Fixed-Fee projects can be dangerous commitments for service providers and consultants. If you use fixed-fee pricing, I have developed a simple model that can help you account — and be compensated for — your level of risk by using a complexity factor.
The model I use for quoting projects is below using a fake widget-making project that assumes an hourly rate of $10/hr. I'll follow up the model with an explanation of how it works and breakdown its various components.
| Task | Best | Worst | P(S) | Est. Time | Sub Total |
|---|---|---|---|---|---|
| Project Management | |||||
| Identify Milestones | 0.25 | 0.50 | 90% | 0.28 | $2.80 |
| Prepare Project Timeline | 1.0 | 2.0 | 75% | 1.25 | $12.50 |
| Write-up Project Deliverables | 3.0 | 5.5 | 80% | 3.5 | $35.00 |
| 5.03 | $50.30 | ||||
| Widget Making | |||||
| Widget Drawing | 4.0 | 7.5 | 85% | 4.53 | $45.30 |
| Widget Manufacturing | 15.0 | 18.5 | 95% | 15.18 | $151.80 |
| 19.71 | $197.10 | ||||
| Complexity (C) Scale | Best | Worst | C-Factor | Adjustments | |
| 90% | 10% | 10 | $0 | ||
| TOTAL | $247.40 | ||||
This approach has really increased my quoting accuracy dramatically - and is pretty straight-forward to setup using Excel.
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