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Handouts

Time and Materials Contracts

At Pivotal Labs we bill using a ‘time and materials’ contract. We believe that
this offers all parties maximum benefit. It allows those working on a project
to concentrate on collaboration and building iteratively, optimizing for
business value rather than profit.

In an ideal world, building software applications would be as predictable as building bridges, but for the moment this is not the case. With over 25 years of experience developing software, we know that flexibility is necessary to accommodate the changing nature of technology.

A fixed bid contract does not allow for the product direction to evolve as more is learnt about the application. This also encourages a supplier to have quality be the variable element in the contract (i.e., the sooner the supplier delivers the product, the more revenue the supplier generates).

When a new requirement comes up during the project, and it inevitably will, contract re-negotiation and change control process will probably be put in place to manage
that change.

THE DRAWBACKS OF FIXED BID CONTRACTS
We believe that the biggest benefit of our time and materials approach is that the cost of change is built in. Clients can change the product direction, shift focus on what to deliver and when, and allow user testing and the team to influence the product during development. Suppliers are not incentivized to sacrifice quality for increased revenue.

We believe that this encourages any application built with this model to always be production ready. We develop and test on a weekly basis, having spent each week fully developing a set of specific features. The result is that a product may not have 100% of the desired features, but those it does have are 100% complete, meaning the product can be launched at any time.

This is as opposed to fixed bid projects, where most of the features are only partly done until the entire project is complete. The product is not ready for testing until the very end, often resulting in serious issues not being discovered until there are other dependencies on buggy code.

We have experienced that through closer collaboration with our clients we will spend less time making sure we have captured every possible requirement upfront, and less time designing the entire system and allow for a more organic, evolutionary design to take place, allowing for reduced time to go from concept to market.

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