Disclaimer: this article is a translation from the original french piece published by Décision Achats.
Structuring professional services procurement that is sometimes fragmented is no small feat. How do you frame your need across different billing models?
Insights from Romain Lopez, Managing Director Eleven VMS.
The day-rate model is based on paying by the day or hour, compensating the consultant for time spent supporting an existing team. The service is billed under an obligation of means: the consultant commits to providing expertise for a given day, without an explicit guarantee of a specific outcome. In contrast, a fixed-price engagement entails a commitment to a predefined result.
The provider commits to delivering one or more deliverables, broken down into milestones validated along the way, with an overall budget and timelines set from the outset.
Day rate: pros and cons
The main advantage of day rate is flexibility. The client can engage a resource for a defined period and adjust as needs evolve—ideal to address a sudden skills gap or a one-off demand. However, without strong scoping and management, the limited control over outcomes can lead to work whose quality is not always measurable.
Fixed price: pros and cons
Fixed price provides budget and timeline visibility from day one.
Projects are split into stages or milestones to track progress and enforce an obligation of result. This improves predictability of total cost and ensures a deliverable aligned with expectations.
The trade-off: it requires a very precise scope and validation criteria to anticipate unknowns and avoid disputes if plans deviate. Fixed price can also make onboarding external advisors easier—unless you rely on former employees via umbrella contract who already “know the house.”
How to choose for each project
Start with the nature of the mission and how well the project is framed.
If the need is ad hoc, requiring flexibility and rapid ramp-up, day rate is often the best fit.
If the project is clearly defined with precise objectives and structured phases, fixed price enables tight tracking and budget control.
The quality of collaboration and the ability to centralize interactions are also decisive for fixed-price success.
In all cases, Procurement plays a pivotal role in selecting the right billing model.
Procurement should step in early to define a clear specification, set selection criteria, and contractually frame the project. They can also help business teams evaluate suppliers and execution quality.
Their expertise balances the need for flexibility with budget control and risk management. And risks abound: illegal supply of labor, data confidentiality, reclassification risk, unlawful labor lending, intellectual property, etc. By centralizing data and making proposals comparable, Procurement helps steer the decision toward the model best aligned with operational stakes.
Disclaimer: this article is a translation from the original french piece published by Décision Achats.
