[patio11]

Clients having their own paperwork is normal. It will get even more common as you go upmarket.

Clients believing meaningful development work can happen in two hours is not normal. You should stop billing by the hour, change your minimum increment to a day or a week, and assist your clients in making the transition from "micromanaging every hour of wayzz's time" to "letting wayzz handle the specifics of how he delivers the fantastic value promised in his Statements of Work." It is possible this client will not make that transition with you.

Also, charge more.

[ekidd]

I agree strongly with patio11. I have a simple rule:

1. Programmers are the final authority on how long a specific piece of functionality will take.

2. Clients are the final authority on what to build, in what order, and how much money it's ultimately worth to them.

In general, clients who insist on negotiating (1) are often unsalvageable. It's better to structure the relationship so that this never comes up at all.

But if a client continues to insist, "No, you should be able to implement our video encoding server for $500," I find that the best response is, "If you have another programmer who can do that for $500—and do a good job—then you should hire them instead of me. That's a remarkably good price."

Basically, learn to qualify your sales leads: You want to work with competent, reasonable clients for whom you can earn a lot of money. Everybody else should be filtered out of your sales pipeline as quickly as possible.

[patio11]

FWIW: You can probably 10X your rates if you take responsibility for what to build, in what order, and how much money it's ultimately worth to them.

Otherwise, broad agreement with your comment.

[gk1]

Seriously consider patio11's advice about daily/weekly/monthly rates.

Issues like this are inevitable when you're charging by the hour. Overestimation, underestimation, false expectations, misunderstandings, ... All these things--even if you're very diplomatic and manage to resolve each of them as they occur--hurt the relationship.

I've been charging weekly and monthly rates for over a year, and I never--not even once--needed to resolve any misunderstandings about hours and time tracking.

[_delirium]

This does depend quite a bit on the market. Large engineering companies, for example, are often resistant to contractors billing in anything but hours, because their whole accounting/etc. system is set up to track internal and external person-hours and lots of things are keyed on that. You can de-facto bill them in 8-hour increments, and your direct contact may agree to that, but moving the bureaucracy so you can officially bill "days" is harder. Even quite large consultants end up following the hourly-billing standard, e.g. when Booz Allen Hamilton does work for oil companies, they bill hours, just like individual consultants do.

[tptacek]

To the best of my knowledge, we've never billed hourly, and though we haven't worked with "everyone", we've certainly worked with a representative sample of the whole industry. You can bill daily instead of hourly, and that's what you should do.

[_delirium]

Interesting. Have you worked with a company like Exxon or BP? I've obviously only met a tiny fraction of their contractors, but I do have a reasonably large sample of both small and large contractors across several fields, and they all bill hourly, and that expectation seemed pretty fixed into how their systems worked. At least the ones doing consultancy-type contracting on an open-ended contract over a significant period of time do so, whether big consultancies like Technip or Booz Allen Hamilton, or small shops like boutique metallurgy consultancies. Different billing applies to one-time deliverables, construction work, equipment sales, etc.

Of course in practice the work is usually chunked into day-sized segments anyway. If you have three of your people working on a particular project all week, and then send an extra two people along on Friday for a site visit, it's reasonable to bill 17 person-days. But in the cases I've run into that still gets formally invoiced as 17*8 = 136 hours.

[m0nastic]

I can't confirm specific customers, but I've done consulting work for virtually every large energy company (as well as financial and manufacturing), and all of those were fixed-price contracts. (I put together all of those SOW's, so I'm very familiar with how they were structured).

In fact, government contracting is the only case where we've ever used T&M.

For what it's worth, I work in the same space as Thomas.

[_delirium]

Hmm; I'm sorta curious how my view on this sector is so much different than what seems to be everyone else's in this thread. What I think of as "consulting" tends to be more open-ended engagements, not a specific deliverable, with work often being very incompletely specified in advance. How do you fix a price for that? If you have a minute (sorry for the long reply) I'll sketch out how I'm familiar with things operating, to see if it makes any sense from the perspective of what you've experienced.

An example: a company did (in-house) the high-level engineering for a refinery or chemical plant, which got preliminary approval and is now moving to the detailed engineering stage (but not yet construction). So it needs to be fleshed out with specced out equipment, a rough civil-engineering and utilities sketch, cost estimates, analysis of regulatory hurdles, etc., so it can be examined to see if it's really feasible and has a good business case. This will still be led by the in-house team, but at this stage the company often needs expertise they don't have in-house, so they hire one or more consultancies who specialize in needed areas to assist. Commonly that's some mix of: equipment expertise (metallurgists, rotating-equipment specialists, specific kinds of process engineering), legal and regulatory expertise (consultancies that specialize in e.g. the Chinese regulatory context), and computational expertise (a consultancy familiar with whatever model/simulation packages are being used).

The consultant might then do anything from just answering questions, to modeling and simulations, to drawing up diagrams, running numbers on alternatives, joining design meetings, presenting some powerpoints to management, going on site visits or along to vendor meetings, etc. Variable numbers of people might be involved on the consultancy's side at various stages, from maybe one person to a whole dedicated on-site team, ramping up or down in agreement with the client. How much work is needed up front is pretty rarely specified, so I don't see how you could put in a bid for that; "we're going to need some ongoing input from a rotating-equipment specialist" is hard to price, even if you're a boutique consulting shop that knows rotating equipment in and out! The billing is instead done more or less like how it's done with lawyers: they bill you as you use them. I could imagine some specific parts of the design work being broken out as fixed-price contracts later in the process (and I know that happens once actual construction starts being bid out), but I haven't personally run across that at more of the process-engineering/design level.

It could be that I have some weirdly idiosyncratic view on how consulting works, but this is how everyone I happen to know who's consulting in chemical & petroleum engineering does things.

[wglb]

Check out their page http://matasano.com/about/ and the last line saying Fortune 100.