by: Gary Crouch
A few years ago we changed our business model. We decided to introduce our Protection Pricing and no longer give proposals that include an estimated amount for services for several reasons.
I find it incredibly interesting when we enter into a competitive bidding situation for a project. They buyers frequently ask me to lower my prices so we will be more competitive with the other vendor’s quote. It is really absurd when you think about it. I can ALWAYS beat the competitors price when I only have to give you an estimate.
We need to retrain buyers to ask for the final, full amount. If you as a buyer insist that all competitors provide a fixed fee bid you will have:
- 1. No surprise costs at the end of the project
- 2. Well defined scope of work document
- 3. Collaborative relationship with implementation team members
- 4. A vendor that possesses strong skills for software functionality and general business processes
If the vendors ARE willing to provide the fixed fee proposal, you will find that typically all software implementation firms will hit amounts that are within reasonably comparable rates to each other. If they vary more than that, you need to look closely at the scope of work they are including in the proposal – something must be missing.
If the vendor refuses to provide a fixed fee proposal you are definitely in for a roller coaster ride with the project, and the costs that will come flooding in on that last long drop before you pull into the station. Ask yourself this: Are they unwilling to provide a fixed fee bid because:
- 1. They KNOW it is going to be a much bigger number than their estimate, or
- 2. They don’t have confidence in their skills or understanding of the project to make a commitment to you?
Click here to read the full white paper about fixed fee proposals and risk from our President.