Mike Wyatt's Weblog

Time and Materials Projects

The most common pricing structure for Identity Management projects, especially large enterprise deployments, is Time and Materials. With Time and Materials projects, there are several approaches, two of which are:

A customer contracts with a service provider for a resource at a specified rate for some duration. There are no specific deliverables associated with the engagement. At Sun we use an artifact called a Consulting Services Agreement or CSA. Usually for short duration general consulting engagements.

A Statement of Work(SOW) is created which includes specific deliverables and pricing for the resources that will perform the work. The SOW usually provides an hourly or daily rate for each resource that will work on the project. The scope of the work performed is typically described in the SOW. Though not included in many SOWs, #Items that are specifically out of scope should be clearly stated as well.

The biggest concern from a customer perspective is that though specific deliverables are listed in the SOW, when the money runs out, there is no obligation to finish the work, or the customer winds up paying for unbudgeted additional hours to complete the deliverables. One way to address this is to have performance criteria in the SOW that protects both the customer and the service provider regarding specific deliverables that must be met in order for the project to be considered complete. Another approach, which I think potentially better is to have a tiered rate structure that at the point the original SOW runs out of hours, future hours are paid but at a lower rate.

One of the biggest risks I've seen in T&M projects is lack of strong project management and project governance. At times the service provider assumes that their job is to work through the project and bill hours. The customer assumes that the deliverables outlined in the SOW are firmly committed. Only when the money is close to gone or gone do the two parties have a hard conversation. By this time, its too late. Even with T&M projects, it is critical that both the customer and the service provider adhere to change control and progress against the plan. Scope creep is often a problem especially if the service provider has resources working at the direction of the customer without a service provider provided project / program manager to buffer the technical resources. I have personally had superstar architects agree to work that is out of scope because they want to solve hard problems and want the customer to be happy with them. When asked to "just let the customer" provide the project management and oversight, I get very nervous. Checks and balances are needed.

Posted at 03:52PM Nov 03, 2006 by Michael Wyatt in Identity Management  |