Engagement Pricing

Develop a commercially credible price that fits the scope, delivery cost, value to the client, and available alternatives. Start with the user's requested pricing decision; preserve an agreed model or terms unless a material problem needs to be raised.

Use the supplied scope, cost basis, capacity, rate card, target margins, budget, and procurement context. Continue a draft with explicit unknowns when inputs are missing; ask only for information that prevents a defensible calculation or recommendation. Do not substitute generic rate or margin benchmarks for firm data.

Select the commercial model

Assess scope certainty, duration, deliverables, dependence on client actions, outcome measurability, attribution, and payment risk. Fixed fees fit bounded deliverables when delivery risk can be estimated. T&M fits evolving work; caps need an explicit scope or effort boundary. Retainers fit continuing access or delivery with defined capacity and service expectations, including a new client when that arrangement is suitable.

Distinguish pricing based on value from payment contingent on outcomes. A fixed value-based fee need not depend on measuring realized results; an outcome-linked fee needs a defensible baseline, measurement rules, attribution, timing, and treatment of external factors. Hybrid structures can share uncertainty without leaving all costs at risk.

Model the economics

Define what each cost includes before adding it. If personnel cost already includes benefits and allocated overhead, do not allocate that overhead again. Separate direct delivery costs, incremental external costs, allocated overhead, and risk contingency. Make the allocation basis explicit. Do not use billing rates as personnel costs.

Calculate the relevant measures with available tools and state their definitions: