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. :-)