Project bigger than what was initially planned. How to tell the customer the higher price and different contract conditions?

Question

I agreed with a customer to import data from excel files and build a report with them. Since it was not a big project I did not charge too much. I also asked for an annual fee for bug fixing and maintenance.

As in the boiling frog story, the customer asked for little changes now and then (the frog is me). After more than a year I realized that I'd built a sort of ERP, where importing excel data was used only once to avoid the initial manual data entry phase.

In order to get the report, I had implemented (for free) a lot of business logic and many statistical calculations just to have a "correct" model (bespoke to the customer).

I'd like to give to my customer a new version of the contract I use for ERP programs (and not for import/export utilities as I did with him), with higher prices for the initial software cost, annual maintenance and other contract conditions.

The project is nearly completed. How can I tell all of this to the customer? I'm afraid he could reply "Hey, we have agreed to this price, I'll pay you only that. The changes you made are part of annual maintanence after all". And as I managed the things he wouldn't be completely wrong. I'd like just to try to recover the situation if possible.

Thanks for your help.

Update - 7th July 2017

I followed the advise to list all the extra features, but the customer kept changing point of view just to be right whatever I said. After sending him a copy of old e-mails to show how his mind (hem...) was not serving him well, he started to say he has an intellectual property on the calculations (it's a weighted average that I suggest to use...).

I offered him the option to pay me nothing more, keeping the part of software he payed, but he had to delete my software (the part not payed) otherwise he was infringing my copyright. I sent also a license agreement. He never answered.

After that, I talk with a lawyer, a friend of mine, who offered to send him an order for payment just to unblock the situation. After a few days he asked if he had to talk to his lawyer or we could find an agreement. I offer the possibility to an agreement.

He told me he wanted to wait for a change in the law since maybe my software (not payed) could be useless for him after that. I tried to let him understand that I worked for that software and the fact he had to pay me had nothing to do with the fact that law can change.

After more than 6 months the law eventually changed and he needed no more my unpaid software... but he don't want to delete it neither.

Nearly a year has passed since that time. He even said to me that that piece of software could be helpful for him even with change in the law, I just have to fix bugs before he can pay... (obviously I don't trust him anymore).

I'm upset and annoyed. I don't know if the story will end in some other way. For sure I learned the lesson. In case of news I will update this post. I think it can be of help to others, just as an example not to follow.

Answer 1

I agreed with the last poster mdomans. The first thing you must do is specifically identify and document that which you consider to be covered by your first contract, and that which you consider to be extra work beyond your original agreement. This is crucial so you know exactly what it is you feel you are owed or may be losing, beyond a general sense of "hey, I'm working more hours than I was supposed to be on this deal." If possible, it may help to put an actual dollar figure on the extra work if that can be calculated.

Once you have the two separated and documented, you'll have a better and clearer idea of what it is you're actually talking about, how much you believe you are owed, or how much you may have cheated yourself out of. It may turn out that upon documenting it, it isn't as much as you believed it to be. However, if after separating and documenting you realize that you have cheated yourself out of just an unacceptable amount of time or money create an invoice. In the invoice include the documentation showing what you believe is beyond the scope of the first agreement, detailing hours, skills utilized beyond any covered by the first agreement, and exactly how you arrived at the "extra" number. Then simply send the client the documentation and invoice for the extra work.

It could be that the client is also aware of the fact that you have done an extraordinarily amount of work beyond the scope of your original agreement, and will take no issue with paying the extra cost for the extra services. For example, if they have requested for just an unreasonable or inordinate amount of changes and work-arounds, making the job a "custom" job rather than your "standard" services or job. Then the client should be reasonable and understand if not accept the fact that this is not what you've agreed to in the first agreement.

It could be that it is as you fear, and the client may say, "Well, I didn't agree to that, so I am not paying that." At which point, you can decide to either finish out the contract, but doing only that which you believe or can legally document to be a part of the first agreement. If the client wishes to have extra services, then it is only fair that they pay extra money. If they have an issue with that, they may turn out to be the sort of people you do not want to do business with after all.

While some may say this approach to be jarring to the client. However, this plan of action is legal, to the point, is the quickest way to both draw a line in the sand, as well as making sure the practice gets nipped in the bud asap. If you play it out in your head, almost any other scenario ends up with you just having to not only forfeit the extra work you've already done, but then being the clients whipping boy for the remainder of the contract. If you think you feel cheated now, imagine how you'll feel having to continue finishing out the contract having to continue to do all that free extra work.

At the very least, the path I have laid out opens the door for not having to continue to do extra work for free going forward. This is because after fully explaining to the client exactly what you believe to be covered by your original agreement, and that which you wish to incorporate into a new agreement, if the client is completely unreasonable you have a fall back position. The fall back position is to tell the client, "Well, I will finish out my obligation to you, but only my obligation. Going forward any extra services, will unfortunately require extra charges to you. The reason being I simply can no longer sustain the continued extra demands on my time and energies, without being compensated for that extra time and demands you are requesting from me."

Please update this blog when you get a chance, and let all know what you ended up doing, and how it turns out for you. Good luck.

Answer 2

I would suggest you work on an hourly rate. This way, you will be able to charge your customer anytime he will require any change. You will not feel nervous for asking for more money.

Another thing that you can do is that you should mention your every client before the project start that any change that will be required later will be charged. If the change is due to the client's mistake or it is just client's demand, you should charge him specific amount. Otherwise you should not charge him.

If you think that hourly rate will increase the project price too high, you can simply go with the second suggestion.

Answer 3

Well. It's kinda late, but still possible.

First, make a list of what's in your opinion new feature and what's yearly maintenance.

Then get in call with your customer (do not do this over an email) and show him the list. Explain that what went into the work is much more than maintenance and stress how much that increases the value of the project.

Since it's very late, I'd also offer a discount, but stage this as a "we want more business discount".

Answer 4

As we often say here "what does the contract say about the scope of work"? If the scope is vague, you will have hard time get the money you earned in the extra work. If not, make a list of any feature outside of the scope of work and charge it.

Make sure you keep all extra work safe at your place until you are paid for it.

I am afraid you cannot do anything more. You can lastly write a letter directing client's conscience, but there is little conscience in business.