Time and Materials Contracts: Model of Formula 1 | KISS digital

Content Marketing Manager.

Time and Materials Contracts: Model of Formula 1

Time and Materials contracts, as opposed to Fixed Price model adjusts better to change in the process

Today, I want to give you a quick, but completely new perspective for the two most popular agreements on the software development market: The Fixed Price (FP) and the Time and Materials (Time and Material, T&M) models. Before writing this article, I asked myself: What do you think when you hear a phrase the Time and Materials? My answer is F1. Yes, F1 racing series. Let me tell you why.

Being flexible is the main secret of champions

Young drivers rarely dream about their spectacular success as quick as they should. But, the strong ambition is the key to success, so the F1 teams have to do everything they can to protect business priorities, budget, and finally, the success of a driver. The same situation applies to relationships in the software development market. The client wants to have the best product, feel safe and stable, and have the possibility of winning.

Before the race day, drivers have to participate in the qualification session. The position on the starting-grid depends on the strategy for all three Q-session. So, if the team doesn't assume the best track, weather, and other conditions before Q-session starting, the driver will be doomed to failure. The fixed-price agreement is the right solution for predictable sport, but not for F1, to be honest. Unpredictable conditions necessitate the use of a particular type of tire, specific aerodynamic set, keep the best timing, and focus based on many more requirements. During the software development process, we have to take care of a similar amount of factors.

We understand it, so the KISS teamwork in Agile methodology tries to prepare the best strategy for every single sprint. The sprint can be named "Q-session" because all team members have to be focused on the current situation and be ready for changes. Time and Materials model gives you freedom with making decisions about next steps taken day by day. A driver can report some suggestions to his team, and the team can keep focus on the correct strategy during the whole development season. From a business perspective, we are billing clients for actual work scope based on fixed hourly rates. So, they are charged for the real amount of labor hours spent on a specific project. The transparency of costs is important because if you know the possibilities, you can make better decisions for the driver and team success. In F1 race, one of the main reasons for the good results is speed, of course, but it is also followed by the concern for high quality.

High quality and speed with Time and Materials contracts

After every single race session, team engineers, stakeholders, and drivers analyze the current effects and time, which spent on the last sprint and all costs of any change. The Time and Material contract allows you to start with maximum speed and move at an accelerated pace while working on improvements along the development track. Let me go back to the F1 analogy for the moment. It is not possible that all teams will be the best in the first race of the season. The weaker teams have to extrapolate on all data which they can collect from race to race. A lot of teams had undergone a significant metamorphosis taking into account comments, suggestions, issues of the drivers and team members, not forgetting about business efforts.

Teams have to remember of budget, driver skills, and timeline. In the same time, the quality is the crucial part of success, because tens of seconds decide who will be a winner across the line. The Time and Materials contract gives weekly or daily time reports for the team, which contain all costs. A client only pays for actual work completed while saving time on the project. It allows you to track progress and know exactly where the team is and what they can do next at any point. The container with all requirements can be overfull or empty. Both situations are not suitable for the final score. So, we should know where we are. Thanks to the comprehensive look, we can decide which part of the development is the most important for the quality, making better results in the future and finally – for our success.

Maybe some area will need to be analyzed and fixed, but they will have to wait for a better moment. Every single day on the track is different, so daily meetings with all team members and prioritizing the next tasks together is essential. We can think all F1 drivers race the same cars, but it's not true. Every vehicle is developed and adapted to the needs of a particular driver. Clients say that they see the excellent product and want to have a similar solution from time to time, but the core value is having a better solution than others. KISS digital team developers and project managers understand it and work together for delivering the best possible results.

The results create the success of the project

All F1 teams have different goals, but there's one direction – the success. Both sponsors and money are critical for the success but the hard work of team members ultimately provides excellent products and results. The precise rules of cooperation allow to control development, take care of the budget, and make the right decision about improvements. But, sometimes we cannot control and schedule everything. So choosing the business model (Time and Materials contract or the fixed price one) should be a conscious decision.

Time and Material contract can be perfect for you but not for every team and contractor. So, let's start by asking yourself about three main things:

Maybe, you want to create a small tool or fix something during a 1-2 week. You may want to develop only MVPs (Minimum Viable Product). The Fixed Price model will probably be better for your project. Precise requirements, limited or fixed budget, and scope plus agreed deadlines are a suitable environment for the Fixed Price model.

If you want to develop a long-term project with changeable requirements, the Time and Materials model gives you the possibility to modify the final scope. You will be able to experiment with your vision of a product with support from a team.

The fixed price model requires all business and product decisions to be known, as well as the scope of work, which have to be agreed upon with the contractor before the project starts. Thanks to that, you know the expected cost which should be close to the real final price.

Time and Materials contract doesn't provide you with the price as precise as Fixed Price model, but it protects both sides by current material costs control during all development phases. So, you will be protected because you are involved in close cooperation with the project team (e.g., using Agile methodology) and you have flexibility needed.

Finally, you have to ask yourself about the most important thing: Do you know what project exactly would you like to create? Maybe it sounds like a joke to you, but it isn't. Every single idea has to have the space for growing and needs redefining. But, you should do as much as you can in order to better define your real requirements before cooperation starts. On the other hand, you can expect our help with clarifying your idea, based on our know-how and good practices.

Two previous points lead to the final question. Every business cooperation model has its pros and cons, but the crucial decisions are based on understanding the right direction for the business side, client, contactor and the team members. You can't know everything, but with the KISS digital team you have the opportunity to find the right cooperation model (fixed price or time and material) and a good way for your project. Are you ready? The race's starting now.

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Krzysztof Kołacz

Content Marketing Manager.