5

Customers prefer a FFP at times because of they believe it helps to control costs. In some ways it does; however, in many cases they end up paying more, either because of the contingency built in the price and / or the vendor submitting one change request after another. And the change requests typically have a lot of built-in margin since the CRs are not ...


2

There are always questions that can't be answered at the start of a project. You begin with incomplete information and learn more as you go on. This is a well-known principle called the Cone of Uncertainty and it means that decisions taken at the start of a project have to be made based on information that may prove to be incomplete or inaccurate. This is ...


2

There's a difference between being a software vendor and being a service provider for bespoke applications development. You seem to be describing a service-provider kind of relationship. A fixed-price (FFP) contract does not mean the customer only pays a fixed price. It means the customer and supplier agree to negotiate on price and scope and that the ...


1

A great option where cost risk is shared and where scope is largely defined is a cost plus fixed fee. In this case, both the seller and buyer are at risk for cost increases and therefore motivated to do what they can to keep costs from climbing, unlike a T&M where the seller is motivated to maximize charges. This type of contract also avoids loading up ...


1

Everybody (obviously) answered yes to getting a lawyer involved. But nobody answered your first question: How does the software development company draw up a contract that protects the company's interests (doesn't cause losses)? However, besides for the legalese, the contract is going to need an addendum; specifically, a detailed Technical Spec. This will ...


1

I strongly advise you to engage an attorney who is skilled at creating this sort of contract. (And, in general, in leading clients through this sort of business negotiation. (The old-fashioned word for an attorney was, after all, "counselor.") An attorney is "an expert in the law." You are not. I stumbled-upon my personal attorney, Tom,...


1

As you mentioned yourself, the problem with software development is that there are a lot of unknowns. These introduce variability in what will be built (which people assume will be fixed). What's worse, is that in the beginning, both parties have trouble knowing what is needed and what will change after the project is started (and things will definitely ...


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