Case Study: Negotiating a ‘cost overrun’ with the client
Mark Palmer
Mark Palmer Client Satisfaction Guarantee
Client

A software development firm with an annual turnover of $2 Mn

Problem

The firm bid for a fixed price project to be accomplished within 5,000 hours. Due to unclear definition of end results and constant changes in specifications, actual effort exceeded 7,000 Hours.

This led to an excess cost of $0.5 Mn at standard billing rates. Needless to say, it was a serious client issue and revenue risk.

Solution

• Focused on understanding reasons for the gap, conducted situation analysis through brainstorming sessions with various teams

• Assisted the firm in preparing a presentation entailing details of the gaps, cost overruns, concerns and possible solutions

• Ensured the facts were delivered in the correct perspective sans any biases, judgements and conflicts

Result

The client of the firm understood the issues and took responsibility for the situation. They offered to split the cost of overruns and paid an additional $0.25 Mn to the firm.