IT project delivery or contracting?

Which form is better depends mainly on whether you have your own project management and how precisely you can describe what should be built.

What is the main difference?

From the outside the two forms look similar: people you did not hire yourself are working on your project. The difference lies in what exactly you are buying and who carries the responsibility.

	Hourly capacity (contracting)	Project delivery
What you buy	the work of vetted people for an agreed scope	an agreed result, milestones and their acceptance
Who directs the work	you set the brief and priorities; the supplier coordinates the specialists and reports work against the brief	the supplier: team, plan and progress
Who is responsible for the project outcome	you	the supplier, within the agreed scope
How you pay	usually by time worked	usually per milestone or for the whole
What you need to have	your own project leadership and technical direction	a clear goal, acceptance criteria and a person who makes decisions

With capacity, the supplier is responsible for providing suitable, vetted people, coordinating them and staying in touch with them. The brief, priorities and acceptance of outputs stay with you, and you are responsible for whether the work leads to the project's goal. With project delivery, responsibility shifts: the supplier puts the team together, manages it and is responsible for the agreed result. Contractually, such an arrangement can rest on a contract for work under the Civil Code, under which the contractor carries out the work at its own expense and risk. The actual split of responsibility, however, always depends on what the parties agree in the contract.

Source: Civil Code, Act No. 89/2012 Coll., Section 2586 (in Czech)

When does hourly capacity make sense?

Capacity is a good choice when you have the project firmly in hand and are short only of people or specific expertise:

you have your own project or product lead and technical direction,
the work changes continuously and you set priorities every week,
you need to strengthen the team in one technology or role, such as testing, data or SAP,
you want the know-how to stay with you and the work to happen in your environment.

The advantage is flexibility. Within the contract terms you can add or reduce capacity and change priorities without renegotiating the scope. The price is that the project outcome remains your responsibility. If you lack someone to lead the project, adding people may not speed it up.

When is it better to order project delivery?

Delivery makes sense when you want the work finished rather than roles filled:

you do not have your own team or the capacity to manage the project,
you can describe the result: what the system should do, what it connects to and how you will accept it,
you want one accountable person on the supplier's side instead of coordinating individuals,
you need to take over a running project, or a part of it that has stalled.

Delivery does not require everything to be written down in detail at the start, though. What matters is agreeing the goal, the first milestones and the acceptance criteria. The scope is then refined in stages, and every change is agreed. Without that, delivery easily turns into hourly capacity with unclear responsibility.

What should you watch out for with hourly capacity?

The risk tends to be organisational rather than technical. When external specialists have no clear brief and nobody on your side sets priorities and accepts outputs, the work breaks down into individual tasks and nobody keeps track of the whole. Before you start, agree who on your side assigns work, who accepts outputs and how often progress is reviewed.

The second issue is the line between contracting and hiring out people. If you want to assign work to external people and direct them every day like your own employees, the law treats it as temporary assignment, which only a licensed employment agency may provide. Hiring out workers outside this regime is disguised employment mediation (Employment Act, Section 5(g)), and a fine of up to CZK 10,000,000 also applies to the company that allows it (Section 140). We describe the available forms of cooperation in the article Contractor, employee or agency worker?.

Source: Employment Act, Act No. 435/2004 Coll. (in Czech)

What should you watch out for with project delivery?

With delivery, it pays to spend time on three things at the start:

Acceptance criteria. How will you know a milestone is finished? If this is not written down in advance, every acceptance turns into a negotiation.
Scope changes. A project usually evolves during delivery. Agree how a change is proposed, priced and approved, and who decides on it on your side.
Handover. What you get at the end: documentation, source code, access rights and training for your team. Whether the supplier will continue to operate or support the system should be stated explicitly in the contract.

Delivery also needs your cooperation. The supplier needs access to the environment, the data and the people who know the current state. If it waits weeks for access, the milestones slip too, even though the team is not to blame.

Can the two be combined?

A company might, for example, have a defined part delivered, such as a new integration or taking a prototype into production, while adding hourly capacity to its own team where it wants to keep the brief and priorities in-house. What matters is being clear, for each part, who directs it and who is responsible for it. Unclear boundaries between delivery and capacity can lead to disputes over what was supposed to be finished.

How do you decide?

Ask yourselves three questions:

Do we have someone who will manage the project and be responsible for the result? If so, hourly capacity will probably be enough. If not, consider delivery.
Can we describe what should be built and how we will accept it? If so, delivery is realistic. If not, start with a short initial phase to clarify the goal and the acceptance criteria.
Do we want to keep the know-how and direction of the work in-house, or do we want a finished result? Depending on the answer, lean towards capacity or towards delivery.

Summary

Hourly capacity: you buy the work of vetted people, you set the brief and priorities, and you are responsible for the project outcome.
Project delivery: you buy an agreed result; the supplier manages the team and is responsible for delivery within the agreed scope.
What decides it is whether you have your own project management and whether you can describe the goal and the acceptance criteria. The two forms can be combined if it is clear who is responsible for each part.

AZ EXPERTUM offers both: IT project delivery of a whole project or a part of it, and contracting of specialists and teams. If you are unsure which form suits your plans, write to us. Describe the goal and the deadline, and we will work out the form of cooperation together.

This article is general information, not legal advice. Have a specific contract reviewed by a lawyer.