T&M vs Scope Based – Which one is right for you?!

Intro

Everything is a project – from planning day-to-day life events to complex corporate activities. Being successful requires you to execute the plans flawlessly. But how do you achieve this? Even if you are not familiar with several formal methodologies, processes and tools of project management, everyone who’s ever been in charge of executing a plan is familiar with these basic principles. The Iron Triangle of Project Management:

It doesn’t really matter if you have seen this triangle or not; it’s obvious that any manager has a certain scope to deliver on time and stay within the agreed budget, while ensuring a certain level of quality. But the main question still remains – How?We should carefully examine the meaning of scope-based projects and time and materials (T&M) models, and analyze what benefits each of these approaches bring to the table. The final step is deciding which one is right for you and your goals.

Let’s define terms first

Let’s use Slick’s definition of both models discussed:

” The Time & Materials model is used if there is no complete vision of the final product, or if it is an ongoing process and impossible to divide it into several smaller stages. We will bill by actual hours worked, as well as cost of materials necessary to complete your project.

”The Scope-Based (also known as Project-Based) model is perfect for small and medium scope projects, where requirements, specifications, and schedules can be clearly defined before the start of the project development. You will pay a pre-determined flat fee for the entirety of the project(s)”

You might think these approaches differ greatly, as Agile product development and Waterfall do, and you’re somewhat correct. But let’s use a more holistic approach in order to determine which one to use and when.

Fixed Scope –  Pros

• Fixed budget – It doesn’t matter if you work with an agency or a freelancer; you’re usually provided a concrete budget. People want to have things under control, especially money.
• Eliminated risks – Both parties have made promises as to what they will deliver, and risks are meant to be eliminated. The company has defined the strict scope, and the contractor has promised to deliver the work within a particular timeline.
• Deadline – You know exactly when you’re going to receive deliverables. Of course nothing is guaranteed, but contractors usually face late fees in case of delay, and nobody wants to lose the money. 

Fixed Scope – Cons

• Tons of homework before kick off – When you ask for hard deadlines and specific timelines of work, logically people will have lots of questions and details to work out. Make sure your requirements are as clear as possible. You have to define everything upfront, every single edge case and user flow. It is a time consuming and challenging task, but it can provide everyone involved with a clear roadmap of the project and what is expected of both parties. 
• Lack of user feedback – In a fixed environment, you don’t have the privilege of iterating with users. You have strict timelines, processes defined upfront, and the benefits of agile product development are almost lost
• Stress and Uncertainty – No matter how hard you may try, nobody is able to define things upfront with perfect precision. Estimates are just best guesses. We ask ourselves to deliver promises which were meant to be imperfect in the first place. This can make the working environment unnecessarily stressful, and lead to tension and misunderstandings between team members. 

Time and Material – Pros

• Agility – The first and obvious advantage of the T&M model is its flexibility. The only constant in a digital world is change. You have to be able to adapt. In this model, stakeholders just focus on prioritizing what’s important at a certain time, and the team focuses on that.
• User centricity – Another huge benefit of agile development is user feedback adaptation. You never know when you need a feedback loop to be initiated. Good news – you can do it whenever the team finds it useful, and adapt your plans according to your findings.
• Better quality – with lesser stress, more user input in the process, and with improved prioritization, product teams are enabled to deliver better results working within this model.

Time and Material – Cons

• Predictability – Stakeholders fear this model because of predictability issues. Contract negotiations are not deadline-based. But a team working with a T&M model knows that a total absence of timelines can hurt the process and yes, we still do have them present here. We have target dates for tasks, and it is still just as important to deliver within the timeline as in other models. Those dates are just not legally fixed, and they have wiggle room in case priorities shift.
• Fear – As dates and promises are not legally fixed, stakeholders often fear that they will end up in endless confusion and will never receive the product. At that point, the question comes down to trust – do you believe in the people you’re working with, and do you trust in their ability to deliver great work on time? The answer should be yes, because you should be making an informed decision when hiring the contractor(s), and be confident in their professionalism and reliability.

Conclusion

The dilemma of choosing between a T&M-based versus scope-based model is definitely similar to the agile vs waterfall debate. If we seek to achieve a high level of innovation and user centricity, fixed scope simply is typically not the best choice. Your team members could end up with their hands tied to initial plans – leaving no room for flexibility and change. Fixed scopes can turn out to be perfect for providing a high level of trust and calmness of stakeholders, but has various downsides and should only be used if there is simply no way of avoiding it.