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Fixed Fee / Fixed Bid Delivery


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Many organizations are comfortable using a Time and Materials approach to buying consulting services. This presentation describes Fixed Fee as a procurement option.

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Fixed Fee / Fixed Bid Delivery

  1. 1. MomentumSI Fixed Fee Delivery Process July 22, 2014 Confidential
  2. 2. Fixed Fee vs. Time and Materials  Fixed Fee (or fixed bid) is a procurement method where:  The buyer agrees to purchase deliverables from the seller (e.g., MomentumSI) for a specific price.  The buyer and seller have agreed on the deliverables upfront, and described it in the contract (e.g., a requirements document or specification)  Changes/clarifications to the specifications create additional contracts called Change Orders that expand the scope, time and dollars.  Buyer can NOT mandate ‘how’ deliverables are created (methodology, practices, team members, roles, status reporting, tools, etc.)  Time and Material (T&M) is a procurement method where:  The buyer procures an allotment of hours from the seller. No guarantees are made on delivery other than ‘qualified personnel’.  Buyer can mandate ‘how’ deliverables are created (methodology, practices, team members, roles, status reporting, tools, etc.) July 22, 2014 Confidential
  3. 3. Fixed *  Fixed Fee = the price is predetermined  Fixed Calendar = the delivery date is predetermined  Fixed Quality = the number of acceptable errors/omissions is predetermined  Fixed Functionality = the functionality of the system is predetermined  Fixed Constraints = certain rules must be followed in the delivery (e.g., use certain technologies, styles, etc.)  When people use the term ‘Fixed Fee’ they often are referring to a combination of (Fee, Calendar, Quality, Functionality and Constraints)  The details are specified in the contract. July 22, 2014 Confidential
  4. 4. Black Box Delivery  Fixed Fee Delivery is a Black Box approach:  Seller identifies the staff they’ll use. This includes the number of people, their location, their expertise, their roles on the project, etc.  Buyer has no say in ‘how’ the seller produces the deliverables, other than items pre-identified in the ‘Fixed Constraints’ portion of the contract.  Example: Gasoline  Buyer purchases gas at a gas station for a specific price.  Buyer isn’t involved in the drilling for oil, the production, shipping, etc.  Example: Hamburger  Buyer purchases hamburger from a restaurant for a specific price  Buyer isn’t in the kitchen telling the chef how to cook it, giving ideas on the ingredients or asking for status reports July 22, 2014 Confidential
  5. 5. Black Box Delivery July 22, 2014 Confidential Buyer Liaison Liaison Seller Requirements & Conditions Deliverables PM’s, Engineers, Testers, Authors, SME’s, … Product Managers, Business Analysts, SME’s, Acceptance Testers, … Changes & Clarifications Change Orders Revised Deliverables Bug / Issue Reports Revised Deliverables The buyer liaison acts as the gateway for scope changes, clarifications, scheduling acceptance tests, ... The seller liaison acts as the gateway for ensuring change orders are done, deliverables are sent, milestone plans are sent, ...Milestone Updates
  6. 6. Formal Documents July 22, 2014 Confidential Master Service Agreement (MSA). A legal document holding the contractual terms between buyer and seller, including payment terms, jurisdiction, liability, confidentiality, etc. Statement of Work (SoW). A legal document describing the terms for a specific piece of work including the price and schedule, often referencing a specification for the details on functionality. Change Order. A legal document describing changes requested by the buyer to the seller for a fixed fee contract. Examples include: changes in features, changes in SLA’s, changes in timeline, changes in approach. System Specification. One or more documents that fully describe the system functionality, features and behavior under specific conditions such as number of users, response time, deployment hardware/OS, etc. Request for Clarification. A formal request from seller to buyer asking for clarification on the System Specification. Clarification requests are written requests, but may turn into interactive meetings to expedite communications. Specification Update. A specification update is a deliverable that supersedes the original specification based on a ‘request for clarification’. Buyer and Seller Liaisons approve updates and generate Change Orders. Milestone Drop and Update. A milestone drop is the delivery of any functionality that is available for review or acceptance testing on a pre-determined date. Milestone updates are status updates provided on pre-agreed dates. Bug and Issue Reports. Bug/Issue Reports are generated by the Buyer and sent to the Seller within predetermined time windows. The reports indicate areas where the Buyer believes the system does not meet specification.
  7. 7. Initiating a Fixed Fee Project  Buyer Team holds an internal meeting focused on how they’ll deliver requirements, provide clarifications, approve change orders, accept delivery drops and issue bug reports  Seller Team holds an internal meeting focused on how they’ll organize the delivery, report status, validate quality, resolve bugs, etc.  Kick off meeting!  Attendees: Buyer and Seller Liaison ONLY  Review the delivery process  Emphasis placed on buyer/seller rules of interaction  How are changes handled?  How are clarifications handled?  When are the milestones? What will be delivered at each one? July 22, 2014 Confidential
  8. 8. Section One