Bala S DuvvuriProject Manager| ShellBangalore, Karnataka, India
Hi Fellow PMs,
As per my understanding we don''t plan budget for the project in T&M like we do in Fixed price project.
Please let me know your thoughts on this and what are the other costs to be considered other than resources cost.
Thanks
Bala Duvvuri Saving Changes...
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Markus KopkoAI Enabler for Project & Program Mgmt | Founder PMotion.ai / The PM
AI Coach| PMotion.aiHamburg, Hamburg, Germany
Hi Bala,
may i ask where this statement come from?
Well, i guess T&M contractions in Europe/Germany are a bit different handled like in other countrys (amerika for instance), but however, why should you not plan a budget for this project?
Didn''t get it. To do a cost management plan and a project budget is somekind independent from the legal contraction form.
Of course the type of contract is interrelated to the cost management process and how to handle the budget over the project life cycle.
But to say you do not need to plan a budget cause it is T&M, this conclusion is not alloewd from my point of view.
Regards,
Markus Saving Changes...
Bala S DuvvuriProject Manager| ShellBangalore, Karnataka, India
Thanks Markus for the response.
May be i didn''t put my question in the correct way.I would like to understand how budgeting and cost management plan are different in T&M contract compared to that in Fixed price contract.
Thanks
Bala Saving Changes...
Roberto GonzálezIndependant Naval Consultant| Deep MarineSan Dona Di Piave, Venecia, Italy
Good morning Bala,
from my point of view T&M increase your risk to be over budget, if you loose in some point close control of your contractor. In terms of cost management big difference are:
- fix price, your team needs to get cost control audits in some points of project and check that any deviation of scope/timing is happening to be impacted in your project
- T&M, your team has to be closely monitoring any deviation in scope/timing to detect points of improvement of your plan to balance your budget.
In other words, you will need closely monitoring in a T&M contract, due to in a fix price you transfer part of the risk to your contractor.
I hope this helps.
Roberto Saving Changes...
Stéphane ParentSelf Employed / Semi-retired| Leader MakerPrince Edward Island, Canada
The main differences, Bala, is in a fixed price contract, you work to a fixed scope. In a T&M contract, you usually - though not always - work to a fixed budget.
Roberto is correct: on fixed price contracts, you want to minimize scope creep; on T&M you want to minimize budget creep.
The same amount of work will cost you more under a fixed price contract than it would for a T&M contract. That''s because the provider is taking on much more risk in the former.
Another rule of thumb is that the work is usually managed by the provider in a fixed price contract. Under a T&M contract, the client can manage the purchased resources and simply treat them as staff augmentation. Saving Changes...
Thejassu RaghavanEngagement Manager in Agile environment| WinWire Technologies LtdBangalore, India
Bala,
Budget plan is required in both cases - Fixed price and T&M.
In majority of cases T&M contracts are selected for ongoing operations. Effort estimation is done based on the volume of work on daily/weekly/monthly basis and based on that number of resources required are identified. The vendor will provide the cost of per resource per hour basis, which will include their margin as well.
Fixed price contracts are selected for specific scope of work. In both cases budget planning is mandatory. Saving Changes...
