The article “Are you underwater and yet your fixed-price project isn’t profitable?” shed light on the development of your corporate mission. It also offered perspectives on how to optimize your company’s profitability.
Today, our aim is to guide you in choosing the best practices for managing fixed-price projects, whatever the type of project.
To carry out such an assignment successfully, you need to take into account :
- the budget
- the perimeter,
- the schedule
- management software
It is possible to adjust one of these four points, but never to the detriment of the others. This law, well known to seasoned project managers and consultants, has a direct effect on delivering your project successfully.
So far, everything is progressing smoothly.
However, behind this theory lies an everyday challenge: the dynamic assessment of budget, scope and schedule as the project progresses. This includes monitoring cash flow and materials costs, while maintaining project scope flexibility.
It is usually at this stage that complications arise.
To succeed, you need effective project management tools to avoid getting bogged down in endless steering committee meetings, which in themselves can sometimes consume almost half the time allocated to certain projects.
Management contracts
Definition and characteristics of "régie" contracts
Time and materials contracts are a form of service delivery in which the customer pays according to the time spent and resources mobilized by the service provider. This approach offers great flexibility, as the customer can adjust the project as it progresses. The main features of time and materials management are:
- Flexibility: the customer can make changes to the project as it develops.
- Transparency: costs are based on the time and resources actually used.
- Flexibility: ideal for projects where needs change frequently.
Advantages and drawbacks of public-private partnerships
Advantages:
Total project scope flexibility: the customer can make changes to construction projects as they develop.
Cost transparency: customers know exactly what they’re spending their money on through detailed cost estimates.
Responsiveness: adjustments can be made quickly to meet changing project needs and market conditions.
Drawbacks:
Difficulty in predicting final cost: the total cost of the overall project can be difficult to estimate in advance.
Risk of budgetary slippage: without proper cost controls, expenses can rise if the project is poorly managed.
Constant follow-up: customers need to be actively involved in monitoring the overall project.
How does a project-based service operate?
An in-house service works as follows:
- Defining objectives: the customer and supplier define the project’s objectives and the resources required.
- Time estimate: the service provider estimates the time required for each task.
- Implementation: the project starts, and the customer can make changes as it goes along.
- Tracking and invoicing: time actually spent and resources used are tracked and invoiced.
- Adjustments: the project can be adjusted to meet changing needs.
Time and materials contracts allow for flexible project management, ideal for situations where requirements change frequently.
Fixed-price contracts
Definition and characteristics of fixed-price contracts
Fixed-price contracts are a form of service provision in which the customer and service provider agree on a fixed price for a given project, irrespective of the time or resources required. The key characteristics of fixed-price contracts are as follows:
- Fixed price: the customer pays an amount agreed in advance, regardless of the time spent.
- Commitment to results: the service provider undertakes to deliver a specific result.
- Defined scope: the project is clearly defined, with precise objectives.
Advantages and weak points of fixed-price contracts
Fixed-price contracts have their own advantages and limitations:
Advantages :
- Budget predictability: the customer knows exactly how much the project will cost.
- Commitment to results: the service provider is encouraged to deliver quality work.
- Simplified management: less follow-up for the customer.
Limitations :
- Lack of flexibility: changes can be costly and complex.
- Risk of incorrect estimation: if requirements are incorrectly estimated, the project may go over budget.
- Pressure on deadlines: meeting deadlines can become a priority at the expense of quality.
What is the operating model of a fixed-price service work?
A fixed-price service works as follows:
- Definition of requirements: customer and supplier clearly define project requirements.
- Pricing: a fixed project cost is mutually agreed upon by both parties
- Implementation: the service provider works on the project within the agreed scope.
- Verification of results: the customer assesses whether results correspond to requirements.
- Finalization: once the objectives have been achieved, the project is closed.
Fixed-price contracts work best for projects with clear and stable requirements. They provide a straightforward structure where the cost is set in advance. This approach gives customers strong control and predictability over their budget.
In our old tool, we found that the project was already hitting the wall. What really matters is being able to see it coming and avoid the wall, and that's exactly what Furious allows us to do. The industry is very competitive and the business model is difficult to maintain. With Furious, we manage to monitor our projects to ensure we respect deadlines and sold perimeters, while staying in a profitability zone.
Blend contracts: a versatile alternative
Explanation of mixed contracts combining time and materials management and fixed-price contracts
Blended contracts are a versatile approach that combines elements of both time-and-material and fixed-price contracts. They offer increased flexibility by allowing for adjustments while guaranteeing a certain level of budgetary predictability. This type of contract is particularly effective for managing complex project timelines. Features of blended contracts include:
Combining flexibility and predictability: these contracts allow for changes while defining a fixed scope and price, ensuring that the project stays on track.
Suitable for complex projects: ideal when requirements may evolve, but you still need enough structure to complete the project successfully.
Mixed contracts for complex projects
Mixed contracts offer significant advantages for complex projects:
- Controlled flexibility: adjustments are possible, but within predefined limits.
- Budget predictability: customers can manage their budgets in a more stable way.
- Adaptability to change: suitable for projects where requirements change, but structure is needed.
Flexibility and budget control
Blended contracts combine flexibility and budget control. They are ideal for complex projects where agility is required while respecting budgetary constraints.
