ECN Forum Forums General Topics of the Trade Business Related Discussion Contract, Flat Rate, T&M.

"It appears to me that LKs position is anytime you give a customer a set price ahead of time that is flat rate."

No not at all my position, i may quote T&M and give a not to exceed, or i may work up a contract price at the office, of i may have the electrician in the field, work up the contract price, in that case some would call it flat rate, when in fact it is simply a contract worked up in the field.

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Quote:

"Flat Rate" is a term used in many different ways in many different industries.

To each their own, I am certainly not suggesting anyone change their business practices.

I am trying to wake some up to the fact that the term "Flat Rate" is not the same to everyone and no matter how much you try you can not make it so.

Bob, i agree the term "Flat Rate" is not the same to everyone, and we hope this discussion, can help bring some light to the subject.

I thought we had a discussion before about this, and we concluded we have 3 systems:

Flat rate
Bidding
T&M

All three have, or could have a definate contract amount somehow associated with them.

All three work, and make money, but only if done ethically and professionally.

Did we wander?




[This message has been edited by Dnkldorf (edited 09-25-2006).]

IMO we have 2 methods,

T&M: which may be directly invoiced, or it may be offered with a contract, and terms.

Contract: a binding agreement with the scope of work defined, where all parties agree on the terms, and amounts.

Either of these, can be used to bid a project.


Flat Rate, just happens to be, a term pricing system sellers, use to market their estimating sheets, for preparing a contract.


Just as a side note, many fortune 500 companies, use the same type of estimating sheets, to generate their internal work orders.



[This message has been edited by LK (edited 09-25-2006).]

[q]Maybe they should have called it an "Upfront Pricing System" instead of a "Flat Rate Pricing System".[/q]

aline, all of our advertising is actually for "Upfront Pricing" We determined that flat rate was not as straight forward.

I use the Term Upfront Pricing in my Advertising too.

That sure is a lot of posts - including my own - just to make the point that not everyone agrees on the definition of "flat rate." In my personal opinion, I don't much care what you call it or how you do it as long as your making money. As others have pointed out, the business model for an industrial electrical company will not be the same as the business model for a residential service company. You have to adapt to your particular specialty, as well as your particular market area. As such, what one specialty contractor in one area calls "flat rate" will most likely differ from what another specialty contractor in another area calls "flat rate." All any of us can do is to explain how we use this particular term ourselves, rather than to try and project our opinion onto others.

For ME, T&M means "exact cost." Flat rate means "highly educated guestimate." Contract price means "any price I want it to be for any reason (even drawing a price out of a hat if I want.)"

For ME, these three terms could be further categorized at "T&M" and "Up-front pricing," as both the flat-rate and the contract pricing methods both give the customer the total price up front.

But again, that's just me. To each his own.

:-)

Kevin

P.S. In regard to itemized invoices...in my line of work it is rare that I would list over 7-8 items. Most invoices are 3-4.

Example: 1030 Fixture Change $65.00
1045 Incandescent 60W Bulbs $8.00
7500 Misc. Parts $5.00

If I'm building out a service or doing other work that will require a large list of materials and tasks, I then give what I call a "contract price."

Example: Install new 200-A aerial service with 200-A disconnect switch. $1700.00

I appologize, this may have already been said, but I've been quite busy and have fallen behind in the threads.

My thoughts on Flat Rate vs Contract Price vs Fixed Bid:

A contract price is created by looking at the materials and labour needed to complete a project and then adding for overhead and profit to develop a fixed bid for a given project.

Flat rate is having contract pricing information broken down ahead of time in the form of unit prices (based on historical costs adjusted for the current costs of materials and labour)including overhead and profit to quickly develop a fixed bid for a given project.

A fixed bid (upfront pricing) is a price given to a customer in written or verbal form before work commences to indicate the cost to the customer so that they may make a value judgement as to the affordability of the project. As opposed to Time and Materials pricing where the customer doesn't know the actual final costs until after the project is completed.

Sorry, if I am repeating what has been said by someone else!

Just my opinion.

[This message has been edited by ExpressQuote (edited 09-25-2006).]

I like to see all of us in a room someday debating this topic and sharing best methods of business operation. Now that'd be a meeting I'd look forward to!

ExpressQuote is as close as I have seen with the difference between "flat rate" and "contract"

We use flat rate pricing on residential service and small commercial jobs. It is a pre-printed book listining all the seperate tasks and their corresponding prices for each task. The customer gets a written invoice from the tech before the work begins listing each task he will need to execute to get the job done right. This pricing is based on averages, so it may take a little longer to do the same thing in one house, but it will get done a little faster in another house. All in all,it evens out in the end. We have been using this system for a long time now and it works well for us.


With contract pricing, which we still use on occassion, I actually estimate the amount of material that I use and add in the labor that it will take on that particular job as well as my burden factors and profit to com up with a price to do the job. The customer gets a written proposal with a detailed scope of work, but only a lump sum of what the cost is.

We also still do a little, actually very little T&M work with large commercial and industrial customers, depending on the urgency. Sometimes time does not allow the privilege of giving the customer the cost up front.

That being said, I agree that all three will work and profits can are being made using all three methods.

This has been an interesting topic w/ alot of great posts and insight.

Les, you know if we think about this, aren't all systems based on how long something would take, and what materials are used.

So on a stretch, we could say everything is T&M.