Re: Contracting moral dilemma

Subject: Re: Contracting moral dilemma
From: Pete Kloppenburg <pkloppen -at- CERTICOM -dot- CA>
Date: Mon, 10 Feb 1997 11:38:57 -0500

Fabien Vais writes:
> I am really shocked to see that I was the only person who suggested to David
> to reduce the estimated amount of money needed to complete the job. . . .

> It seems that some of you people are of the opinion that if
> the client was *foolish* enough to accept the high estimate in the first
> place, well too bad for them. An estimate is a gamble...! Anyway, next time,
> it could be in their favor. So run to the bank before they change their
> mind! Well I disagree. An estimate is just that - an estimate of the work to
> be done and the money required to accomplish the job. It can (and should) be
> adjusted if you feel this is justified.

I think most of us who responded "nay" to David's should-I-or-shouldn't-I
question don't see this as a moral dilemma at all. And the reasons for that
are ugly but difficult to avoid.

First, there is a difference between a contract paid on an hourly basis and
one paid lump-sum based on a bid. As several others have noted, many
companies like the security of knowing what they will pay for a job to be
done. When a company accepts a bid for a piece of work and inks a
contract, this means that they believe the work to be worth that money
to them. They also write up the contract so that you *can't* come back
to them and ask for more. If you don't like the gambling analogy, think of
it as insurance: the company is paying a premium for the knowledge that
the project won't get out of hand. David should take his premium and
go shopping.

The second point goes hand in hand with the first. When you bid a fixed-price
contract, you aren't (or shouldn't be) bidding the worth of your work. You are
now bidding the worth of your *product*. That's a crucial difference, and
one that drives the business world. The pricing for any product in the
world is determined by what the market will bear, not by what it costs
to produce it. David might have determined his fee based on estimated
hours times a fixed rate, but the outcome was a price the company
felt comfortable paying. There are all sorts of ways to manipulate your
price : raise it to the roof when you've got a monopoly or more work
than you can handle, lowball it when you want to undercut the competition
or gain market dominance, or have it mirror what your competition charges. But
really, the cost of producing the product doesn't come into it. If the company
wanted to pay David simply what it cost to do the work, they would have
offered a contract based on time, and he could have charged at an
hourly rate. THEN there would be a moral problem with charging twice the hours
he actually worked.

Of course, it's very very difficult to run an independent technical writing
contracting business the same way Microsoft runs its software business.
There aren't many times when we can sell the same work a million times
over and reap huge profits from it. But, and here's the crucial but: the
companies who hire contractors DO live in that world, and understand it,
and don't feel upset when you make a profit. We DO have the same
rights to make a good profit, or even an obscene profit, if we have the
chance. It doesn't happen on hourly contracts (unless somebody has
decided to pay us $100/hr) but it can happen on fixed price contracts,
and David got lucky. Keep the coin, David: that's business.

Pete Kloppenburg
Technical Writer
Certicom Corp,
Mississauga Ontario,

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