When you set up a Project as a Fixed-Price Project, once you have added billable assignments, you will notice that from the Performance tab on the Project Dashboard, you have the option to choose between T&M Benchmark and Fixed Price.

When Fixed Price is selected, you will see a column named Effective Hourly Rate per role.

It is the hourly rate per role based on actual charge per billable hour worked. It helps you to understand the performance of your fixed price project when compared against the T&M Benchmark. Ideally, you would want to be more profitable than charging based on Time and Materials in a Fixed Price Project.

Here is the formula for the calculation of Effective Hourly Rate:

The terms in the formula is illustrated with the following example.

The client, Digico, has agreed to pay a fixed price of $10,000 for a UX Design Project.

The Project Pricing Model is set up in Runn as a Fixed Price Project.

The Hourly Rate you define per role when you Edit the Budget of the Project. This is the Hourly Rate that will be used if the Project is charged by Time and Materials.

In the example, two roles have been added with the following Project Rate:

In a Fixed Price Project, Project Revenue equals Project Budget. In this example, Project Revenue equals the Project Budget, which is set as $10,000, since the client has committed to pay $10,000 for this project.

T&M Benchmark is the revenue earned if charged as Time & Materials, based on the scheduled hours / actual hours added in Runn. In this example, 15 hours and 10 hours of scheduled hours have been added to the two roles on the Project Planner:

As a result, the T&M Benchmark is $5,000. It is the sum of:

Senior Project Manager: $200 (Project Rate) x 15 Hours = $3,000

Senior Software Engineer: $200 (Project Rate) x 10 Hours = $2,000

Plugging the numbers back into the formula:

The Effective Hourly Rate is $400:

As the Effective Hourly rate is $400, which is much higher than the Project Rate of $200 under Time & Materials, this is a project much more profitable than if it is charged under Time & Materials!