Standardizing web development pricing

Update: Thanks in part to the comments, which completely panned this idea, I’ve come to see this proposal is a bad one. I’m preserving it here for the record, but it no longer reflects my thinking.

If doctors can be made to charge less and provide better service for their patients, however uncomfortable for them, then maybe so can web designers.

One nifty thing about Obamacare: More checklist use in hospitals

My cousin in-law shared this Planet Money segment about Obamacare driving checklist adoption in hospitals as a cost-cutting measure. The whole thing is good, but they mention checklists specifically at around the 7:30 mark.

The upshot: New rules for medicare payments change the incentives for hospitals to cut costs beginning in January. Instead of being paid for each procedure, which incentivizes more procedures (say, to fix complications from the first procedure), some doctors and hospitals in experimental programs will be paid lump sums to fix given patient problems. More procedures to fix complications will no longer result in higher compensation. This means the care will both cost less and tend to be better.

In reaction to this, more hospitals are implementing checklists than before, because checklists are shown to dramatically reduce complications from surgery. Lives were on the line before this change, and will continue to be, but making doctors directly accountable in a real financial way will do more to encourage the use of checklists (and other best practices) than simply having available the knowledge that they work.

Similar issues in the web software service industry

At Rocket Lift, as is the case generally in our industry, our incentives are out of whack. Our client’s lives may not be on the line, but when we make mistakes that create more work, we often charge more to fix them. Just like with the doctors in the NPR segment, we never try to exploit this. Just like the doctors, the nature of our work means there will always be unforeseen complications, and we can acknowledge that the incentive structure is wrong. And just like the doctors, this is an uncomfortable reality for us to confront. But we ought to.

Solving this in a way that links billing to fixing problems, and benefitting both us and our clients, is very challenging. Frankly, I don’t know how to do it. But I continue to believe that our industry needs to act more professional if we want to be treated like adults.* Just as doctors are facing the hard questions about cost-saving, we web professionals ought to, as well — and can, for the benefit of our clients and the world, with all of the latent potential for better technology to improve lives.

Doctors and hospitals are having this difficult conversation because Medicare regulations are changing. Absent government rules (all joking about the debacle aside, we’re not about to be cost-regulated by the feds), what could this look like in our field? Flat fees are untenable, because too much of our work is fundamentally novel and cloaked in unknowns. Not-to-exceed commitments threaten to sink service businesses. Variations on hourly billing are the only sane choice for web contractors in most cases.

A Proposal

I invite feedback from our web development peers and customers of our industry on this idea:

I propose a standard cost schedule, with not-to-exceed guarantees for certain tasks based on task requirements (e.g. which browsers are supported?) and known — and unknown — factors that impact the likely time required (tools used, quality of existing code base, etc.). I imagine an open database of tasks, estimates, and actual time spent, contributed to by many of our peers. This would allow us to peg the “right” cost for a given task with given circumstances, based on industry consensus. This would be a neutral, data-driven, third-party arbiter setting and validating estimates of time required. It would play a role similar to the one Medicare plays for doctors, but for time instead of cost, and on a voluntary basis between contractors and clients.

With this database and resource to refer to, contractors could still charge whatever they’d like, provided clients were willing to pay. We would compete on a mix of factors including hourly rate, track record, culture, process, specialty, need/service fit, etc. …

I’ll admit I cringe to think of having to estimate and bill according to a standard schedule of codes for different tasks. “HTML and CSS for a single custom dynamic WordPress template, with five distinct page Components and deliverable SASS source code, minified… Let’s see, is that five units of code SWC-24 (20 hours), or a single unit of HUI-23 (18 hours)?”. Ick! But I believe we could do much better and avoid that nightmare, with enough investment of thought and energy to build a voluntary system for technologists, by technologists (instead of bureaucrats).

I think this could help us to structure pricing for web work in novel ways that would reduce “complications” and protect clients from cost overruns. Two other benefits: shortcutting the time and energy developers spend trying to figure out what they are worth, and giving them the confidence to in fact charge what they are worth.

What are your thoughts?

*If there’s any question about our industry’s desire to be treated like professionals, consider the energy we’ve spent producing films lampooning The Vendor Client Relationship in Real World Situations, and the popularity of Mike Monteiro’s resources for web designers to value themselves and grow a backbone.

By the way, this post isn’t meant to focus on Obamacare. I’ll delete comments picking a fight about it, so no need to waste your time there, folks. :-)

6 thoughts on “Standardizing web development pricing”

  1. This is not the appropriate first step because the analogy is unsound. Doctors exit a standardized teaching and learning methodology and all pass a standardized test that is administered routinely. So the level of expertise is both qualified and quantified. After that, there is a standardized amount that insurance will compensate doctors for, not a standardized amount that doctors charge. One of the complaints of doctors and medical practicioners is that by being so strict about the listed comp amounts, insured people lose by not being able to follow the uninfluenced advice of their doctor, who likely know whats better for a patient than an insurance agency. As a consumer, people enjoy and are entitled to the right to pay more for better service, and that exists in the world of medicine as well.

    Until we have more standardized practices for teaching and learning within development, including some sort of way to qualify professionals (a certification process?) this sort of pricing isn’t going to be successful or even inviting.

    This also overlooks something else: when you are in a hospital, you are devoid of options. You go in and somewhat willingly commit to a standard of treatment because you have faith in a physician. They tell you that you need surgery, and you get surgery. Perhaps there are options within that standard you can choose from, but the point is that multiple practitioners are likely to recommend the same treatments (which is why second opinions are so in practice). No two web developers are going to recommend the same thing, there is no standard of practice, and thus the “patients” don’t trust us and are terrible patients (clients). So our pricing must take into account the clients themselves.

    Basically, idealistic thought. But no.

    1. Thanks for weighing in, Amanda.

      No two web developers are going to recommend the same thing, there is no standard of practice, and thus the “patients” don’t trust us and are terrible patients (clients).

      Agreed, that’s the real issue I was trying to get at. And, I take your point that standardized pricing doesn’t make sense before standardized practices. Put another way, having data-based guidelines for “how to estimate if you’re going to X” is less useful than guidelines (or… rules?) for what to do in the first place.

  2. I agree with Amanda that without certification this would be a tough model to push.

    If certification was there, I think a more appropriate analogy could be found in auto mechanics. The guidelines provided around maintenance tasks in that industry are pretty well developed.

    I’m not sure that this could apply to anything more than maintenance of an existing website. All parts of the creation process have so many variables. Would be interesting to see it tried though.

  3. I think the whole checklist, reduce things to their lowest common denominator and reduce costs misses the point. I actually think it is dangerous.

    Creating websites if a creative process – when creative processes turn into predictable check lists the results wind up looking like paint-by-number ‘art’. Perfectly acceptable according to the process that anyone can do but which misses the essentially human, creative element.

    One ‘solution’ (or I should say resolution) to this dilemma, would be to set boundaries with the client – minimum functionality, maximum budget, and then work to delight the client within those boundaries. If the designer messes up, they eat the over-run and learn quickly.

  4. Thanks to everyone who’s weighed in on this! I posted an update (see the top of that post) that I’ve been persuaded this is a bad idea.

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