Back in the days when I wore a proferssional services hat the T&M (time and materials) contract was prevalent. T&M was good for a consultancy as it loaded most of the the risk on the client. I also think it did a good job of focussing the client minds as the last thing they wanted was expensive consultants sitting idle whilst they provaracated over making a decision.
Over time clients more often moved to a Fixed Price model for their consulting engagements which helped control their costs. It also shifted the risk to the consulting firm and for that I know that my consultancy would add a margin of 30% to offset that risk. What the clients failed to understand in the shift from T&M to Fixed Price was how that would change the mindset of the consultancies that they engaged.
Back in the T&M world we really focussed on doing things right. We knew we were expensive and we knew we had deadlinesto meet. I can honestly say that when I worked on site I believe I acted in the clients best interests. The problem with Fixed Price is that the consultancy focusses on doing as little as possible to cover its contractual obligations.
Hence the client may think they're getting a better deal by fixing the price - but you know what - I'm pretty sure they haven't figured out how to measure whether they're getting good value or not.
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