Not to Exceed Proposal 3

[SteelPE]

I am fairly new to the consulting business. Was forced into the position due to a job loss a few months ago. As I go about trying to drum up new business I am constantly asked to do different things.

Yesterday I was visiting a potential new client, an architect, who has two projects that need structural engineering. We went over the projects and what he wanted in terms of a proposal. At the end he said that he wanted the work to be done hourly but he wants the proposal to state a guaranteed not to exceed price. Now most of the projects I have done have just been straight proposals. While I understand the concept, it almost seems like a loose-loose situation on my end. If I underestimate the time it takes to complete the project I take a bath. If I overestimate the project I loose out to my competition (which I am not really worried about) or I don't make up for the jobs I underestimated (I have taken baths on a few projects).

I have discussed this with a few peers and they suggested to slightly inflate the price and hourly rate to try and "cover" myself. The client was referral so they do have access to what my current hourly rate is, so this may be a little difficult. I'm also assuming that they are going to want to see a breakdown on my invoice in terms of hours and days. Since I am a one man shop, this is going to be more of an inconvenience than anything else. How do others handle this situation?

 

[SteelPE]

Ron,

I'm not bidding.... I'm proposing (hahahahahahaha). I get your point. Out of all the calls I have fielded trying to drum up business from something that was not existent 10 months ago (probably 20-30 calls from different people) not one person has ever been receptive of just giving me work with no boundaries. How do they know I can even handle the task in a timely fashion? If I refused to work with people who wanted me to bid on projects I would have no work and be an unemployment statistic.

 

[ukengineer58]

I am a little confused, I'm uk so maybe it's a different culture. Here we generally agree a scope a total fee and away we go. Change in scope, changes or redo are subject of change orders and billed. Depending on client we add a little into a 'risk pot' if we know there will be changes, we then don't bill until that is used up although still notify the client the cost of extra hours against the fee just so they are aware of the extra they are paying for. If it is a feasibility maybe or something that cannot be defined we may go for hourly rates and notify costs at certain agreed times. Or maybe say you'll have x number of engineers y days a week for z weeks working on your project. Whatever is done it that time is done.

 

[racookpe1978]

From the customer's viewpoint, I'd like (love!) a not-to-exceed contract - as several have pointed out, that gives he customer in these hard times, an assured cost. And, in fact, you'd be very likely to ramp up costs to meet that not-to-exceed dollar limit.

But, equally you, as the second member of that contract, need to be assured that "changes based on growth in scope, in changes in conditions or requirements not already explicitly stated in this contract, changes in other as-delivered supplies or suppliers, or in as-found conditions at the site not already described in this contract, will be accepted by both parties and be accepted as exception beyond the limits of the not-to-exceed amount ...."