CONTRACT
The purpose of the contract is to facilitate establishing
proper mechanisms for both parties in close cooperation, and to protect the
sides from possible undesirable actions towards each other.
With AGO you are confiding into an agreement for better
prospects of nourishment to your Business, based on your priority
Discuss all the conditions of the project before launching it,
Be clear on pricing and payment terms,
Make sure all the details are in writing,
Choose a contract that will be a good fit to your chosen work
methodology.
We have a summary of the 3 types of outsourcing contracts.
TIME & MATERIALS CONTRACT
This is a kind of contract where the Client pays the supplier
for work time (according to prearranged hourly rate of each team member) and
used materials (e.g. using the software license). The executor’s hourly rate
considers all costs and profit, calculated by the supplier. Time and materials
(T&M) contract are usually used in short-term projects.
FIXED PRICE CONTRACT
In this type of contract, the Client and the supplier agree on
a steady ‘fixed price’ for the service (i.e. for delivering the solution). The
price is estimated by a supplier based on well described scope of work to be
done. The constant price means the constant scope and the deadline for the
project.
TARGET COST CONTRACT
This contract is a type of cost reimbursable contract. This
type of contract is used when the exact scope of work is uncertain and,
therefore, costs cannot be estimated accurately enough to apply fixed price
type of contract. In this situation buyer pays the service provider allowable
incurred costs to the extent prescribed in the contract. A cost reimbursable
contract requires the service provider to have an accounting system that can
track project costs. The client has the most cost risk because the total costs
are unknown. Research and development or IT projects in which the scope is
unknown are typical examples of cost reimbursable contracts.
