Unsettlingly Settling — Why it’s Best to have Zero Certainty from your Suppliers
I signed an app development contract last year with no certainty I would get what I wanted for my money. It was a software company and they told me they don’t do fixed priced contracts and to trust them. Oh yes and they were based 3,000 km away.
Here’s how the contract described the output, for an estimated £70k of work:
“Final deliverable: Progress report, Installable iOS app file, test backend upgrade”
I am serious, this is a direct lift.
They told me they only do time and materials, there would probably be a lot of bugs, and if there were, we would need to pay more to fix them. This was unquestionably unsettling.
But they did tell me they were very good at their job. They were backing themselves and it was up to me if I trusted them — it was no skin off their nose if I looked elsewhere.
It’s human nature to want to get the other side to commit to something, in return for a fixed cost. If you’re getting your roof repaired who wants to keep writing cheques while the project drags on into the middle of winter?
But then I thought about it and realised this was all wrong.
The truth is fixed price contracts immediately create a relationship of distrust.
Think about it. A fixed price contract says ‘We are limiting ourselves to delivering ‘this’ because any more will eat into profit margin, which we must maintain at any cost. We will either squeeze the quality, or put up our price, but one way or another we’re making our profit.’
So it’s actually a nonsense. There’s no way anyone knows up front exactly how long anything will really take to build/make/deliver, and what unexpected problems they’ll encounter. A fixed price contract is a desperate attempt by a buyer to protect himself from something he doesn’t understand.
So what’s the alternative? Well try this for size. You the buyer actually trusts the supplier, that their people are first rate and will honestly bill the hours it takes to deliver the project. And crucially, the scope of the work will be flexible and adapted as needed throughout to fit the budget. Whatever you’re asking for, there is always a way to prioritise. I challenge you to think of something that doesn’t.
When you take the plunge into these refreshing waters I can tell you a great weight lifts. You’ve decided to unequivocally trust each other, and it’s up to you to work together to make it work, not refer back to the contract every half hour.
And what happened to my software contract? Delivered on time and on budget, and got 1,300 active users in 6 weeks. You can see for yourself here. Thanks for the recommendation Ben.
Michael Goulden
Co-Founder, Pinga — the world’s fastest delivery, run by the people around you.
michael@pinga.co.uk
