The Tricky Nature of Software Development

Consulting work performed by BEC does not always include a software development component. However, if creation of software tools becomes a central deliverable of a client’s engagement, the effort can be challenging to define in detail. As you might expect, unless the client has a very clear idea of what is desired, it is difficult to estimate with certainty how much effort any software development job will take, and therefore what the effort will cost. This uncertainty must be addressed within the contract cost structure.

Types of Contracts

Two types of contracts predominate in the software development domain: Fixed Price (FP) and Time and Materials (T&M). A Fixed Price contract requires that the client fully describe through documentation exactly what is desired of the contractor so that the amount of time and effort necessary can be accurately estimated. A Time & Materials contract is more adaptable; the client has a general idea what is desired, but wishes to collaborate closely with the contractor to refine the requirements while development is ongoing.

Listed below are the key aspects (pros and cons) of both Fixed Price and Time and Materials contracts. In a Fixed Price model, the client is paying for an identified outcome (a deliverable), and requires the client to write a descriptive document before work is started that will guide the development process. In the Time and Materials model, the client is paying for the contractor’s time and expertise on an hourly basis. The inherent flexibility of this model can sometime result in unforeseen circumstances that may impact the development effort, however the close communication between client and contractor results in a higher-quality product.

Recommended BEC Pricing Model

While BEC is comfortable working under either type of contract, it is our recommendation that a Time and Materials contract be negotiated for this kind of effort. A T&M contract can be open-ended, such that if the client wishes to explore an unanticipated direction for software development or project consulting, this is easily accomplished through conversations with BEC to define a new work focus. This may require redirection of the contractor’s existing agreed-upon hours to focus on this new aspect, or the allocation of additional hours to complete the requested tasks.

Though a T&M contact has no firm fixed price associated with it, if desired, a “not to exceed” budget can be agreed upon. In this case, BEC will provide the best value possible for the defined budget amount, and deliver a workable solution. Fortunately, Boulderfield Educational Consultants has the expertise and the history of institutional software development and project management to navigate this somewhat nebulous environment to produce a quality product in a timely manner within the budget granted.

Time and Materials Contract Pros and Cons

PROS:

• It’s a far less complicated model and hence the easiest way to get started. The client is not required to have detailed specifications to start the project.
• T&M contracts provide a lot of flexibility. Within the same budget, the client can change priorities of specific features, delete features no longer needed, and add new ones as desired.
• There are more chances of the client achieving the result they envisioned since there is constant communication throughout the engagement.

CONS:

• Deadlines could shift as the requirements are updated, so it’s harder to foresee when exactly the product will be ready.
• In most cases it’s quite difficult to predict the final budget since the budget fixed initially will change noticeably depending on the client’s changing requirements during the development process, and the possibility that some features are harder to implement than anticipated.
• This approach requires constant communication between the client and contractor, requiring more time and effort from both ends.

Fixed Price Contract Pros and Cons

PROS:

• The client is assured to get what is defined in the contract for a fixed price. This can be reassuring and could make it easier to get your budget initially approved.
• The risk is primarily on the contractor to deliver the product for the agreed upon price, even if more hours than anticipated are required.
• Strict deadlines are enforced, everything has been planned out, and there is no need for time-consuming project oversight by the client.

CONS:

• The contractor might finish the requirements in the contract at a lower cost than the estimate, and the client will not have the benefit of additional hours from the contractor for the price negotiated.
• The client cannot change the requirements of the project as easily, since the scope has been predetermined. Changes will require a new fixed price contract specifically stating the additional work, requiring more work by the client.
• Visibility into the development process may be limited, as the contractor is working to the statement of work and communication with the client is not as imperative.