One Page Guide: Is a fixed quote reasonable for electronics product development?

What’s the issue?

The essential truth is that a reasonable, firm and fixed quote for electronics product development is only possible if a complete and prescriptive specification of requirements is available. Fixed quotes are only valid if a fixed and prescriptive specification of requirements exists: try testing your specifications against our Specification Requirements article. It is unlikely you’ll pass, and even if you do, things nearly always change during the course of a project. 

The best kind of quote will have a core value that reflects development on the basis of perfect specification; and this value should be low because the risk is low if everything is fully specified. It is then necessary to assess risk on the basis of a gap analysis between complete specification and what actually exists, and what might change. The EM recommends this is handled using a subscription charge per month that covers an amount of work that will continue for the full duration of the project. 

The EM suggests that fixed quotes from developers are handled with care for the following reasons:

• A fixed quote that hasn’t really covered requirements will result in either demands for extra funds during the project despite its fixed nature, or the performance from the developer will be reduced to save money. The latter effect is particularly pernicious because it initiates a downward performance spiral that isn’t transparent, e.g., a feature that would have been solved using an optimal method isn’t, and the fact this is the case may well be hidden from the client. This situation is very damaging to a project – nearly always disappointing – 75% of electronics projects that come to the EM have come from failed first attempts. 
• Developers typically protect themselves from the scenario above by loading quotes excessively. This is actually less damaging than the case in the bullet above, but it isn’t honest and doesn’t result in value for money. 

How is a gut feel quickly attained for how well a project is specified?

The best off the cuff method of assessing how well a project is specified is to put a business head on and use Kipling’s servants (poem quoted below).

‘I keep six honest serving men; their names are What and Why and When and How and Where and Who.’

It makes sense to re-order these as follows:

• Marketing (Why, When, Where, Who)
• Specification (What, How)

Keeping a business head on and running through these:

• Why?: Does the marketing adequately identify the niche that’s to be exploited? Note that for an existing product enhancement may require less, but a clear definition of niche must be known. It is not good enough just to answer with to make money. 
• When?: Markets are of course time sensitive. Too late to market comes at a high cost, but sensible assessments of earliest practicable dates and risks of variance from this should be fully understood – in monetary terms.

• Where?: Where the product needs to be for optimum promotion should be fully understood. It may be that an exhibition followed by vigorous sales activity is enough; maybe not. Also note an existing product may already have its promotional profile. 
• Who?: Who the target market is should be fully defined. Who is the product to be aimed at for sales. There is a consequent ‘how’ in that it also needs to be clear how audiences with the target will be encouraged.
• What?: Only when the above bullets are understood can a proper list of written requirements be compiled. Every single clause must be prescriptive, feasible and test worthy. Both the test and acceptance criteria must be fully defined. 
• How?: It must be clear how every ‘What’ is to be achieved and resourced. 

Are there any general rules to follow?

The EM would be delighted to give you further guidance if you need it – please get in contact and we’ll take it from there.