Posted tagged ‘bidding’

How much would YOU pay??

June 25, 2009

I went to my car mechanic the other day.  I said, “Fritz, my car isn’t running right.  I am not sure what the problem is.  Can you fix it for $400?”   Fritz said, “I’m not sure – mind if I take a look at it, run some diagnostics and see what the problem might be?”  I immediately suspected Fritz would use the diagnostics not to hone in on the problem, but to justify charging me more money.”  “No way,” I said, “you either guarantee me that you can fix it for $400 no matter what the problem is, or I am going to another mechanic.” 

You can only imagine what Fritz reaction might have been.  It’s extremely likely that he would have said that he couldn’t help me without being sure of what the problem is and what the likely cost of parts and labor might be to get it running smooth again.  Or MAYBE, if he was really desperate for some cash, he might take the gamble that he could fix it for less than $400 and pocket the rest as pure profit.  But I seriously doubt it…

And isn’t that what we, in the consulting business, do every time we bid on a fixed price project without the proper time, insight, and validation for what the scope of the project is??  I am not against fixed price contracting any more than I am against a car mechanic taking my tires and brake shoes off and then telling me I need new rotors, that it’ll be $300, and when I go to pick the car up, it’s exactly $300.  But I am vehemently against being so desperate for revenue, any kind of revenue, that you will bid a fixed price on  a project based on a set of vague requirements and then spend the next 6 months either trying to nickel and dime every change order you can think of, argue about what’s in and out of scope and/or hope that you can claim you’re “done” before you find yourself wildly upside down on your P&L.

Next chapter, coming soon to a blog post near you…  What to do instead…