Time and materials contracts

With this type of contract, the customer is charged at a fixed rate per unit of effort, for example, per staff-hour. At the start of the project, the supplier normally provides an estimate of the overall cost based on their current understanding of the customer's requirements, but this is not the basis for the final payment. The advantages of this approach are the follow ing.

• Kasc of changing requirements Changes to requirements are dealt with easily. Where a project has a research orientation and the direction of the project changes as options are explored, then this can be an appropriate method of calculating pay ment.

• Lack of price pressure The lack of price pressure can allow better quality software to be produced.

The disadvantages of this approach are:

• Customer liability The customer absorbs all the risks associated w ith poorly defined or changing requirements.

• Lack of incentives for supplier 'The supplier has no incentive to work in a cost-effective manner or to control the scope of the system to be delivered.

Because the supplier appears to be given a blank cheque, this approach does not normally find favour with customers. However, the employment of contract development staff, in effect, involves this type of contract.

Function point counting was discussed in Chapter 5.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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