Project Management

What if your project ends early and you're charging a fixed fee?

When a client pulls back on the amount of work he promised you, will he also try to renegotiate your fixed fee? Here are some tips for ensuring that you're paid everything you are due.

In last week’s article, I discussed what you can do when a project is ending earlier than you expected and you’re being compensated on an hourly basis. This week, I’ll take a look at the implications of the same situation when you’re charging a per-project fee.

Flat fee? Then there’s probably no problem
If you’ve set up your contract so that you’re being paid on a per-project basis, a contract ending ahead of time isn’t likely to be a problem. First, if you were able to bid a fixed fee on this project, it’s likely that the scope of the work was well defined. If you complete a well-defined project ahead of schedule, then that just makes you look that much better. Second, if the project ends early because the client incorrectly estimated the amount of work they needed to contract out to you, then you’re still ahead of the game because your contract stipulates that you will be paid a certain amount for your services.

The situation could get sticky, however, if your contract states that you will be paid some amount to perform services x, y, and z, but the client decides that you are no longer needed to do z. The client could try to put a dollar value on z and pay you for only x and y. As always, work with the client and attempt to reach a resolution.

Assess the best strategy for reaching this resolution by using the methods I laid out in last week’s article. The wording of the contract may be the determining factor, but if the client just arbitrarily cancels part of your work, you aren’t necessarily obligated to lower your total fee—the client did contract with you to provide that service, after all. Your contract’s termination clause should be of some help here.

A moral dilemma?
That said, consider the dynamics of the issue. If there’s a good reason why the client no longer needs you to perform part of the project, you’ll only damage your relationship with that client if you insist on being compensated for it. If you want to work with this client in the future, it would be smart to lower your total fee, although you shouldn’t feel like you have to cut back 100 percent of your fee for that part of the project. The client cancelled, not you. You should retain some of that money for the time you spent researching the project scope and the time you set aside to do the work.

However, if the client won’t give you a good reason why you aren’t to do any more work, then you shouldn’t cut back on your fee. If your client doesn’t think you’re doing a good job, he or she can invoke the non-performance clause of your contract, and you can work it out that way. If the client won’t specify a reason, then you shouldn’t give what amounts to a refund.

But there’s nothing wrong with a profit on a job well done
There’s a distinction here between a client terminating part of the project and you performing all of the specified work ahead of schedule. Don’t confuse the two. If your hard work and creativity brought the project in early, then you deserve the extra as a bonus. After all, you’re entitled to a profit on your efforts—that’s part of the attraction of being self-employed.

For example, I took on a project that I billed in two parts: In the first, I billed an hourly rate while I met with the department managers and employees to determine the project scope and a time estimate. Based on this, I presented my analysis, a documentation plan, and a time estimate of each deliverable milestone, along with a fixed fee for completing the entire project. The hiring manager, looking at the company’s bottom line (which is reasonable), seemed only slightly uncomfortable with the amount. But then he asked if I would refund a portion of my fee if I brought the project in ahead of schedule.

I employed my favorite negotiating tactic: a moment of silence. This not only gave him time to rethink what he just said, it also let me compose my thoughts and answer appropriately and succinctly. Then I said, simply, “No.” I told him that my estimate was based on detailed discussions with company management and staff and on my own experience. Then I asked, “If the project runs longer than my estimate, would you be willing to pay me more?”

He let it go there, and we eventually agreed on an amount close to my initial bid. But if he had wanted to pursue it, I would have pointed out certain truths of contracting: Sometimes I lose money and sometimes I make money, and in return for the substantial risk I take as a contractor, I’m entitled to earn a profit as well as a loss.

Next time, network on your way out
In the last article in this series, I’ll discuss how to uncover additional work at your client and how to take advantage of your very best networking opportunities when leaving that client. Especially when a project is ending early either because you’ve done a super job or because the client overestimated the amount of work they had for you, you might have some extra leverage that you can use to get more contacts—and possibly more work—than you might have otherwise.

Meredith Little has worn many hats as a self-employed writer, including technical writer, documentation specialist, trainer, business analyst, photographer, and travel writer.

When you’re charging a fixed fee, what’s the best action to take when there’s less work than promised? What if the client tries to pay you less than promised? To share your thoughts, post a comment below or send us a note.

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