Rate per hour vs overall budget?

Question

This is the scenerio: The customer fills a web form, requesting for basic information such as description of what he/she needs done, and the budget or rate per hour. This can be analyzed by testing both options and seeing A. How fast are form submited B. Which one ends up in a fee dispute.

Has anyone tested this? Or any input on this two options?

From a user perspective of a first world citizen, such as UK, USA (where a lot payment is estimate by hour)... In a site where customer communicate with propsective companies they might hire for a job, would having a estimate Rate per Hour provide a better experience for both parties (customer and company)? Or it is recommended to use the standard (or at the very least the commonly used) Budget, which is a overall cost of the project.

This is assuming the users have an idea on the timeline for the work.

• Rate per hour = $20/hour

• Budget = $1,000/project

Answer 1

It is human nature to underestimate the size of the (investment) hole and overestimate the size of the (profit) treasure.

http://www.favaro.net/publications/pvcf/ken_pvcf.html

As a result of that I would think that it's common for the project being billed as a whole to backfire on the company doing the work.

That's certainly been my experience in the IT field. The other problem is that IT jobs are notoriously difficult to estimate. It's why IT is billed by the hour so often.

Other industries may be better about estimating projects and the per hour vs per project billing may not matter as much in terms of the total amount the customer is going to pay in the end. But the customer is of course going to favor having a finite dollar amount on the project before they sign on.

Answer 2

Most users will have a good idea of what they are comfortable to pay for a service/project. Based on this cost, a user can make a decision. If he is looking for a contractor to perform a task he has no idea about, a per hour price may not be the best way. He will have no idea of how long it will take and therefore no idea of what cost he is in for.

In most circumstance where I have observed disputes regarding charges, it is because a service/project has taken much longer than was expected (rightly or wrongly by the user).

I find the way is to provide both. The user must describe what service he requires to be performed. The contractor and the user can then agree what is required. The contractor can then quantify how long the project will take and provide an hourly rate as well as a project total. A SLA can be drawn up between the 2 parties and disputes can be avoided.