“I just wanted the world to see I was real with it | Wanted a deal, got it, and couldn’t deal with it” – Joe Budden
Previously, I answered the most popular question ever regarding mobile app development: How Much Does It Cost To Build A Mobile App?. You’ve since read that post, done your homework, found a great service provider (still looking, hit me up), answered all the questions about pre-engagement cost levers, and have a price that’s on budget.
You are good to go, right?
“But if the devil’s in the details, then I’m Satanic” – Drake
Don’t be blindsided by a good deal. (All respect due to Stevie Wonder … he’s a national if not global treasure!)
We only discussed the pre-engagement factors that affect the cost of developing a mobile application. However, there’s a major, hidden, shady A.F. way that costs can increase during the engagement, and it is all in the contractual statement of work.
RISK MITIGATION IN CONTRACTS
Typically, engagements will either be of one of two contractual formats:
- Fixed bid: the product requirements, deliverables, necessary work effort and resultant price are set in the statement of work contract – ostensibly a low-to-no risk engagement
- Time & materials: given a degree of uncertainty, client pays the contractor for the work effort exhausted toward achieving the statement of work, understanding that the desired deliverable may or may not be achieved within the contracted work effort
One can debate the merits of either format from a budgetary or resource planning perspective, however, in our experience, this is immaterial due to an unethical trick in practice.
FIXED BID TRICKS
Clients inexperienced with contractors may opt for fixed bid given the attractive benefit of a known price – it is an easier internal sale. Some unscrupulous contractors leverage this to win the engagement via a low fixed bid, while also withholding some of the unknowns necessary to complete the deliverables that have not been detailed in the contract.
What then happens is a slippery slope. The engagement kicks off, everything is great, work is getting done, but then, the unknowns are revealed and a work order or change order is presented as it deviates from the contract.
Uh, oh .. your fixed bid price is no longer fixed!
At this point, the client is stuck with the contractor, so there is no competitive bid on the work/change order. Whenever the scope of work creeps, so does the price. Now you have to go back and ask for more budget after you promised fixed costs. Ouch.
“But what I’m doing is not a good look | I never did it by the good book as a lifetime crook” – The Roots
In the world of mobile apps, where the hardware and software technology is constantly being updated, there are a host of unknowns that make fixed bid historically difficult if not impossible to navigate. Repeat after me:
Fixed bid mobile development is an aggressive business tactic that never ends well.
TIME & MATERIALS TRANSPARENCY
In a time & materials contract, where there is clear definition of price-for-level-of-effort rates, the client understands implicitly and explicitly how scope creep affects the pricing. We find that this clarity aligns both the client and contractor:
- We both know directionally where we want to end up.
- We both understand that there might be some known unknowns and unknown unknowns along the way.
- We agree on how the pricing structure will work in advance of those eventualities.
Though it takes more time to explain the value of time & materials, there’s a beauty in being transparent, resulting in better mutual guidance, fewer legal rotations, happier clients, and repeat business or referrals. 👍🏽
I pride myself on running an ethical mobile advisory and development business, where we reveal every risk, every cost, and every solution path before signature.
If you’re looking for a trusted, ethical mobile services partner, please consider Touchlab. We’re ready to earn your business. My name is Jeff. I help build businesses.