How does this contract programming business work?

Disclaimer: I wasn’t sure if this should go in GQ or IMHO, but since I’m looking for facts, opinions and advice, I’m putting it here for now.

Here’s my situation: I’m an RPG (That’s Report Program Generator not Role Playing Game) Programmer. I’ve worked for the last 7 years for the same company. Their financial systems run on an IBM AS/400 and were my baby. In fact I was the only AS/400 literate person still on their payroll.
Their production systems run on their network and are written in a language called Progress. They want to get rid of the RPG financials and convert to financials written in Progress which they already have a license for.
I knew this, but I figured I’d be employed at least ‘til the end of the year ‘cause they’ll need me for the conversion.

I was wrong.

They laid me off this morning. Probably not the brightest thing they ever did, but what the Hell.

Anyway, they asked me if I would come back and do the conversion as a contractor.
I said I probably would, but I’ve never done contract work before. I’ve asked a couple of local guys I know for advice, but I wanted to put it to the Teeming Millions as well.
I’ve quoted them what I think is a pretty fair price, and of course I’ll get it all in writing, and I think I know about the tax end of it, but are there any ‘gotchas’ I need to watch out for?
Is the COBRA stuff a good deal?
Would anyone be willing to e-mail me a sample contract?

Any input would be greatly appreciated.
*Mods: I’ll probably bump this in the a.m. so as to ask the daytime Dopers too, okay?

I’ve been an RPG programmer since ‘84. Started on a 34, spent years on a 36, a short time on a 38, and have been working on AS/400s since ‘89. I work for a small contract programming shop (I’m the owner these days), doing financial systems, both package and custom work. If you ever worked on 36s, you may have even heard of us. We did a lot of assembler work on the old S/36, and sold some programmer utilities packages that (among other things) allowed you do a sort of a call/parm type program call on the 36 using good old RPG-3, and a file update package called Global File Power.

My basic custom rate is $110 per hour. That can vary a bunch depending on the work and the customer, but never goes below $50, and averages about $90. We charge either straight by the hour, or bid big jobs. Always pad your bids at least 30% over your best estimate.

On small jobs (stuff under about $2000) or with known customers, we just bill at the end of the month, or at the end of the job, whichever comes first. For larger jobs, or customers where we don’t have a payment history but the customer looks reliable, we charge 25% before we start, 50% on installation, and 25% thirty days later. For shaky looking customers, it’s at least 50% up front, and the balance on installation.

The most important to remember is never undersell yourself. The tendency to cut price because you think they won’t pay it your worst enemy. Especially in the situation you’re in now, where they want to hire you for work on a system you developed. No one, repeat NO ONE can do that job in less than 3 or 4 times the number of hours you can do it in, and maybe more like ten times. You designed the system, you know how it works. Anyone else will spend a lot of time just figuring out where the data is to export, and will always miss something along the way. So go long on your estimate, give yourself plenty of time to do the job right. You can take twice as long as you need to, and still give them good service because it will be twice as fast as anyone else can do it.

We use a standard “Fill in the blank” form we designed for contracts, which we call a Professional Services Agreement. It spells out in broad terms the job and the payment terms, and allows for notes and defining documents to be attached. It has some boilerplate fine print that we mostly never change. They’re just word documents that I update for each job. If you want I can email you a copy (it may take a day or two, I won’t be in my office again until Wednesday or Thursday).

Make sure any contract you use spells out not only the job itself, and the exact deliverables, but also any follow-up services, testing, warranty, etc. We fix bugs for 30 or 90 days, depending on the product, and then charge for anything after that. Phone support is free for the same 30 or 90 days, then billed at regular rates.

If you’re looking at contracting long term, consider incorporating. It’s pretty simple, and has some advantages, especially a sub-s corp. Talk to your tax guy about this, they’re the expert and can make the whole process very painless.

If it were me, I’d go for the cobra at least for a few months. Insurance for one person is expensive!

Good luck!

Ugly

Bumba, one alternative is to use an “employer of record” service. They take a small cut and set you up like a corporation. Then your “coporation” handles all of the billing / payroll / expenses / benefits / 401k, etc. They also provide “indemnification insurance” (important, many employers require this from contractors, you’re insured in case the system blows up on your watch).

E-mail me and I can point you to the folks I use (full disclosure, I get referral incentives). Also, they have lots of good info on their web site about working as an independent contractor.

