Dear Project managers, 

Which is better according to you? Managing a fixed-cost project or a Time & material project?

The answer will be different for all. Or you may say it depends on how the client wants or what organizations offer.

Any of the approaches you choose, there will be hiccups. Although we can make sure the value is delivered regardless of the approach of billing. 

This time, let's discuss T&M approach. Most of the projects I worked on, are T&M. There are limitations to it which I have experienced - you might have too.

But hey, there is a solution to every problem, right?

In today's newsletter, I will share the limitations first - to make sure - you also recognize these limitations if you have not yet. Then we will discuss while implementing T&M - what techniques we can utilize. let's get started.

Problems with implementing T&M:

• Cost Uncertainty: While fixed monthly costs offer predictability for budgeting, they can lead to cost uncertainty if the project scope varies from month to month. If the project requires more resources than initially anticipated, the fixed monthly cost may not accurately reflect the actual expenses.We all have been there at some point. The assigned resources go on unplanned long leaves, the client gets up to speed and ask to work on multiple requirements and the need arises to add more resources. 
• Inefficiency Risk: Fixed monthly billing can create a risk of inefficiency, where team members may not be fully engaged in the project throughout the month. This can lead to overpayment for underutilized resources.
• Scope Creep: The absence of a clear scope in the contract can result in scope creep, where additional work is performed without clear agreement on additional charges. This can strain the client-provider relationship and lead to disputes. We will discuss in technique - section - how to avoid this. 
• Client Budget Constraints: Clients may have difficulty accommodating fixed monthly costs, especially if the project requires significant resources for extended periods. This limitation can affect the willingness of clients to engage in long-term projects.
• Client Involvement: Some clients may prefer a fixed-price approach as it requires less involvement in monitoring resource utilization. This approach demands more active client participation and oversight. If client delays in providing clear requirements, or do not show up in Sprint review or do not get involved as required - this can quickly become risk to project success.

Techniques to implement T&M approach effectively:

• Scope Statements: Develop detailed project scope statements and deliverable descriptions to minimize scope creep. Clearly define what is included in the fixed monthly cost and what falls outside of it.If client is not clear at initial stage for long term plan, you can choose the route of known requirements and adding resources accordingly. 
• Resource Planning: Conduct thorough resource planning to ensure that the necessary resources available throughout the project. Quick note: You can also use - Resource levelling technique: According to the Project Management Body of Knowledge (PMBOK) Guide, resource leveling is a technique to help you better accommodate resource constraints by adjusting the start and finish dates of a project. In doing so, you can make realistic project deadlines without overworking your team and increasing the total cost of the project.

Source: A guide to the fundamentals of resource leveling - Work Life by Atlassian

• Resource Utilization Reports: Provide clients with regular reports detailing resource utilization, project progress, and associated costs. Transparency in reporting can build trust and ensure alignment.
• Client Collaboration: Actively involve the client in project planning and monitoring. Regular meetings, status updates, and reviews can help the client understand resource utilization and any potential adjustments to the fixed monthly cost.
• Detailed Contracts: Ensure that the contract includes explicit details about the fixed monthly billing structure, the resources covered, and the mechanisms for handling changes. Legal expertise may be necessary to draft comprehensive contracts.
• Monthly Reviews: Conduct monthly review meetings with the client to assess project progress, resource utilization, and any scope changes. Use these meetings to make necessary adjustments to the fixed monthly cost.