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Home About Us Engagement Model
Engagement Models
 

Time and Materials (T&M) & T&M with Not-to-Exceed Clause

The standard time-and-materials methods of work, is based on actual spend. This is usually monitored through weekly timesheets and progress reports. From the customer's perspective, you are always assured of getting what you need and pay for only what is needed.

There are several benefits that the Time and Material engagement model brings to the customer:

  • Complete openness
  • No hidden fees
  • No hidden agendas
  • Reinforcement of provider's ability to offer flexible engagements and teams
Time and material jobs seem to work out best when there are many 'unknowns' about a project. Since there is a degree of uncertainty, a time and material job with no cost control is like a financial time bomb waiting to go off. It is hence, generally suggested that a not-to-exceed clause (that price will not exceed a certain amount) is built in to maintain a control on the project financials. It is also highly essential that all the aspects of the project are taken into account and a scope is kept for the incidentals.

Fixed-price Project

Project is executed on a fixed-price, fixed-time billing basis. Engagement may be fixed on a hard set of specifications, or may accommodate certain level of flexibility. A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the provider's cost experience in performing the project. This engagement type places upon the provider, maximum risk and full responsibility for all costs and resulting profit or loss. It provides maximum incentive for the provider to control costs and perform effectively and imposes a minimum administrative burden upon the customers. The customers may use a firm-fixed-price contract in conjunction with an incentive fee. This actually works well for the providers too as they leverage optimal measures to ensure more profitability. For example while outsourcing a call center outbound project that is solely paid for on the commission basis per lead or a sale. It's better to use fixed price plus incentive fee model. As per the service level agreement, the center produces the deliverables for a fixed fee and is awarded an incentive for any additional leads or sales made. The incentive fee component will always lead the center to make more sales to increase profitability.

Milestone-based Payment Schedule

In a remote development project, milestones-based payment schedules reinforce progress monitoring, and the development of achievable milestones. Milestone-based payment helps you justify payment, and visible progress reduces risks. This engagement model is well suited for clients who are concerned about highly sensitive projects schedules. The good part about this model is that the core point is to move away from paying for time, to paying for results.

Monthly Resource-based Payment

This schedule is ideal for the Extended development center model. Billing is done monthly based on the number and level of resources utilized. In outsourcing parlance this can be as per the number of operators or agents used for a fixed price per resource every month.
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