Pier Luigi CalabriaProject Manager| INFORM Institut für Operations Research und Management GmbH, Aachen, GermanyAachen, Germany
In the context of a service provider / supplier, the best contract form should be CR. Or T&M.
Why are FP contracts so used, instead? Is it just for "reduced admin" purposes, or? Saving Changes...
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Sergio Luis ConteHelping to create solutions for everyone| Worldwide based OrganizationsBuenos Aires, Argentina
In my personal opinion, buyers push for fixed price contracts to translate risks to sellers. But it has no sense mainly in terms of to keep a good relation and acting as a team to achieve the objectives. No matter that I am working inside fixed price schemas from lot years ago. Saving Changes...
Translate risks to sellers is reduced admin.
However FP should have "a good defined statement of work" by A buyer if not then T&M preferred in my opinion as it is hybrid.
As Sergio indicates, a primary driver is to reduce risks but as he has stated, this is a short term view as it doesn't incent the contractor to excel.
A lesser justification is to be able to have certainty regarding costs.
It does make sense in situations where the "what" is very well understood and not likely to change. For example, if I want to get a room painted in my house and I know there's no hidden "gotchas", I'm okay with a fixed price bid on that...
Kiron Saving Changes...
Amany NuseibehSpeaker, Global Leader | Optimal ConsultingSydney, Nsw, Australia
Pier,
As discussed by both Sergio and Kiron, it's definitely a risk transfer preferred option. However, incentives can be introduced in the form of pain / gain share to ensure a quality outcome on time and within the overall budget. While service providers might refer to FP as they experience delays, an organisation that have its own resources in addition to the service provider would still incur additional cost (taking resources out of the Business, hiring SMEs); hence, the pain / gain sharing option. Saving Changes...