Advantages of working in-house
Advantages of working in-house
There are many advantages to working under contract, including :
- Adjustability to changing needs: project management enables us to respond to frequent changes in project requirements.
- The difficulty of defining a measurable deliverable: in projects where the end result is difficult to predict, the régie offers a flexible solution.
Maximizing the benefits of management through prioritization and testing
To maximize the benefits of management, it is essential to :
- Define a budget and a deadline for a first version of the product: this allows you to set clear objectives.
- Test functionalities regularly and review priorities accordingly: this ensures efficient project progress.
- Define important deadlines: planning is essential for project follow-up.
Working on a contract basis is particularly well suited to projects where requirements change frequently and flexibility is crucial to success.
How do you choose between time and materials management and fixed-price contracts?
When deciding between a time and materials contract and a fixed-price contract, it’s essential to understand the differences and take into account the specific needs of your project. Here’s a comparison of fixed-price and time-and-material contracts to help you make the best choice.
Comparison of time-and-a-half and fixed-price contracts
Making an informed choice requires understanding the key differences between time-and-material and fixed-price contracts. This knowledge ensures you select the most suitable model for your project. Here’s a comparison of the two approaches:
Time and materials contracts :
- Suitable for projects with frequently changing needs.
- Flexibility to adjust project scope.
- The customer pays according to the time and resources actually used.
- Ideal for projects where it’s difficult to define a precise deliverable from the outset.
Fixed price contracts :
- Suitable for projects with stable requirements and a well-defined scope.
- The price is fixed, offering budget predictability.
- Less flexible for changes during the project.
- The customer pays a predefined amount, regardless of the time or resources used.
Comparing time-and-material and fixed-price contracts will help you determine which approach is best suited to your project. Once you have a clear understanding of the two methods, you can consider the essential questions to ask for a fixed-price project.
What are the best practices in fixed-price project management?
Our key recommendations are as follows.
Fixed-price project management: the right questions to ask
To begin, could you answer a few questions about your most recent projects? If you respond “yes” to all of them, it indicates a high level of project leadership proficiency.
- Has the project scope been clearly established and documented? Have you detailed everything that needs to be done, and can you put a time value on each item?
- Has the initial scope-versus-time document been shared with the customer?
- Has it been shared with the responsible person?
- Has all of this been incorporated into the project schedule?
- Does it align with the schedule of the responsible person?
So far you’ve escaped the trade vs. production war #bravo
To steer the company’s strategy effectively, these elements must be rigorously monitored and integrated into a global vision of the project.
- Have you identified potential purchases for the project? Have these been included in the budget? In other words, do you have a written gross margin target for your project?
- Do you share progress reports with your customer on a weekly basis?
- Do you know in real time what remains to be done on the project?
- Does your customer receive weekly updates?
- Do you review and adjust the project schedule on a weekly basis?
- Have you invoiced according to the work completed?
- Are you able to track, in real time, the hours spent on the project versus the hours billed? Here are the best ways to track time spent on a fixed-price project
- Do you measure your customer’s satisfaction during the project in a clear and summable way?
- Do you have an accurate measure of your output on the project? We recommend that you (re)read our article on the advantages of tracking your activity by progress rather than by invoicing.
- For all these controls and follow-ups, were you able to spend less than 20% of the total project hours?
With our old tool, it was like taking 'photos': we looked at the situation after the fact, in the rearview mirror. With Furious, we can now anticipate and project into the future thanks to real-time planning.
Furious streamlines project monitoring and control, significantly reducing time expenditure.
With Furious, all these questions are answered automatically and without any extra work!
You can monitor the main criteria in real time:
- load (time spent vs. time sold)
- planning (what I told my client)
- project progress (current status)
- billing (where I stand)
The challenge for you is to always be in line with these 4 criteria, and to share them with your customer every week. In this way, you anticipate any possible readjustments to the schedule, scope or budget.
Thanks to Furious, I have dashboards that are absolutely amazing in real-time. Every morning, I can check where we stand in terms of profit, gross margin, and progress on our objectives. It's become a daily reflex
Book a custom demo with Furious to see how our platform helps you stay ahead of project challenges. Get real-time visibility into profitability, automate your progress tracking, and ensure perfect alignment between scope, schedule, and budget—no matter which contract type you’re managing.
You may be asking yourself these questions?
01 What is a Flexible CRM Interaction?
This is a type of customer interaction that you can create and customize according to your specific needs. Beyond the classic “call” or “email,” you can track WhatsApp messages, LinkedIn interactions, client lunches, or any other type relevant to your business.
02 how to Create a New Interaction Type?
You can configure your custom interaction types in the CRM settings. Once created, they will appear in the dropdown list when you create a post-it note or a client note. It’s simple and quick.
03 Can I Modify or Delete Existing Interaction Types?
Yes, you retain full control. You can rename, modify, or delete interaction types as your business practices evolve. Interactions already recorded will remain in the history.
04 Can the Whole Team Use the Same Interaction Types?
Absolutely. Interaction types are configured at the company level and are accessible to all users. This ensures consistent tracking and facilitates smooth handovers between sales representatives.
05 Can I Link Multiple Interactions to the Same Contact?
Yes, of course. Each contact has a complete history where all interactions are stored, regardless of their type. This allows you to build a comprehensive relational memory that can be leveraged over time.
