Contingency Pricing / Unexpected charges

[Marisol]

Does anyone have any published pricing guidelines to help explain to a client that during development of databases, sometimes developers discover that additional items not included within the scope of the plan come up? Specifically, the client is unconfortable with a 15% contingency (that would need to be approved by the client before I proceed) built into the estimate.

Resources online would be helpful, so that I can point them to an unbiased third party.

Thank you in advance.

[stanley]

Marisol:

Welcome to the Forums.

I don't know of anything you can point the client to, other than common sense. Everyone on this board knows that what you first sketch out on paper is never what you end up building. When there is a client involved - especially a business entity, where there are different users with different needs (and different understanding of those needs) - any given project almost always mutates significantly from the original plan.

This is not just true of database construction, but applies to building a house, designing a car, starting a restaurant, etc.

I recently built a system for a small engineering firm. After they'd given me the specs and I'd submitted a bid, the head engineer asked me where the quote was padded. I told him that I didn't pad quotes, and that I'd be within 5% of the quote. I then told him that the system he'd asked for wasn't what he was going to want, once he had begun to use it, and that (in my estimation) the final product would probably cost him 75-100% more than the original quote. He said, "no, I just want what we've put on paper here." I told him that was fine, and I'd build just what he asked for, but I also told him to try to remember what I'd just said.

The result? Three months after the original system was set up, I am still adding items on that were overlooked in the original, or which the client realized he wanted after seeing the initial system. The cost to the client is more than double the original estimate. The client is fine with it, as I had explained the whole thing to him in the beginning.

You have two choices in this sort of case - either the client accepts the notion of a contingency, or you tell him "this is what you want, this is what I'll build, and nothing else. If you want more, you pay more."

-Stanley

[Lee Smith]

Hi Stanley,

Marisol received some excellent impute on the Blueworld List under this subject:

Contingency Pricing or Unexpected Events Cause Estimated Price to Go Up

Here is the link for those who want to read more:

Click Here!

Lee

[stanley]

Lee:

A very interesting thread. Thanks

-Stanley

[awcase3rd]

Marisol,

I have a Masters in Information Management from Syracuse University. There I had a prof who worked for Mutual of New York doing project management. I equated him to a gun slinger, hired to revive projects going south. He had told us that project scope is very important. Most projects follow what Carnegie Mellon's Project Management Institute (www.pmi.org i think) calls the 80/20 rule. This means projects are 80% complete and 20% over budget. The 80% refers to requested features. I would check out PMI's website for more statistics. I am certian they would have some on it. I wish you the best of luck in this. Perception accounts for alot in business and justifying added expense is a big one.

-Allen