Question
Hitting deadlines and keeping everyone happy, is there another way than the fixed price approach?
Developer team says "2x days", the project manager says "3"…and it ends up taking 5 and the client is not willing to pay for any extra work. What can you do, in order not to get pinned down to a fixed budget where there are so many unknowns and evolving elements to deal with?
I have been reading lots about 'Agile Development' recently: http://en.wikipedia.org/wiki/Agile_development, which is based on the concept of moving away from committing to a fixed price delivery model, and working iteratively towards a prioritised wish list. That sounds a great way to manage complex digital projects. But how can you sell this approach to clients when there are so many other agencies out there operating under the fixed price structure?
Answers
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Interestingly, since this question was posted we have managed to secure two quite large contracts which are both utilising a form of Agile but only to the extent that we break the project down into its component modules and then agree with the client a fixed budget for those core elements. We then discuss why the other, more complex modules need to be worked on in an agile workflow and charged as worked due to the unknown element of creating something new with un-tested technologies.
Clients seem happy with this system and know the 'majority' of their budget is being spent on the core project elements to a fixed price. They seem to then be much more open about what the entire budget they have to spend actually is, which makes all our lives a lot easier.
It seems that just getting the Agile theory into your mindset when approaching any project can help. Either way, we are meeting targets now and are confident that all time on new projects is properly scoped and covered.
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Many agencies are moving to the agile model and there are many merits in it. However some clients will always want a traditional waterfall/fixed cost approach and I'm not entirely sure that's the answer to your challenge.
My view is having the ability to manage projects to a fixed cost and timescale is a vital foundation for any agency but it takes time and focus to get it right. At e3 we do by far the majority of our work to fixed cost and for many years that meant pulling out all the stops and a string of late nights to ensure we were meeting client deadlines. However if you do get it right, things will go much more smoothly (without all the late nights)!
There are several key parts, of which Roger has already mentioned some. The first is to define a scope of work in sufficient detail and in a way which both the client, the PM and the developers understand. At the time of quoting this is about thorough Q&A and making sure you documenting all your deliverables and assumptions. Outline as much as you can about what you're delivering and how, that way before you start everyone has a clear understanding.
The next part is managing the expectations of your client and internal teams, this has to be done in every meeting and conversation. We find on most projects you don't really get to understand what the client wants until you're appointed. That's the point of a requirements/discovery phase where you can explore fully what the solution should be. At that point you can change priorities, add new ideas or change functionality - your job is to manage expectations so whatever you discuss is achievable within the budget and time you have available. That will involve saying no, suggesting alternatives or a 'phase 2'. Once you've finished that exploration though, you lock it into a spec, agree final timings and then it's fixed scope, time and budget.
The final part is estimation, it's always a challenge but over time people get better at it. Developers and PM's need to take responsibility for their estimates and you must be able to rely on them to deliver in the timescales they quote unless the scope changes. To aid this, keep a track of quotes vs time spent for each element of work so you know whether previous quotes were correct. There will be times people underquote, it's a fact of life however when that happens make sure you learn from it and take those learnings into the next project.
There's loads more I could say on this so give me a shout offline if you want to chat further.
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We have toyed with Agile as a client wanted it, but it does seem a way to really exacerbate the problem for an agency. It seems to me that you would have to get the client to really buy into this approach and maybe do it on a cost plus basis. The only other way I am afraid is to get better at bolting down the spec and scoping docs up front. Sometimes you will get it right - sometimes not. However we all need excellent project management. They need to manage client expectations from the very beginning whilst keeping it 'light' and be very clear about what is out of spec and therefore an extra. Difficult job but vital. I am afraid there are probably no easy answers to this one.
