Friday, September 8, 2017

Hourly or Fixed Bid?

At Endigit, our services come in two flavors: hourly and fixed bid. Many factors contribute to deciding which flavor to choose.  This article is designed to discuss the benefits of each option in order to help decide which will work best for you.


Hourly


Hourly work is set up such that Endigit charges a fixed hourly rate for whatever time is spent working for you.  The reins are entirely in your hands.  You can specify how much or how little work to do at a time, when to check in, and when to stop.  For larger projects, we can provide an estimate on how many hours it will take and keep you up to date on whether we are on track to meet that target.


We generally invoice on a monthly basis, but can adapt to whatever schedule or amounts you need.  We'll often have clients set up a PO for a certain number of hours, say 100, then we'll work on whatever they need our help on, at their direction, until those hours run out.  Other clients need to keep each invoice under a certain amount.


Our hourly rates vary based on experience and expertise.  An engineer with a higher rate should ideally be able to complete a project faster than an engineer with a lower rate, with the overall cost coming out about the same.  However, certain types of projects, such as embedded work using LabVIEW RT and FPGA, require higher end programming.


Hourly work is best when requirements are not very well defined, or when we are functioning as consultants, working alongside internal engineers to complete a project together.


Benefits of Hourly Work
  • Doesn’t require up front specifications
  • Endigit can help design what you need
  • Supplemental to existing engineers and project managers
  • Easy to control when and where efforts are applied


Fixed Bid


Fixed bid work is more like a contract between you and Endigit.  You define exactly what you want and Endigit provides an exact cost.  You pay Endigit that exact amount, on whatever schedule is set up (half up front/half on completion, according to milestones, etc.)  If it takes Endigit longer or costs more for us to meet those requirements, you don't pay any extra.


Fixed bid work lends itself well to projects that are clearly defined.  Because of this, you know exactly how much the finished product will cost and Endigit has a clear idea of when we are done.  Fixed bids often include hardware and installation costs in addition to software development.  Fixed bids make planning and budgeting much easier on you, but require that you fully specify what you want.  


What happens if, during the development process, you find additional features or added scope you want done?  No problem.  We can either add those items to a list of features to implement as hourly work after the fixed bid, or we can increase the fixed bid amount to account for them.  


Fixed bids also work well when comparing contractors.  Once the project is fully specified, you can have multiple companies bid on the work, potentially lowering your cost for getting the work done.


Benefits of Fixed Bid Work
  • Can budget entire project up front
  • Great when you have solid specifications
  • Easy to compare multiple bidders
  • Often lower cost in the end


Combining Hourly and Fixed Bid


It is often the case that clients need help defining requirements.  Endigit takes a two step approach to this situation: we help you write the specifications for the project on an hourly basis, then provide a fixed bid for completing those requirements.


Other clients begin with a fixed bid on their first project or phase of a project with Endigit, allowing them to gage their comfort with how fast we can accomplish tasks.  Once they have a feel for the quality of work we can do in a timely manner, they switch to hourly work.


Which Do I Choose?


Another perspective on these two routes is through the lens of risk.  Who owns the risk?  Hourly work puts more risk on you that the project will take more hours than estimated.  Fixed bid work puts more risk on Endigit that the project will overrun the budget.


Hourly or fixed bid, jumping into a project with a new contractor is a risky endeavor.  Do your homework, get some references, and talk to other customers to find out how their experience has been.

Some projects and situations lend themselves to hourly work and some to fixed bid.  Either way, Endigit will provide efficient, quality work to help meet your needs.  We would be happy to discuss these issues with you and how they apply to your situation.  Feel free to contact us by phone or email, or through our contact page.

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