As a contractor, you have to ensure that you protect your interests as you complete projects for clients. The contract sets out the terms of the project so that you are only bound to do what you agreed to do for the quoted price. It also contains various project points that are important for the client.
One of the important components of the contract is the pricing. Some clients might think in absolute terms when you quote a project; however, not all pricing models are absolute. There are four different pricing models that you might consider. Be sure that you clearly state the pricing model in the contract.
Fixed pricing is the model that uses an absolute term. In this case, the client is responsible for paying a set amount for the entire project. It is possible to include terms that provide a bonus for finishing the project head of schedule or a penalty for finishing it after the deadline.
Time and materials pricing sets rates per day or hour for the contractor. It also requires that the client has to pay for materials that are needed to complete the project.
Cost plus pricing means the client pays for everything related to the project, including all materials and labor costs. There is also a fixed fee or a percentage basis that’s added to cover other things, such as overhead costs and profits, for the contractor.
Unit pricing is a model that helps to break up some projects into smaller pricing. It’s common for large or complex projects. The units can be set by task or location.
If a client comes to you claiming that you breached the contract or if the client breached the terms, you need to take immediate steps to protect your company. Contract claims can be time-consuming and costly, so be sure to find out your options from the start.