Outsourcing Cost Models | Choosing the Best Model for AEC & MEP Industry
Construction documentation and BIM services embrace a wide range of works including CAD drafting and drawings, BIM modeling, Revit drafting, Revit conversion, Millwork, Millwork shop drawings, 3D rendering, etc. Being knowledge driven and task intensive, architectural and engineering back office jobs are increasingly being outsourced to BluEnt’s CAD/BIM drafting studio through different cost models. Choosing of the model depends on several factors both from the client perspective, the nature of work involved and BluEntCAD’s competencies and experience as an outsourcing firm.
We, at BluEntCAD, follow three types of engagement models in the AEC and MEP industry –
- Fixed Time and Cost
- Hourly Basis Method
- Full Time Equivalent (FTE) Studio Model
A comparative analysis would endorse a clear picture to enable the owners, builders and contractors to make a more informed decision.
|Description||Fixed Time/Cost||Hourly Basis Method||Full Time Equivalent|
|Meaning||Project or tasks that are completed within a fixed budget, timeline and cost are referred to as fixed time project.||Projects are contracted for a defined number of hours. Costs are calculated on an hourly rate spent on the project. Working extra hours is billable to client.||Assigning skilled resources by outsourced company to client company on a monthly rate for a specified duration of time or the project.|
|Features||The most common of all engagement models. A target cost is agreed.|
Fixed price projects are executed with much care as the projects risks are owned by the outsourcing firm.
Periodic status reports, regular follow up with client, cost control, and quality of deliverables are very essential.
It is good for low scale projects where the end user is buyer of services or products.
|Price is calculated on the basis of hours spent on that task.|
Any extra item of the work done is over-charged by the offshore partner.
Detailed reports for hours are sent to the client. Cross-verification is done.
It is good for those to whom the ‘quality output’ holds more relevance than quality ‘output on time’.
Deliverables hold more relevance than the resources and technology.
|The client leases the resources for a specified period of time from the outsourcing firm.|
Client may check skill sets, experience, competencies requisite for the project before approving them to start on the work.
Resources are employed for the client’s tasks only.
Client may visit the firm to review the progress and productivity of resources and may request a replacement if the work is unsatisfactory.
|Payment Methods||Percentages are decided against major milestones. There is an advance, startup cost.||Details of hours spent on the project are sent to the clients for approval. The client may cross-check the details and, thereafter, approves it. And invoice is raised.||Outsourcing firm prepares a daily/weekly time sheet for the resource utilization and gets it approved by the client company. Payment is done at the beginning of each month.|
|Advantages||Fixed price project is well suited for the organizations that have executed such projects in the past.|
The project can be completed within a budgetary constraint.
|Good working relations can be developed over time between the client and outsourcing firm.|
Due to flexibility, any adjustments to the project can be done at any stage of project development.
|As resources are locked for a specified period of time, competencies can be developed.|
Winning more projects without hiring, staffing, training and re-training. No peak load and off peak load worries.
Charges are low
|Disadvantages||Not cost-effective method for lump sum works. Requirements are not likely to change during the project development phase.|
Projects risks have to be managed properly. Charges are high
Learning curve is longer. If the client has another project in the near future similar to the current. The same team may not be available and the learning from one project may not save time in the next.
|Though advantageous, this model may not be strategic to the client to build long term competencies. Higher chances of counter-productive results. Duration of the project can’t be estimated. Not gainful for large projects.|
Charges are medium
The same risk in learning curve as the Fixed model. It there is a long gap between projects the same team may not be available. Intermediate options need to be worked out.
|This model requires a good understanding of the project management and a tighter monitoring of firm resources.|
Need continuous monitoring of the outsourced resources. Else, the resources would remain idle.
|Suggestions||Fixed time/cost is good for low budget, starting level and Business-to-customer venture. Good for trying out outsourcing.||Good for some development and maintenance projects that usually span a particular period of time. Good for conversion projects. Good for well define peak and off-peak time scenarios.||The best way to complete lump sum works on-budget & on-time without loss of quality and control.|