The ERP Contract Doesn't Run the Project

What consulting agreements actually require from the people leading the project.

Over twenty-three years as a CIO across three institutions, I have been part of five ERP implementations. The first four were delivered on-time and on-budget, each eventually delivering much of the value promised at project inception. The fifth, the University System of Georgia’s Workday Finance and HCM implementation, is currently underway. Across those projects, I have worked with nearly every variety of consulting partner: independent contractors, small boutique firms with deep higher education expertise, and some of the largest consulting organizations in the world.

Two moments have stayed with me. In one, a senior consulting partner came to my office to inform me that the University Registrar had continued to change the scope of the transcript implementation, and that the accumulated bill had reached $400,000. That was a time-and-materials engagement. In another, a workstream leader flagged that the consulting vendor had spent little time studying a complex business process, and that their process maps still carried another institution’s name in the document header. That was a fixed-price engagement, and the vendor had every incentive to move quickly and less incentive to dive deep. Both situations are more common than most leaders would like to admit. In today’s Dispatch, I want to bring my decades of ERP experience to bear on that common problem: how to best manage consultants working on a fixed-price agreement and those working on a time-and-materials basis. How you manage each one is different, and the cost of getting it wrong is the same: a project that runs out of money, time, or both before it crosses the finish line.

The big picture

Most CIOs and project directors do not choose the contract model governing the consulting work on their ERP implementation. That decision typically occurs upstream, negotiated by procurement officers and CFOs who are optimizing for budget certainty rather than daily project management. By the time the consulting team is assembled, the contract is signed and the operating conditions are fixed.

This creates a practical problem. The management discipline required to run a fixed-price engagement is fundamentally different from what a time-and-materials agreement demands. The incentive structures are different; the failure modes are different; and the skills that matter most are different. A project director who manages a time-and-materials engagement incorrectly will watch the budget erode one unbilled decision at a time. One who manages a fixed-price engagement incorrectly will find themselves buried in change orders and contractual friction.

Neither model is inherently superior. Institutions have succeeded and failed under both. What determines the outcome is not the contract type, but whether the project director understands the constraints they are working under and manages accordingly.

What Fixed-Price Actually Means on the Ground

Fixed-price contracts are attractive to CFOs and governing boards because they appear to convert a sprawling, uncertain transformation into a bounded financial commitment. The number fits cleanly into a capital budget. For institutions that are risk-averse or lack experienced internal project staff, the logic is entirely reasonable.

However, the fixed-price architecture carries a structural tension that every project director needs to understand from day one. When a vendor assumes financial risk for overages, they protect their margin by limiting scope, resisting depth of process discovery, and substituting lower-cost resources as the project matures. This is not bad faith; it is a rational response to the incentive structure both parties agreed to. Senior architects who are highly visible during the early phases will be replaced by junior analysts once unit testing begins. The partner is implementing a static scope document while the institution is still discovering its own preferences in real time.

Higher education compounds the fixed-price problem in a specific way. Business processes are often exception-driven, poorly documented, and understood only by the people who have run them for years. Because a fixed-price vendor is incentivized to move quickly through the early discovery and configuration phases, there is a structural pressure to keep requirements workshops shallow and move toward build. The project director's most important job in a fixed-price engagement is to resist that pressure. The vendor must invest real time in process discovery, and the institution's configuration teams must be pushed to go deep during workshops, surfacing edge cases, exceptions, and dependencies before the design is locked. Requirements that are not discovered early do not disappear; they surface during testing, when the cost of addressing them is highest and the institution's leverage is lowest. By that point, every gap in the original specification becomes a formal change order, often priced at a premium, and negotiated at the moment the institution can least afford to walk away.

