Holdfast Training Services Trial Blog

I am just about to provide technical recommendations to the Client for a £350k plant movements package that I have tendered out and the potential sub-contractors have offered two pricing options for the Client to choose from.  Therefore I would be interested to hear other peoples real world experience of these two options:

Fixed Price

We will sign a fixed price contract.  This is a low risk option but the package is likely to be subject to continual change meaning that change requests will need to be used extensively and additional costs will be incurred due to out of scope changes, omits and additions.  This means that the total cost of the package is highly likely to go over the agreed fixed sum.

Cost Plus

The potential sub-contractors have offered to sell us a set number of labour days (at gang rate) and how we use these resources is up to us.  The number of days sold will be based on the current schedule and programme.  This option is high risk as we could use more labour and equipment than planned and will have to pay for it but it also offers the Client with opportunity since any savings due to more efficient use of resources and due to not using the full allocation of days will go straight back to the Client.  Another benefit of this commercial arrangement is flexibility.  Since the package scope is likely to change numerous times, this contract removes the requirement for change requests and additional charges for change since we would simply use our allocation resources for the change.  If we do use more than our allocated days of labour and/or plant, additional days will sold at a pre-agreed daily rate.

So does anyone have any experience of these two contractual arrangements and if so how did the final package costs compare to the initial agreed sum?