in a dilema

[telnettech]

I recently bidded on a small project to install 18 outlets and 2 cables per outlet. The way that i did my estimate was that it would take 2 people to run each cable from outlet to patch panel, terminate, and test 1 hour each cable. the cable runs ranged from 75 feet to 115 feet. The customer accepted the bid. I did my estimate for 72 man hours.....we were able to finish the job in 40 man hours. I was wondering if i should invoice for the 72 man hours or since we got done early, the 40 man hours....looking for thoughts

Brian

To error is human.....if the machine doesnt work, then KICK IT !!!!!!!!!!!!!

 

[sleipnir214]

You're kidding, right? You're looking for an okay for billing fraud?

Sure, you go ahead and do that. But if in the future you estimate 40 hours and the job takes 72, you'd better only charge the client for 40 hours.


Want the best answers? Ask the best questions! TANSTAAFL!

 

[telnettech]

thats what i wanted to hear.....i dont know what the normal thing would be.....i had someone say that they ok'd at 72 hours and said that if i had taken longer to do the job would they have paid my for the overage? i am new to this whole contractor bit as far as the billing.

To error is human.....if the machine doesnt work, then KICK IT !!!!!!!!!!!!!

 

[ecobb]

Now wait a minute, let's look at this thing. Maybe I'm not understanding the situation, but my opinion is the opposite of sleipnir214, with whom I seldom disagree.

That's why I would like a little clarification. Which of these following situations are you in?

1) You told the client you would charge so much per hour, and you estimated it would take 72 hours.

2) You personally estimated the 72 hours and just told your client you would do the entire job for a set fee. You just gave a "lump sum" bid without discussing how many hours involved.

If situation #1 applies, then yes, sleipnir214 is 100% correct and you should only bill for the hours you worked. (that is what billing by the hour is about, after all)

But if it's situation #2, then I'm not so sure you should drop the price. Let's say you were to contract a builder to build you a house, and you agreed on a fixed price. If that builder finishes ahead of schedule or uses less materials than originally anticipated, does he drop the price or just have a higher profit on this job?

I'm confused....

Hope This Helps!

ECAR
ECAR Technologies

http://www.ecartech.com

"My work is a game, a very serious game." - M.C. Escher

 

[ecobb]

Now wait a minute, let's look at this thing. Maybe I'm not understanding the situation, but my opinion is the opposite of sleipnir214, with whom I seldom disagree.

That's why I would like a little clarification. Which of these following situations are you in?

1) You told the client you would charge so much per hour, and you estimated it would take 72 hours.

2) You personally estimated the 72 hours and just told your client you would do the entire job for a set fee. You just gave a "lump sum" bid without discussing how many hours involved.

If situation #1 applies, then yes, sleipnir214 is 100% correct and you should only bill for the hours you worked. (that is what billing by the hour is about, after all)

But if it's situation #2, then I'm not so sure you should drop the price. Let's say you were to contract a builder to build you a house, and you agreed on a fixed price. If that builder finishes ahead of schedule or uses less materials than originally anticipated, does he drop the price or just have a higher profit on this job?

I'm confused....


Hope This Helps!

ECAR
ECAR Technologies

http://www.ecartech.com

"My work is a game, a very serious game." - M.C. Escher

 

[telnettech]

ECAR

the situation is number 1.......this is the 1st job i have done under my own company(used to be done by brother's general contractor business).....this is why i am asking before i finish any of the paperwork for this file.....that is what I thought but had a couple people tell me that if the customer agrees with the estimate, that i should be charging the higher amount.....to me that would be unfair as well as unethical cause i did not use the all those hours......but like sleip said, if it i quoted x hours and it took me longer, than yes i would expect toget paid for those hours worked

Thanks for all your help guys

Brian

To error is human.....if the machine doesnt work, then KICK IT !!!!!!!!!!!!!

 

[Welshbird]

I generally quote for ad-hoc data work in just the same way... almost... except I would say

"I believe the work will take me 9 days @ £1,200 a day. If it should take me longer, then I will shoulder the extra charge. If it takes only 7 days then I will only charge you the 7 day costing."

