[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]

There are various kinds of contractual engagements that I have run across or heard of in my lifetimes in this business.

  * SOW-focused engagements
  * Long-term cost-plus engagements
  * Staff-augmentation engagements
  * Temporary staff

Where the last two are quite similar. In the Chicagoland area, at least, there were the often long-term Temporary Staff (where temporary could be a multiple of years) where the organization did not yet have the know-how to staff up full time folks. Also common in the run-up to Y2K were everyone was in full-blown panic. At one time, there were over 200 organizations supplying the Chicago BigCo set with bodies for this.

Staff-augmentation requirements are where an existing organization is trying to internally grow a particular segment of expertise.

I suspect that the kind of engagement you are describing here is of the long-term cost-plus kind of engagement with some very large project.

What I call the SOW-focused engagements are of the kind "Pen-Test this application" or "build out the following functionality in my BFE accounting application according to the attached 900 page document" or "build me an identity service with the following security requirements".

The long-term cost-plus engagements are of the sort requiring a multi-year sales cycle. SOW-focused agreements, once a master is in place, are often just a matter of a phone call to set them up, plus scheduling.

[wglb]

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