Theres More Than One Way to Pay the Piper

Suffering from scope creep brought on by consultants dragging their heels on projects?

Suffering from scope creep brought on by consultants dragging their heels on projects? You may have only yourself to blame, since how you set up the original contracts fee structure could well be causing your pain.

The most frequently used fee structure calls for agreeing on a rate of pay—for example, per hour or per day—and then paying as you go. An alternative method calls for setting a fixed fee. Both have pluses and minuses.

With pay-as-you-go, a consultancy may bloat your bill with excess consultants. You also have to make sure youre getting good value for the billable time. After all, with pay-as-you-go, consultants have little incentive to work fast or prevent scope creep. In a worst-case scenario, unscrupulous consultants could be working against your project objectives.

But fixed-fee contracts arent necessarily a panacea. Ive seen a fixed-fee consultant get the short end of the deal when failing to correctly assess the project and environment before quoting a fee.

But at least fixed-fee contracts give consultants the incentive to finish as soon as possible. The consultant has a vested interest in not wasting time and in avoiding scope creep. The danger is in ensuring the consultant doesnt take shortcuts in order to finish sooner.

The best way to manage a consultant in a fixed-fee situation is to ensure the initial contract is clear about issues such as deliverables, milestones and terms of acceptance.

But how do you persuade consultants to go with the fixed-fee model? The better you can define a project, the better your chances. Rare is the consultant who will sign on the dotted fixed-fee line if youre presenting him with the epitome of the fuzzy project: for example, "Build me an e-business Web site."

A compromise solution for hard-to-define projects is pay-as-you-go billing thats capped by an agreed-upon maximum fee. But take note: Under these terms, it seems you almost always end up paying the maximum.

When aiming for a fixed-fee contract, you must demonstrate that yours is a manageable project. Be prepared to share specifics about the environment—for example, network infrastructure capacity. Also, do your research about the work. Discuss with the consulting team the typical pitfalls encountered on a project like yours—for example, lack of desktop standards—and why they wont be problems on your job. And lastly, make it clear that your in-house staff will be involved with the project.