Projects billed by the hour for the work performed are called\n\u201cTime and Material\u201d projects. This style of billing structure is where the cost\nof the work provided represents hours worked multiplied by the rate per hour of\neach resource. For example, if a consultant\u2019s rate is $100 per hour and they\nwork 160 hours in a given month, they will bill the client $16,000. This is the\nmost common method of project revenue as it allows an accurate representation\nof cost at a lower risk. Companies that usually hire consultants have some form\nof a project budget that cannot be exceeded without being seen as a failure.\nThis dollar amount usually relates to the \u201creturn on investment\u201d (\u201cROI\u201d) of the\nwork, so it is in the firm\u2019s best interest to be honest and precise about\ninitial estimates when scoping out the work. It also dissuades frivolous and\ninefficient billing.<\/p>\n\n\n\n
Fixed bid projects represent a set cost project. This style of billing structure provides the client with a higher level of security against costs overrun. The contract usually includes specific deliverables for a set cost. From the consulting firm\u2019s perspective, it is in their best interest to staff this type of project to where the margin is similar to a time and materials project. If the project runs longer or burns at a higher rate, the margin decreases. If project finishes up sooner or requires fewer resource then the margin ends up being higher.<\/p>\n\n\n\n