[amosson]

A few large consulting companies in the 90's, Cambridge Technology Partners and Viant, for example, were very successful with this model. They were selling against the $100-200/hr Big 6 type consulting firm so there was plenty of room budget for the "risk" associated with going over the time estimate. The other key to their success was getting the client to agree to pay for an upfront 'spec'ing' phase before bidding on the development work. If you do the spec'ing phase correctly you can give a fairly good bid on development and truly assess what is in scope and what is a change order.