In the planning phase of a new project, choosing the right agency engagement model is crucial. While it may just seem like a matter of bureaucracy, it can significantly affect how your project plays out.
We’ve seen that procurement teams tend to have comfort zones. Some organizations are all about time and materials, while others would never consider anything but a fixed bid project. Honestly, from our vantage point, those biases never seem rooted in anything beyond habits.
We think the nature of your project should drive the engagement model. If your procurement team is as flexible as a desk-bound web worker who’s avoided outdoor exercise for the last 14 months for fear of contracting a highly contagious coronavirus and possesses a natural propensity for Netflixing, you have my sympathies. Assuming you have some flexibility, keep reading.
While there’s some nuance in how each engagement model is implemented, there are, generally speaking, three ways you can work with Modern Tribe. Each is underpinned by a unique billing model, and each has varying benefits for clients.
To determine which engagement is right for you, you need to think through a few questions:
1. How defined is the scope?
This is the biggie. If we can’t define your scope well enough to give you an accurate estimate, we’re either going to encourage T&M, or we’re going to have to pad the shit out of the estimate to cover our butts. That’s life. No scope definition equals risk if we fix bid. That risk is offset by padding.
2. Do you have an internal product owner?
Agile product roadmaps are fluid. By design, they should shift as you learn and adapt.
3. Can you easily document your project priorities, or are there clear KPIs you need to move?
If you’re targeting specific outcomes, it makes sense to tie those outcomes to specific investments.
4. Does it have a start and stop?
If we can’t identify how a project successfully ends, we can’t give you a meaningful fixed budget.
5. Are you managing an annualized budget? If you don’t use it, do you lose it?
This sort of budget-first approach means your project scope will likely adapt to “best possible for this investment.”
6. Are you maintaining an existing platform?
Does it need security patches and plugin upgrades? These situations often have both planned and unplanned needs.
Using your answers, see which engagement model best suits your project.
Time and Materials with a Budget Cap
T&M projects are straightforward. You’re buying our time. We work an hour, and you get billed an hour. Many service industries function like this; lawyers, accountants, and consultants of all kinds have hourly engagements.
Some folks are really uncomfortable with T&M because they feel a lack of control. What if I’m just opening a floodgate? What if I don’t get what I need? What if they bill me for just sitting around?
All those fears make sense. They stem from a lack of trust, and at the outset of relationships, trust is something you still have yet to build. Knowing that, we put structure and guardrails in place to give you some level of control.
An upfront estimate and a collaborative planning process help you understand what you’re getting into. Transparent reporting and full access to project details help you feel confident in our follow-through. And pre-agreed-to-do-not-exceeds ensure that you don’t find yourself in a tough spot. T&M projects can have fixed starts and stops and still follow detailed schedules.
Some orgs really like T&M because it makes it easier to do apples to apples comparisons between potential vendors. Firm A charges $100 an hour, and Firm B charges $200 an hour. Therefore Firm A is cheaper. The reality is you can’t identify who’s cheaper until you compare the value that’s produced.
If Firm B is producing three times the value, the savings are apparent. However, when it comes to software development and design, it doesn’t take much for less talented firms to rack up large bills if they flail or miss the mark.
Great For Projects That:
- Have a moderately well-defined scope
- Still require some flexibility to reprioritize as the project unfolds
- Require budget clarity
- Might ebb and flow its burn rate/speed depending on the phase
- Span many months
- Require monthly billing
We’ve seen that orgs focused on T&M engagements can struggle to see the forest for the trees. It shifts focus to tasks and requires the ability to reconcile task costs versus overall investment. For organizations with a handle on strategic planning, this isn’t a problem. But others wander the woods and lose track of their destination.
Fixed bid describes well-defined deliverables attached to specific costs. In these engagements, you’re not buying our time; you’re buying the output of our time. How many hours it takes is irrelevant to the engagement.
These projects can be great for all involved. They entirely hinge on an explicit scope of requirements and how well everyone involved understands them. If we really understand the work, we can confidently tell you how much it’ll cost. We have a strong motivation to be competitive in our pricing, so you’re likely to get a “deal.”
If you lack a defined scope of work, we can still give you the fixed bid pricing—but there’s a considerable amount of risk. So we offset that risk with the price of the project.
Generally, the larger the project, the less defined specific deliverables are. That means you could potentially save money via a T&M-style engagement. If you’re flexible on implementation, T&M lets you mold the outcome as you go. But you, the client, inherit some of that risk and responsibility.
Typically fixed bid projects also require less reporting and, as a result, potentially less overhead. If you know what you want and can articulate it well, fixed can be a great way to go.
For projects without a clearly defined scope, we usually propose a discovery phase. Often, we can offer these as fixed fee engagements that produce a crystal clear set of requirements. Discovery phases can be a great way of getting you to that well-informed position.
Great For Projects That:
- Have an extremely well-defined scope
- Require little flexibility to pivot during execution
- Require exact budget clarity
- Require milestone billing
- Are medium to small in size
- Have a fixed timeline
The biggest challenge to fixed bid projects is definition alignment. Whether something is “in scope” or “out of scope” can be a tough question to answer if that alignment doesn’t exist. New requirements can trigger change order processes that can be difficult for some organizations to manage. It’s normal for scope to shift to some degree, even in well-defined projects, and that can cause organizational friction even for well-aligned teams.
If you’re buying our time with T&M and our output with a fixed engagement, what do you get with a retainer? You’re buying our availability.
As you can imagine, we try to have our teams pretty well booked most of the time. For whatever faults capitalism may have, we’re sort of stuck with it at the moment. So ensuring we have productive and billable work is vital to our business health.
What if your needs ebb and flow? What if you know you’ll need some help, but you’re not sure when? If you call us and say, “I need a bunch of stuff by next week,” nine times out of ten, we’ll have to say no because our team isn’t available. Retainers can solve for that.
Usually, our retainers either map to annualized budgets or maintenance agreements. With annual budgets, you likely know where you want to invest in your business, but the specifics will play out over the year.
Retainers are often “use it or lose it.” We’re not angling to get paid for not doing anything, so we’ve found that a quarterly true-up process ensures that you’re getting good value for your retainer. Month to month, you might be over or under your spend, but we’ll reconcile it at the end of the quarter. Large retainers enable us to offer lower rates, as they help ensure that our teams are booked.
WordPress Support or platform maintenance agreements are another engagement where retainers make sense. There are going to involve security patches and updates required on your platforms over a year. Sadly, those required updates are almost always a surprise. Having a maintenance retainer in place can ensure that we have the capacity to take care of your platform when it needs it.
Great For Projects That:
- Are more a collection of features or goals rather than a complete project
- Require total flexibility to pivot during execution
- Require exact budget clarity, but hours can be shifted and reprioritized across quarters
- Require regular monthly or annual billing
- Are more ongoing in nature than fixed in size
- Have a series of small timelines or priorities as opposed to a big release
Retainers don’t lend themselves well to significant feature development. They can introduce limitations on pace and project scheduling that might not align with the ideal outcomes. Reconciling that dev work with the ongoing realities of maintenance creates a conflict in priorities. The new requests eat up time that should be reserved for maintenance, leaving you with a bright and shiny feature and a dilapidated website or app.
All Things Considered
No single engagement model is right for every scenario. It’s an oversimplification to say that one is cheaper or less risky than the others. There are trade-offs to every approach.
We try to be as transparent as possible about how we make these kinds of decisions and how you can set yourself up for success. At the end of the day, we’re a service business. We’re here to serve your goals. We want you to feel great about the work we produce and your experience working with us.
Now that you have a better understanding of how we can work together, what do you say? Reach out here anytime.