Would you like to inspect the original subtitles? These are the user uploaded subtitles that are being translated: 1 1 00:00:01,080 --> 00:00:02,740 When you procure something, 2 2 00:00:02,740 --> 00:00:05,250 there are two potential kinds of contract 3 3 00:00:05,250 --> 00:00:09,303 you can put in place: Fixed Price and Cost Plus. 4 4 00:00:10,670 --> 00:00:13,593 The most common kind of contract is Fixed Price. 5 5 00:00:14,840 --> 00:00:16,290 These are best for contracts where 6 6 00:00:16,290 --> 00:00:21,290 the scope is very well defined and very unlikely to change. 7 7 00:00:22,810 --> 00:00:24,410 The parties agree on a price, 8 8 00:00:24,410 --> 00:00:27,170 then a contractor can make or lose money 9 9 00:00:27,170 --> 00:00:28,803 without impacting the buyer. 10 10 00:00:30,240 --> 00:00:33,890 But the downside is they also fix the scope, 11 11 00:00:33,890 --> 00:00:35,630 so any changes to the scope are 12 12 00:00:35,630 --> 00:00:38,240 usually much more expensive since the 13 13 00:00:38,240 --> 00:00:41,023 contractor will then have all the leverage. 14 14 00:00:42,950 --> 00:00:44,570 And smaller companies will not be able 15 15 00:00:44,570 --> 00:00:47,030 to proceed if they are losing money. 16 16 00:00:47,030 --> 00:00:48,780 They will often just stop work and 17 17 00:00:48,780 --> 00:00:51,380 say "pay me more or sue me" 18 18 00:00:51,380 --> 00:00:54,313 even though it was supposedly Fixed Price. 19 19 00:00:55,990 --> 00:00:57,740 If the scope does change, 20 20 00:00:57,740 --> 00:00:59,070 remember one of the most important 21 21 00:00:59,070 --> 00:01:02,410 project management tricks of all, whenever possible, 22 22 00:01:02,410 --> 00:01:04,810 offset any additional work by removing 23 23 00:01:04,810 --> 00:01:08,430 some existing scope to balance off the impact. 24 24 00:01:08,430 --> 00:01:11,093 A win-win solution for everyone. 25 25 00:01:13,270 --> 00:01:16,393 The other main type of contract is Cost Plus. 26 26 00:01:17,350 --> 00:01:18,930 Cost Plus contracts are best for 27 27 00:01:18,930 --> 00:01:21,570 larger value and more complex efforts, 28 28 00:01:21,570 --> 00:01:24,180 where the scope will probably change, 29 29 00:01:24,180 --> 00:01:26,120 and arguing over changes in the price 30 30 00:01:26,120 --> 00:01:28,483 will likely cause many problems. 31 31 00:01:30,100 --> 00:01:32,290 Start by obtaining the best possible 32 32 00:01:32,290 --> 00:01:34,440 estimate of the work from the contractor, 33 33 00:01:34,440 --> 00:01:36,080 based on the requirements, 34 34 00:01:36,080 --> 00:01:37,810 often a full project plan, 35 35 00:01:37,810 --> 00:01:40,193 with as many assumptions as needed. 36 36 00:01:41,490 --> 00:01:44,280 Then, you agree to pay the contractor's cost, 37 37 00:01:44,280 --> 00:01:46,300 plus some preset profit percentage, 38 38 00:01:46,300 --> 00:01:47,520 often based on their bid rates 39 39 00:01:47,520 --> 00:01:49,950 for the various resources and materials, 40 40 00:01:49,950 --> 00:01:51,510 so then you know what the cost will be 41 41 00:01:51,510 --> 00:01:53,773 if you need more time or materials. 42 42 00:01:55,470 --> 00:01:57,440 You do need to do more project management 43 43 00:01:57,440 --> 00:01:59,560 of the contractor to maintain cost and 44 44 00:01:59,560 --> 00:02:02,403 schedule performance with Cost Plus engagements. 45 45 00:02:03,410 --> 00:02:06,230 So, integrate your and the contractor 46 46 00:02:06,230 --> 00:02:08,790 teams wherever possible setting up paired 47 47 00:02:08,790 --> 00:02:12,670 contacts and perhaps even colocate and 48 48 00:02:12,670 --> 00:02:15,560 implement very rigorous change control 49 49 00:02:15,560 --> 00:02:18,260 so you can actively manage any scope changes. 50 50 00:02:18,260 --> 00:02:19,280 So we'll take a look at this further 51 51 00:02:19,280 --> 00:02:21,180 in the monitoring and control chapter. 52 52 00:02:22,440 --> 00:02:26,193 Obtain written weekly and monthly reports on their progress, 53 53 00:02:27,200 --> 00:02:29,240 and put in checkpoints for formal notification 54 54 00:02:29,240 --> 00:02:30,960 by the contractor on their spending. 55 55 00:02:30,960 --> 00:02:35,150 For example, when they reach 25%, 50%, 75%, and 90% 56 56 00:02:35,150 --> 00:02:38,010 of their bid price guaranteeing you can catch 57 57 00:02:38,010 --> 00:02:40,313 cost issues if they are occurring. 58 58 00:02:42,418 --> 00:02:44,450 Then with Cost Plus contracts, 59 59 00:02:44,450 --> 00:02:46,090 if the scope does change, 60 60 00:02:46,090 --> 00:02:47,410 you'll be able to make the adjustments 61 61 00:02:47,410 --> 00:02:50,467 very quickly without a long contractual delay 62 62 00:02:50,467 --> 00:02:52,883 while you negotiate the increase. 5276