1. an estimate of the costs shall be made on the basis of the elements already outlined above for the description of the objectives.
2. a cost ceiling is agreed which deviates by a maximum of 10% from the cost estimate (this is how estimation inaccuracies are addressed); this is also budgeted.
3 The following agreement is made for deviations:
The external partner receives a bonus of, for example, 30% of the difference value for costs below the cost ceiling.
If the cost roof is exceeded, the external partner may only settle the expenses at, for example, 30% of the otherwise estimated hourly rate.
If the company now tenders out about half of a possible saving (in this case 100%-30% = 70% / 2, i.e. 35%) for the internal project participants as crediting, all project participants are directed in the right direction, many discussions are unnecessarily and thus significantly less time is wasted (by the consulting partner as well as internally). Here is a calculation using the numbers mentioned:
Expenditure estimate of the external partner: EUR 500’000
(assumption 500 md a 1’000 EUR/day)
Agreed shared risk cost ceiling: EUR 550,000
Total charged on completion / acceptance: EUR 450’000
Realised shortfall EUR 100’000
Bonuses:
external partner (30% of savings) EUR 30’000
internal project team (35% of savings) EUR 35’000
Total costs for the company (in EUR thousand) 450+30+35 = 515, which means that the company has also saved EUR 35,000 compared to the budget and at the same time created a high level of motivation for all project participants in order to achieve the specified goal.
With regard to completeness: In this calculation example, exceeding the cost roof (budget) would then only be offset against 30% of the daily rate, i.e. EUR 300/day.
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