Fixed-Price Contract Adjustment

"Whenever possible, choose a fixed-price contract"

When I started working on a project with a vendor, I ensured that we had a fixed term contract in place. However, during the project implementation phase, the vendor's project manager informed me that their team had gone over hour extra hours to develop specific feature for our project.

The vendor' s project manager mentioned that their team had gone over by 60 hours of work to complete the work. The vendor wanted to get paid for the overage incurred and asked for us (the client) to approve the overages and release payment.

During one of our meetings with the vendor's team, the project manager mentioned that they had decided to go over the hours "out of good faith".

First of all, as a project manager I identified this situation as a risk at the beginning of the project. This risk became an issue during the project lifetime and I escalated the situation up to management after an initial discussion with the vendor's project manager and not being able to find a mutual agreement.

Management engaged in a series of meeting to find a mutual agreement even though it was clear that a fixed term contract was in place. In order to not impact the timelines of the project and continue having a good relationship with the vendor, management negotiated an amount that was mutually agreed to be paid to the vendor.

It was an amount that was within the project contingency and allowed a fast resolution to the issue.

Choose a fixed-price contract when dealing with vendors as the vendor is contractually bound to complete the project within the agreed dollar amount and places maximum risk and full responsibility for all costs, profit or loss on them.