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Bulk Hourly Contract for Consulting

Posted on 2012-08-20
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Hello,
I do web consulting and I have a client which would like to enter into a bulk hourly contract for working 100 hours over the next couple of months for doing various tasks. My situation is that I have always billed for the hours worked after a project has been completed so I have no idea how to approach this billing wise. Is there any sort of industry standard for this type of arrangement? Do people usually bill up front or after the fact.. or do they bill monthly? I realize these are all possibilities, but I am curious about what others have done or seen done in this type of situation.
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Question by:Aaron Feledy
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Mark Wills earned 2000 total points
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Part of the answer is dependant on the client and your relationship.

Why or what is the client's motivation for entering into 100 hour bulk contract ? Is there the expectation of some large discount, or, an assurance of availability, or, specific milestones that need to be reached ?

If there is an expectation of discount, then typically bill up front. But make sure the scope is extremely well defined to cover the specifics of the expected work and the anticipated hours for each task (if it can be defined).

The trap with these types of contracts is when it getting to the target hours and there is clearly a lot more to do. If they have consumed hours for work they did not consider to be part of the scope, then disagreements can start. That's why it is best to bill up front. The other trap is that they have already paid, so if there is some unforeseen circumstances, or scope creep, then it can be difficult to charge more.

If the contract is to make sure of resource availability, then normally bill a month in advance, and then at the end of each month reconcile work actually performed, bill any adjustments or include the adjustments (ie extra work not included in scope) into next month's billing.

If you are quite comfortable and can carry the cash flow, then why not continue as you are doing - bill for the hours worked after the project. Maybe define the various tasks as if they were mini-projects and set milestones based on the "variety of tasks" which gives a billing point.

There is no industry standard as such, just the way it works best for you and your relationship with your client and their motivations for "buying" 100 hours. Having said that, there is an expectation that a day rate is cheaper than an hourly rate, and a longer term commitment (like 2 weeks) is a little more negotiable.

The traps with a day rate is that it is often more than a simple 8 hours a day, so, you have to be very diligent about managing your time as the unit of time increases.

Hope that helps a little...
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