Re: Establishing Rates - Protect Yourself

Subject: Re: Establishing Rates - Protect Yourself
From: Andrew Plato <intrepid_es -at- YAHOO -dot- COM>
Date: Wed, 5 May 1999 08:26:02 -0700

No company in its right mind would sue you for $1000. It is not even remotely
worth it to them. What is more likely is that if you bomb a job and cost a
company more time and money, they will make sure that you are never hired ever
again (at the company) and they certainly will never recommend you for work.

This is a very real problem and emphasizes the danger in being an independent
contractor. When you 1099 contract with a company (even an agency) you are
typically contractually required to deliver. If you don't, the company can A)
term the contract immediately, and B) demand all the money they paid you back.

Fixed-bid contracts are inherently dangerous. They rarely work unless the
project is very small with a well-defined deliverable. It is better to do an
estimate with a cap. Also, the estimate should include the requirements to do
the project, deliverables, time line, and conditions under which you will issue
a project change request. Lastly, your estimate should be a binding part of the
contract - not just some random emails between you and the client.

Andrew Plato
President / Principal Consultant
Anitian Consulting, Inc.

--- Tom Johnson <johnsont -at- STARCUTTER -dot- COM> wrote:
> One frequent topic on this list is setting rates for contract work. I've
> been a firm believer in a free-market approach. I think I still am, but we
> had an unfortunate incident with a company we contracted for a translation
> project. In short, they have failed miserably in meeting deadlines. Now we
> are looking at the prospect of hiring another company to start from scratch
> for a portion of the project. After talking with an attorney, I found out
> we could hold the first company liable for whatever additional costs to get
> the project finished. That got me thinking about what my liability would be
> if I were working on a project and some unforseen crisis put me weeks or
> months behind schedule. Any disparity between what I was charging and what
> someone else would charge to finish the project could really come back to
> haunt me.
> For instance, imagine charged $1000 for a project. My bid was intentionally
> low because I wanted to get the experience and get my name known. Halfway
> through I got in a bind and couldn't finish my job. I let the client know
> and they hired someone else to finish the job. This person, who may have
> previously bid on the job, charges $2000. Their initial bid may have been
> $1500, but they added 33% because it is now a rush job. Now, I would be
> liable for the extra $1000 because I told the client they could get the job
> done for $1000. If my original bid were for $1400, I would only be liable
> for $600.
> So, if I get into the contractor market, I'll be setting my rates with this
> is mind. I don't want to underbid by too much. Stuff does happen. By the
> way, I really do believe there were some very extenuating circumstances
> that caused our translation company to drop the ball. It still is hard to
> get our customer to understand why we're late delivering the translated
> manuals. We had a substantial buffer of "contingency time" built into our
> contract with the translators, but we've burned that up and then some.
> Tom Johnson
> Elk Rapids, Michigan - On the freshwater coast
> johnsont -at- starcutter -dot- com work
> thomasj -at- freeway -dot- net personal
> PS Does anybody know Portuguese? :)

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