The single most important tool in a fixed-price engagement is a pre-negotiated rate card, agreed to before the contract is signed. This is a comprehensive schedule of billable rates for every consultant tier the vendor might deploy, and it remains binding for the life of the implementation. When scope inevitably expands, the negotiation shifts from price to volume. Instead of arguing over what additional work should cost, the project director is managing how many hours a task consumes. This converts change orders into a more manageable administrative process. A fixed-price agreement without a pre-negotiated rate card is a structural failure waiting to happen.

What Time-and-Materials Actually Means on the Ground

Time-and-materials agreements rest on a different premise. They assume the institution and the implementation partner are aligned in pursuing the best possible outcome, and that the flexibility to respond to what gets discovered during the project is worth more than the predictability and comfort of a fixed budget ceiling. The model is well-suited to complex environments where detailed requirements genuinely cannot be fully known in advance, which describes most university ERP implementations.

The structural weakness of T&M is the absence of any financial incentive for the vendor to say no. If a functional lead wants a customized workflow built for a process that serves twelve people a year, the consultant will bill the hours to build it. This happens not because the vendor is acting improperly, but because the contract rewards hours worked rather than value delivered. Scope expansion in a T&M engagement is quiet and cumulative. It shows up in the burn rate, month after month, until someone does the math and realizes the budget will not reach the go-live date.

A T&M engagement requires the project director to function as an investment manager rather than a contract auditor. The most effective tool for maintaining that discipline is a miniature scope and cost agreement for every major deliverable, negotiated before billable work begins. This converts the engagement into a series of small, bite-sized fixed-price commitments, providing cost predictability while retaining T&M flexibility overall. The core evaluative question never changes: does this activity move us toward go-live, or does it merely satisfy someone's preference for how the system ideally works? Decision velocity matters here as well; in T&M, slow institutional decisions are expensive in a direct and visible way, and the project director has to build that speed into the operating rhythm of the project.

T&M also offers one significant advantage that fixed-price does not, which is resource sovereignty. Because the institution is paying for specific talent rather than a guaranteed outcome, the project director can more easily remove a consultant who is not performing and request a replacement without proving a contractual breach. The difference between a senior consultant who understands higher education processes and one who does not is measured in months of rework and unexpected cost overruns.

What Both Models Share

The most common failure pattern in ERP implementations, regardless of contract type, is slow institutional decision-making. In a fixed-price environment, indecision triggers delay and disruption complaints from the consulting partner. In a T&M environment, indecision quietly burns the remaining budget. The contract cannot solve this problem; only leadership attention can. The project director needs standing authority to bring decisions to the right senior executives quickly, and those leaders need to understand that deferral and queue-time carries a real project cost.

Both models also require the project director to manage internal stakeholders as actively as they manage the vendor. The consulting partner is a visible risk; internal stakeholders are a quieter, often more systemic risk. The functional lead who keeps expanding requirements, the department head who will not release staff for testing, the executive who changes priorities midstream: these are project realities that no contract structure can contain. Managing them requires credibility, immediate executive-level access, and transparent decisions from above the project leader.

The final word

The contract with the consulting implementation partner is the operating system of the implementation, but it does not run the project, nor does it guarantee outcomes. What runs the project is the judgment and discipline of the people managing it daily.

Fixed-price rewards boundary control: the project director’s credibility depends on holding the line between what was scoped and what gets delivered, with a pre-negotiated rate card as the mechanism that keeps change orders grounded and controlled. T&M rewards investment thinking: credibility depends on demonstrating that every dollar spent moves the institution toward go-live, and on cutting off the quiet accumulation of non-value-added time before it becomes a budget crisis. The management disciplines are different, but the underlying standard is the same: the project director has to know which game they are playing and manage accordingly.

Ultimately, both models demand the same underlying capacity: the project director must separate what the institution genuinely needs from what various stakeholders sometimes want, and keep the project moving toward the former without losing the trust of the latter. That capacity does not come from the contract. Institutional leaders who understand this stop asking which contract type is right and start asking whether their project director truly understands the model they are operating inside. That is the right question, and it is almost never the one that gets asked until it’s too late.