Not -to- exceed budget

While all professional IT service organizations are proficient in understanding the risks involved in software development and how to appropriately manage those risks, it is unfair to expect the client to have that same proficiency outside of their core business focus. By fix pricing a project’s development effort, the client knows exactly what he will be charged to deliver exactly what has been specified. This model presumes both a static goal and leaves little room for error in the specifications. Although factoring risk into a project as both additional cost and additional schedule is a requirement for smart project planners, it does not mean the additional cost and schedule is guaranteed. The risk is a potential risk not a realized risk. Additionally fixed price projects often draw a fence between the vendor and the client with every small correction being an issue or worse yet disagreements as to the exact meaning of items in the specification.

To help overcome these and other shortcoming in the fixed-price model, EUO has created the “not to exceed” budget model. Our team presents a conservative and an aggressive estimate for each function point defined in the specification. The sum of the conservative estimates becomes the “not to exceed” project budget with any overage being the responsibility of EUO. All risk is built into the conservative estimate and as the project proceeds, work is completed exactly as with a time and materials project but with the idea that the budget belongs to the client not to EUO. Change controls still exist, with specification alterations adding potential budget to the project, but unless the total project activities exceed the conservative estimate the additional budget will not be realized. With the not-to-exceed budget model the client is protected from overages that are outside their control and is rewarded with a smaller bill by being more interactive with the project as it unfolds, helping find better more direct methods of completing the project.