This doesn't help you now I know, but it may be worth bearing in mind for the next time you quote.

(Of course, it means I tend to slightly over-quote, and then under-charge. That information soon gets around the local industry and does me no harm at all in getting work!!)

Fee

The question should be [red]Is it worth trying to do?[/red] not [blue] Can it be done?[/blue]

 

[johnwm]

Can you perhaps clarify your original post? You speak of estimate AND bid.

An ESTIMATE is a guess that you make to give the customer some idea of what the price MAY BE - the actual billed amount to be determined when the job is complete. If you are working on an hourly rate against an estimate you should bill for 40 hours.

A BID is a formal offer to treat (which if accepted becomes a contract) to do a particular job for a specified sum. If this job is done on a fixed-price contract then you should charge for 72 hours.

Either way you should review your internal estimating procedure. You may also need to clarify your contract/estimate paperwork

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[dwarfthrower]

I always work on either a time and materials basis, or a fixed price quote. It's all to do with risk versus reward. In a fixed price scenario I'm banking on being able to complete the job within the number of hours specified so that the extra hours become cream on top of my bread & jam. Conversely I assume all the risk should the project go overtime... essentially working for nothing for however many hours I need to to get the job done in excess of what the customer will pay me for.

In a time & materials situation the client takes on the risk and I know that I'm getting paid for each hour of work that I do.

But there's no real ethical dilemma. If the job is T&M then you bill for the hours worked... if it's fixed price then you bill for the agreed amount.

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[mmorancbt]

Agreed. If it is an estimate and I go over, a lot, I better be able to justify it. If I estimate and go over on job after job - it is a problem with my estimating.

I do much the same as dwarfthrower does. I do time and materials for a rate and simply work until completion at that rate.

If they want a fixed bid - I am assuming a greater risk. I do a couple things to mitigate that risk.

First, I use my highest rate (no discounts) in my calculation.

Second, I make sure that I have identified appropriate assumptions (things that are assumed on my part and on the client's part - availability, properly configured systems (outside of my control), space and access as necessary, timely response to questions by both parties, etc. Any unmet assumptions can lead to additional billing - ie: If something does not work and it is discovered a server was mis-configured (again, not my work).

Third, I make sure a clear statement of success is defined. I am getting paid for x.

Fourth, I estimate best case and worst case scenario - then I base my calculation on 80% of worst case scenario.

When doing fixed bid, you are undertaking a risk. As such I work to mitigate the risk and maximize the reward. I love that type of project - particularly for higher-value, productivity enhancing tools. They want the fixed bid and if I can get it done A.S.A.P. to the success definition and boost my rate by double or triple, good for me and good for them.

That's my methodology for that.

Of course, you asked a question which I didn't answer - but I think you have probably found your answer above.

If it is an estimate but you are being paid for Time and Materials, bill for your time.

Matthew Moran (career blog and podcast below)
Career Advice with Attitude for the IT Pro

http://blogs.ittoolbox.com/pm/career

http://techcareerconsult.blogspot.com

 

[aarenot]

We use different methods of estimates.

Fixed quote, $XXXX.XX, that is what you pay. This has a very defined, and refined scope of work. These quotes include a higher margin specifically to cover the investment of time for jobs which are not recieved after the bidding proccess investment. This type of bid is more expensive to prepare, and the cost of such are covered by charging more for these types to cover the manpoweer to prepare the quotes you do not win, as well as to cover the risk inherant in a fixed quote. there are no additional charges for work within the scope regardless of time, or materials used.

"not to exceed" quotes. These have a defined scope as well, and are Time, and materials, but with a set limit prior. This is in reality an over-estimate of the T & M, beyond which the customer does not pay any more regardless of the time and materials within the scope. Adds do apply if items not in the scope are added, like another data drop here, or another phone line there. if you find a firewall in the path you didn't know about, you eat the added cost if it goes over the "not to exceed" figure.

Anyhting beyond the scope is an add which is T & M unless quoted seperately.

T & m, is simply a quote of the hourly rate spent on the job. All time, and all materials will be billed. Strangley enough, these in my experience doing the job are the least costly in most cases. Low risk, low margin, in a trusting relationship, everyone wins. No time wasted bidding, no time wasted gathering bids, just get er done, and get paid.

