How to use Contract Types

Click to Play 5 Different Project Types

What are Contract Types?

Contract Types allow you to change how a project recognizes revenue. When planning a new project you can choose from 1 of 5 Contract Types:

  1. Fixed Bid. For when you agree to complete the project for a flat fee. Useful for projects you can accurately estimate.  
  2. Monthly Retainer. For when you agree to complete as much work as needed for a flat monthly rate. Useful for projects that require ongoing maintenance and support.
  3. Time and Materials. For when your client is billed based on hours worked multiplied by your billable rates. Useful for unpredictable projects, or when your client wants to determine the amount of work needed. 
  4. Not to Exceed – For when you agree to bill based on the hours worked and billable rates, but agree to complete the work under a specific amount. Useful when your client’s have a limited budget, but want the benefits of a Time & Materials contract. 
  5. Non-billable. Use when a project has no revenue. Useful for planning and tracking internal projects and pro-bono projects. 

Bric uses Contract Types to calculate your project’s revenue; then compare your revenue, expenses, and profit as you plan your project. Once your project is Active, Bric updates these numbers when plans change or you track time; displaying different version’s of the same project’s financials side-by-side.

  • Expenses. Bric calculates labor expenses based on hours people are on a project multiplied by their hourly cost. For salaried people, Bric calculates an effective hourly rate. Effective hourly rate = Salary / (Weekly Billable Hours * 50 Weeks) Learn more about cost rates.
  • Profit. Bric calculates your gross profit by subtracting labor expenses from Revenue.
  • Revenue. Bric calculates revenue based on the contract type selected. If no Contract Type is selected Bric defaults to calculating revenue based on each person’s hours multiplied by each person’s hourly billable rate. 

You can compare the financials of multiple projects using Bric’s Financial Reports. Financial Reports calculate actual revenue of Active and Completed projects.

How to Select a Contract Type

Click to Play Select a Contract Type

On a project, you can select a Contract Type above the Project Plan Financials box. After you select a Contract Type, Bric will automatically update the actual Revenue in Project Plan Financials. You will need to add a budget for Fixed Bid, Monthly Retainer, and Not to Exceed contracts. Non-billable projects have the option to impact capacity. The option to allow the project to impact capacity will appear to the right on the menu — learn more about planning capacity

Note: You can change a Contract Type or modify a Budget once a project is Active. Bric will save your Original Estimate, and will update your Current Plan and Work Completed Revenue. You can view compare the different versions side-by-side in the Project Plan Financials box.

How to Switch between Est. Revenue and Actual Revenue.

Click to Play Actual and Est. Revenue Toggle

Bric calculates Est. Revenue by taking each person’s hours and multiplying them by each person’s billable rate — Est. is an abbreviation for Estimated. Bric uses Est. Revenue until you select a Contract Type. Once a contract type is selected Estimate Revenue changes to Revenue, because Bric can now accurately calculate the project’s actual revenue.

Once you have selected a Contract Type, you can toggle between Revenue and Est. Revenue by clicking on Revenue. This allows you to quickly compare your actual Revenue to what you could have made with a simple Time & Materials contract.

How Revenue is Calculated using Contract Types

Bric uses Contract Types to calculate your project’s actual Revenue. Actual Revenue is used to provide you financials inline as you manage projects, and are used to update your Financial Reports. The following is how we calculate Revenue for each Contract Type, and recognize revenue as you complete projects. Bric uses GAAP standards for Revenue Recognition.

1. Fixed Bid. For Fixed Bid Contracts your revenue equals your client’s budget. You have an approved budget, and you will get paid the same amount no matter how long the project takes.

Project Revenue = Fixed Bid Budget

Since your revenue is fixed, profitability depends on managing your costs. Thankfully, Bric’s Project Plans make it easy to monitor your team’s progress, timelines, and financials.

Fixed Bid contracts are great if you do the same type of projects over-and-over, can accurately estimate costs, and control the project’s scope. As you complete more of the same type of project, you can increase your profitability through specialization, innovating your process, key investment.

Pro Tip: Use Financials Reports to find out how much you are really earning per hour. Click on View Report above Project Plan Financials to view you real rate per hour. You might discover you aren’t working close to your target rate.

2. Monthly Retainer. Monthly Retainers generate consistent revenue. Your client agrees to pay the same amount each month, and your total revenue is based on the length of the contract.

Project Revenue = Monthly Retainer * # of Months

If a project starts or ends halfway through a month, Bric calculates the revenue for that month using the following formula, Days in Project / Days in Month. For example, 10 days worked in March / 31 days in March = .32 * Monthly Retainer.

Note: Projects in Bric are estimated and planned by the week. However, Bric calculates the actual revenue using the monthly retainer’s daily value. 

The profitability of each month depends on the expenses for the month. Some months your expenses will be higher, and some months they will be lower. The key is to manage the profitability of the entire project — adjusting your hours and level of service to make sure that you end the project profitably.

3. Time and Materials (T&M). With a T&M contract your client agrees to a billable rate(s) per hour, and your revenue equals each person’s hours * billable rate(s). Bric uses the most specific billable rate  learn how Bric manages multiple billable rates.

Project Revenue = (Hours * Billable Rate)

Note: For T&M Contracts, Est. Revenue with equal Estimated Actual Revenue. Bric uses the same calculation for Est. Revenue.

4. Not to Exceed. Similar to a Time & Materials contract, but with an upper limit. You and your client agree to a billable rate(s), and you charge your client for the hours worked. However, after the limit is reached, your revenue is fixed to a budget. Your Time & Materials contract becomes a Fixed Bid. 

Before Limited is Reached: Project Revenue = (Hours * Billable Rate)

After Limited is Reached: Project Revenue = Budget

Not to Exceed contracts are great clients with tight budgets. They can agree to the project, but not worry about incurring a financial obligation they can’t meet.

Your profitability depends on finishing the project under the limit — because that is all the revenue you get. 

5. Non-billable. These are projects you agree to complete free of charge. These can be charity projects, internal projects, or other non-billing projects. Bric continues to calculate costs and expenses for non-billable projects.