Fixed-Price Vs. T&M: My Perspective

Good Change Control Needs to Be Implemented on All Projects, Whether Fixed-Price or Time-and-Material (T&M)

By ControlDesign.com

Ray BachelorBy Ray Bachelor, president, Bachelor Controls

After reading "Fixed-Price Vs. T&M" [Jun09, p13], some thoughts came to mind that I want to share.

We are a control systems integration company, as opposed to an electrical contractor or a full-service engineering firm, so our perspective is a bit different from that presented in the article. We strictly focus on engineering and programming to deliver the control systems piece of a project, and when appropriate we provide the information layer on top of the plant-floor controls.

We view change control as a means of keeping all the stakeholders in sync with project deliverables. Good change control needs to be implemented on all projects, whether fixed-price or time-and-material (T&M). A change in defined project variables can result in extra cost, less cost or no change in cost. Without good change control, a project can migrate from what was originally intended and surprise some of the project's stakeholders. Surprise is usually not good.

The subject of change control leads to the need for good scope definition. A T&M project without a good project scope will cost more than it should and will take longer because of rework. Without a good project scope, each of the stakeholders could have a somewhat different picture of the project deliverables.

When evaluating rates in T&M proposals, clients should consider contractor capabilities. The bidder that funds internal technical training, quality programs and safety training will have a higher overhead than a company that is just brokering bodies, but firms that provide training offer more professional and lower-risk services.

A good way to find high-level and professional system integrators is check for Control Systems Integrators Assn. (www.controlsys.org) certification. Certified companies must have a structured project methodology proven by third-party audits, and these companies understand how to run both T&M and fixed-price projects.

The article also stated that larger contracts, those exceeding $1 million, are better candidates for attracting fixed-price bids. The work we do for our clients is primarily fixed-price, and most of our contracts are measured in $100,000 increments, rather than $1 million increments.

If we don't get anything other than a process-flow diagram from our client, we'll use our experience and expertise to do an I/O takeoff along with a summary description of deliverables as part of our proposal. This is where our domain expertise adds value, as it allows us to competitively bid fixed-price with limited information from the client.

On the subject of local service, we find that being geographically close to the client does have advantages in terms of travel expenses. But with a good set of P&IDs, or even with just a process-flow diagram along with a project scope, we can gain a good working knowledge and successfully execute projects far from home. We always include a simulation test for our projects, and we encourage the client to participate. Simulation reduces risk, results in a better prepared on-site team and expedites both local and remote startups.

We've installed and continue to support projects from coast to coast, and we think going with a local partner shouldn't be the primary criteria. With high-speed Internet connections and other communications options, most required support can be provided without getting on an airplane while still maintaining a high degree of security.

The control systems element of a project is so highly leveraged that paying a little more attention to that discipline can offer great returns. The controls team is always the last to commission their work simply because everyone else has to be finished before controls implementation. Contractors and operators have to remain available to ensure a timely and efficient startup, so the smoother the controls startup, the quicker and cheaper the project.

Ray Bachelor is president of system integrator Bachelor Controls (www.bachelorcontrols.com) in Sabetha, Kan.

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