billable labor hours dispute

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kchap

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Location
Peculiar, MO, USA
I am a controls integrator, caught in a dispute with a customer for whom I have been doing work for a few years now. Recently my company supplied them with a control panel for a brand new machine and performed the install/startup for it. Because this was a small job, I delegated it to one of my employees who is still learning the job. Because this employee is still learning, I did not charge for all of the hours he worked - about a 30% discount for the labor.

There was a fair bit of "figuring out" to do on both the controls and mechanical aspects of the project, and it required my employee to learn how to use configuration software for a light curtain that was new to us (the light curtain was supplied by the customer). After receiving the invoice, the customer requested a greater discount, arguing that he should not need to pay for the time it took for my employee to learn how to use the software and stumble through PLC program development. (I suspect the actual reason is that they have way more of their own resources invested in the project than they anticipated when they quoted the machine, and are now trying to recoup some of that cost.)

For anyone who has encountered a similar situation, how did you navigate it? Did you offer any kind of discount, or did you stand firm on the price? What were the results?
 
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There will often be disputes with T&M pricing and when final costs are higher than estimates. Offering a fixed price is the only way to surely and truly avoid that, of course I understand that can be difficult on some projects. Only other recommendation I have is in the future avoid giving customers details about what is happening on your side of things. The experience level of your guy and how you are figuring out Billing him is none of their business.
 
electrofelon said:
There will often be disputes with T&M pricing and when final costs are higher than estimates. Offering a fixed price is the only way to surely and truly avoid that, of course I understand that can be difficult on some projects. Only other recommendation I have is in the future avoid giving customers details about what is happening on your side of things. The experience level of your guy and how you are figuring out Billing him is none of their business.
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Agreed. Unfortunately in this case, the "sausage factory" was at the customer's site, where they were able to see the struggle taking place.
 
kchap said:
Agreed. Unfortunately in this case, the "sausage factory" was at the customer's site, where they were able to see the struggle taking place.
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Ok fair enough. Well that's a tough one. If you felt you made a fair reduction in time and the client still disagrees, I guess you'll have to just come to some sort of compromise or give in, taking into account how important it is to keep the client happy.
 
A few talking points that might be used:
Maintaining employee competency is a cost of doing business, and it's ultimately paid for by customer fees even if it's lumped in with overhead costs and incorporated into the hourly rates. In your case, the investigation and learning by the employee was specifically targeted to the customer's needs instead of on a broader range of applications and skillsets that this job did not require. And even so, you gave a discount for the extra time that was needed.
 
kchap said:
After receiving the invoice, the customer requested a greater discount, arguing that he should not need to pay for the time it took for my employee to learn how to use the software and stumble through PLC program development.
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I disagree with that statement. Stick to your guns.
 
Learning a customer supplied control system is no to operate equipment is no different than taking apart same equipment to troubleshoot a problem.
 
electrofelon said:
There will often be disputes with T&M pricing and when final costs are higher than estimates. Offering a fixed price is the only way to surely and truly avoid that, of course I understand that can be difficult on some projects. Only other recommendation I have is in the future avoid giving customers details about what is happening on your side of things. The experience level of your guy and how you are figuring out Billing him is none of their business.
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I've had enough customers backtrack on hard prices that they already agreed to that I started putting verbiage in my terms of service that there will be no haggling after a price is agreed upon.
 
kchap said:
Agreed. Unfortunately in this case, the "sausage factory" was at the customer's site, where they were able to see the struggle taking place.
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Ancient roman law considered slaves currency for settling disputes.

Let client take that apprentice off your hands to maintain client equipment, for training costs already invested.

If client goes for it, tell apprentice dispute requires compensating client for unforeseen complication, and promise to hire again if client lays off.
 
How far apart is the pricing they got, vs what you would have charged them had you sent a J-Man out to do it?

Presumably he would have had to do at least some figuring, although it might have been quicker.

One option would be to charge what it would have cost had you, or a J-Man had done it. I’ve always felt that was fair, if someone is hiring me as a professional, if I send someone who doesn’t have my experience, and it takes them longer, the customer doesn’t have to pay for that.

On the other hand, I can usually pay a helper 2-2 1/2 hours vs one hour of my time.

They may find that they are paying more if they pay what it would have taken you to do though. 👍
 
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