management contractor or development team with diverse skills and an empowerment approach to delivering their services. Negotiate value driven hourly rates and determine a budget and burn rate that will help you efficiently plan and execute your project priorities. Look for qualified experience and personalities that will create effective collaboration with your team. Remember these kinds of projects may taper to a maintenance mode but they never really end since web technologies are becoming a necessity for doing business. Then stay focused, pay attention to your customers incoming knowledge stream, respect your vendors time and they should respect your budget. Make sure to do careful planning but do not get to bogged down that you can not respond fast enough to your customers and competition. Then empower your team to collaborate and be willing to get in and stay involved in the process. This method, model and approach will allow you to get more information to make better decisions and thus produce a much greater value on your investment. Chances are if you approach this right and pick the right team you will enjoy the process.
Our goal with CNP integrations is to provide the best service, deliver the fasted innovations, and offer the greatest value to our customers. Through our labor service and project management contractor model, we feel we can offer the greatest overall return on your investment. We offer more than the technology and the talent to bring it all together, we offer process with a CRBM Platform to guarantee success.
I look forward to your comments and discussion on this topic.
CN
