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I graduated from University College London (UCL) in 2013 with a Starred First Class BSC in Economics. Following a number of investment banking internships, which didn’t quite incite the excitement I w...

Sitara Kurian-Patel, Consultant

Sitara Kurian-Patel

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The CIO's supplier dilemma: Outcome Based vs T&M Contracts

The CIO's supplier dilemma: Outcome Based vs T&M Contracts

The project you signed off last year has seemingly been going to plan, then just weeks before the launch date small cracks become gaping fissures and you find yourself confronting reality: the project isn’t going to deliver as planned.

When large sums of money and your personal reputation is on the line, there is not a more terrifying or isolating experience. But you are not alone. Of all large (>$10m) projects started just 10% are delivered on time, on budget and with required features. 38% are simply cancelled before completion or never used.

Partner Hadley Baldwin has been wrestling with this challenge for 15 years. 

Hadley has worked with several blue chip companies including Royal Mail, Marks and Spencer and HMRC to get projects implemented straight through to their successful launch. Through his extensive experience he has identified a key dilemma that a CIO faces and one which can make all the difference: Should I insist on outcome based contracts for my largest projects when everyone around me seems to want Time and Materials?

There are many reasons why others may want to get the project started with an input based Time and Materials (T&M) based supplier arrangement:

  • The business might want to move quickly which is easier with T&M, at least to begin with
  • The project team may not want to face the reality that there are gaps in their understanding of the outcome or requirements
  • Procurement may find T&M easier to understand, negotiate and benchmark
  • For the supplier, T&M is lower risk

In Hadley’s experience, however, insisting on outcome based contracts with suppliers is a battle worth fighting. In this article he shares his insights on how this key supplier choice will keep you from becoming one of the statistical casualties.

But first of all you need to work out exactly what you want your outcome to be...

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