Using Risk to Drive Outcomes and Innovation

Reading this reminded me of a software consulting company I worked at a few years ago as a developer. When bidding for a software development project they would offer a fixed price bid and/or a "time and materials" bid. Our fixed price bid would include a margin to cover our risk. That margin was usually about 30%.

The interesting thing was they were also very good at estimating and executing projects and often came in on time and on budget.

It never occurred to me that because the estimation process always included the risk estimation even if the client went with time and materials, our estimate would likely be more accurate. Looking back now, it does seem likely that was a factor.

We had a good company culture and great management too, so it wasn't the only factor of course.