Outsourcing projects is common in the engineering industry. Often times companies find it easier and more cost-efficient to partner with external teams that have more equipment, design capabilities and time. But in contracting short-term staffing, an important agreement needs to be made: Will the project be billed on time-and-material or fixed cost? Here are the major differences between contracting projects hourly versus at a fixed-price.
Contracting Projects Hourly
Billing by the hour is a familiar way for businesses to contract projects. This method is often considered when the scope of a project has unclear parameters. One example of this might be during a 3D design project where deadlines, revisions and approval processes are more hazy. While it’s always smart establish time and material estimates, know that actual hours may vary.
If your company has budgetary concerns, agree upon an hourly limit not to exceed before the project starts. This way, services can be contained to a certain cost.
Contracting Projects at a Fixed-Price
Not everyone is comfortable with the ambiguity that comes with contracting hourly projects, especially when the work isn’t in-house. Fixed-price projects commit to a set cost upfront. This method of compensation is popular for projects that have clear expectations to what work needs to be done and by what date, like a print job.
While this payment plan has benefits such as clear spending goals, it also comes with limitations in regards to adding, removing or canceling any amount of the workload. Do your best to account for all functions and features in advance, so you can plan a series of milestone deliverables and stick to them.
Still don’t know whether contracting engineering service projects hourly versus fixed-rate is right for you? That’s okay. Contact TriMech Services, so we can help you weigh your options and process a quote today!