Fixed Cost – Variable Scope

I recently blogged about a traditional fixed scope – variable cost procurement framework and the merits to this low-bid scenario. Today I wanted to turn the tables and discuss what at first glance can seem a little more open-ended approach: fixed cost – variable scope. Essentially, budget is never not an issue on a given project, but when is it so constrictive that you would cut scope (or add it) to spend only what (or exactly all) you have? Let’s discuss the benefits and pitfalls to this RFP structure:

PROS:

–          I’ll Gladly Take More, Thank You: If you have the money to spend and additional scope is available beyond what you had anticipated, why not just get the job done in full now rather than coming back in a few years?

–          Budget Certainty: I know exactly what I am going to spend. No more, No less. This is important to agencies of all sizes. If I get more scope for my buck – great; if I have to cut scope to stay on budget – that is reality. Budget it King.

–          You Don’t Really Know What you Want: You have a pretty good idea to guide the proposers with, but in reality, you aren’t completely sure exactly what you want. Furthermore, you are completely open to suggestions on how to improve your scope…within your budget. Don’t sell yourself short…get what you deserve.

CONS:

–          The Tail Wagging the Dog: Do you really have to live and die for that budget to the extent that you are cutting valuable scope just to keep from an overrun? Do what is truly needed for the project and figure out a way to keep the costs in check but out of the driver’s seat.

–          You are a Sucker: Salesmanship 101 – with this approach you will almost certainly be sold something you really don’t need. Could that money be better spent elsewhere?

–          The Contractors / Consultants don’t Really Know What you Want Either: You may end up with different scope offered from multiple proposers for the same costs with few metrics to value apples vs oranges. Someone’s gotta lose, at least make the rules fair.

I am personally a big fan of this approach, but set your base goals / scope high. You will be impressed by what the market can bear. On the other end of the spectrum; money doesn’t grow on trees. Budget often is King and this approach will help you reach your #1 goal.

What’s your preferred approach? Fixed Costs or Fixed Scope?

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