 

[telnettech]

guys

To end all this doubt, here is the exact wording that was used on the proposal:

"You recently requested pricing information from our company. Here is our revised quote for a total of 26 cable drops:
Part # Product Description Unit Price # of Units Total
27350 1000 Ft Cat5E PVC Cable-Blue
27356 1000 Ft Cat5E PVC Cable-Red
03784 Single gang Wallplate Mounting Bracket
03796 Cat5E Rj45 Keystone Jack-Blue
03790 Cat5E Rj45 Keystone Jack-Ivory
03411 2port Multimedia Keystone Wallplate-White
99999 Installation 72 man hours


Thank you for giving us the opportunity to bid for your business. "


Now obviously for competitive reasons, i have deleted the actual pricing but you get the idea of the wording i used on the proposal.

So is this an estimate(which was the intention) or an actual bid?

Brian

To error is human.....if the machine doesnt work, then KICK IT !!!!!!!!!!!!!

 

[mmorancbt]

Hmm???

My first inclination is that it is a quote. However, at assume you may do more work for this client and the long-term affect of 72 versus 40 hours of income is incidental.

If you go to them and tell you ended up doing the job in far less time and so you are only charging for time spent, you go a long way to cement your good name and get referrals.

And you always ask for referrals directly and several times during the year, right?

Another thing, you've probably spent more time thinking about this then its worth. I believe your moral intuition is indicating that you should charge him closer to the time actualy spent on the project.

That is what I would do.

Matthew Moran (career blog and podcast below)
Career Advice with Attitude for the IT Pro

http://blogs.ittoolbox.com/pm/career

http://techcareerconsult.blogspot.com

 

[audiopro]

I don't think it matters whether it is an estimate or a quote. No company is going to refuse an offer of a lower bill. The important thing is to discuss it with the appropriate person and explain the situation to them. Tell them what you based your original bill on and what made the job quicker than you antcipated. Holes already in walls between rooms, good surfaces to fasten hardware to etc. Just be honest with the right people.
I would say keep a few hours extra to make up for the next job, where you have to drill through the wall of a bank vault to thread a phone wire.

Keith

http://www.studiosoft.co.uk

 

[nerbonne]

HUH? Unless you agreed to bill at an hourly rate (which makes you an "employee"), then the company pays the contract price, since a "bid" is something that you do when you "contract".

If you had gone OVER 72 hours, would you have charged more? No.

 

[burtsbees]

It's got a lot to do with ethics. Though there usually is a standard answer for this sort of thing, another thing to consider is putting yourself in the customers' shoes and treat them BETTER than you would like to be treated. Why? Because 99% of honest people out there take a humble approach to this question..."how would I like to be treated?", and also I like to try and set my standards high. If I think about what I should do, and then think about me being the customer in that situation, and I would come back for more business because of this treatment---then if I treat them BETTER than this, that just ensures repeat business that much more. Is my grammar horrible or what???

Burt

 

[telnettech]

thanks for all the replies.....the issue has been dealt with and i only charged for the actual hours......Since then i have used them as a reference and they have sent other customers to me to get work done......The business is taking off and have added a 2nd fulltime person instead of using my teenage son and paying him( though i do still use him from time to time to teach him about working hard and being a responsible person)

To error is human.....if the machine doesnt work, then KICK IT !!!!!!!!!!!!!

 

[aiotech]

I would only invoice for the 40 man hours. The customer will be happy that you were able to get it done in less amount of time and will also be happy that you saved them money.

 

[rolm9751]

First of all, I wouldn't have itemized the labor into "hours". It should have been simply listed as "Labor". As an IC, only YOU need to know how many hours are actually required to satisfy the scope of work outlined in the contract. You estimate the hours that you think it will take to complete the job. Multiply that by your (and your assistant's)"hourly worth" and the result is listed as Labor.
That formula works good for bids. Time and materials is different. I agree with Dwarfthrower, I use bids for Installations and maintenance contracts. I use T&M for service and MAC work(Unless they are already under a maintenance agreement).