Survey: How to handle cancellations to recoup opportunity costs?
I’ve been asking friends how to bill for project cancellation/delay. It is a tough situation for both the client and the contractor.
Cancellation: A company hires a carpenter to build a table and six chairs; halfway thru the project, scope changes to include only the table. Delay: a company hires a painter to paint a house; when the painter shows up, the electricians are still working (a delay is a cancellation with immediate rescheduling.) What to do?
Bill a % of cancelled time. The percentage depends on the client. How much money do they have? Do you want more work with them? Is there a history of cancellations?
- 0% is a favor.
- 100% is a spanking… though many consider it fair.
Alternatively, ask the client. Instead of setting the %, ask the client how to bill for lost time, and accept their offer gracefully.
What do YOU think? The answer might be in my next contract.
A note about retainers: A retainer is money paid in advance for services. With a retainer, we still need to decide whether to refund (or carry forward) unused credit and whether a cancellation counts as billed time.