Contracting is great, you can make a lot of money, and it sounds like the assignment will not be too short-term. Remember that you will have to file “estimated tax” with the IRS every quarter. (I forget the name of the form, it’s been a while since I’ve contracted, but you can look it up on IRS website.) And like RKJUgly said, make sure you don’t underbid for the job, especially since you ARE the ONLY person who can do it. Remember that whatever your pay rate might be, YOU will be responsible for health insurance, vacation time, etc., so make sure you get paid enough. You can explain all this to your employer during negotiations. Good luck!

I have done some contract work and might start looking to do some more soon. One of the hardest parts which it seems that you are also having trouble with is coming up with a rate and justifying it. Here is a method that was recommended to me be people that have done lots of contracting jobs.

Take the annual salary that you would (did) get as any employee for the same job. Say it is $60,000. Take that and roughly double it (go a little lower but not too much). 85% over sounds like a good number.

So we have 185% of $60,000 = $111,000 per year as the target.

There are about 2000 hours in the contracting year so your new and improved rate is: $56 per hour which is very competitive or maybe even a little inexpensive in the contracting business.

You will be making a little less than double what you were but remember that your new taxes are going to be killer not to mention the fact that you will have no health insurance, 401K or other benefits. You deserve to be compensated for all of that plus some for the insecurity associated with contracting. You should make out well financially if yu do it right.

I agree that $50 per hour is the lower limit for a fair contract versus the ass rape of someone that is being taken advantage of. Don’t go lower than that because it indicates that neither you nor the company should respect your work.

Well, it’s been an interesting day.

The phone rang at 8:00 this morning. It seems that the AS/400 missed me and decided to quit talking to everybody sometime last night. :smiley:
Seriously, the dept head, the guy who laid me off, was in the computer room yesterday after I left and pushed the wrong buttons. I had to go in and answer a couple of messages in the QSYSOPR queue, and ended up staying for 4 hours explaining some things to them, for which they will pay. :wink:

I guess I’m a lock for the contract. Unfortunately, it’s not as much money as I’d like. The competition around here is brutal right now, and they had some lowball offers from other people. And did I mention that they aren’t the most rational folks? There’s a lot of egos and politics, not to mention plain ol’ backstabbing going on. One of the bids was from the golfing buddy of the plant manager, and I had to underbid her. So I’m a little embarrassed, but it’s over $50.00. And I’m thinking 4 months of solid work. Possibly more.

Also, when I got home just now I had two phone messages from a good friend asking me to e-mail my resume for his boss to see. This is at one of the best places to work in the area, so I’m a little pumped right now. Maybe nothing will come of it, but I feel much better, for the moment.

Now I need to come up with a contract, so Ugly, I’d like to take you up on your very kind offer. I believe my e-mail addy is still in my profile. Thanks a lot.

Icarus, that’s a good idea, but my wife and I already have a corporation set up (long story), so we’ll just run it through that.

ratatoskK, You’re right, I am the only person who can do it, but they don’t seem to understand that.

Shagnasty, I’d be surprised if they did respect my work, they never have before.

I sincerely want to thank all you folks for taking the time to respond to this thread and for your advice and encouragement.

Now I need to go fluff up my resume.

You guys rock!

Bumbazine, I am a former programmer in both RPG and Progress. These days, I supervise programmers, in-house and contract.

Not sure what the rates are in Orygun, but around here (New York area), $50 sounds low to medium. We pay a little less to direct consultants than to consultants that come through an agency (makes no sense, I know). If the assignment is really short-term (weeks), the rate goes up. Are you locking in a timeframe, or is this hourly until they don’t need you?

One very weird thing about consultants in some offices is that management takes them more seriously than they do employees. If they knew you before, I wouldn’t count on this, but I’m pointing this out in case you’re thinking about staying a consultant after this gig.

If you really want the consultant lifestyle, you need to price yourself to cover the downtime. To me, the main benefits are that you can deduct a lot of things as business expenses, and that you can pretty much name your vacation schedule.

Finally, I would encourage you to learn a newer language. There’s nothing wrong with RPG, but it isn’t sexy anymore. Niche languages like Progress can be profitable, but expect a lot of travel.

Anyway, best of luck. Hope this helps.

TLB

Thanks Bob. A year ago $50 would have been low around here, but two of their bids, (I heard), were for $45. (I have spies everywhere!) Oregon has the highest unemployment in the country right now and those consultants out there are hungry!

So I allowed myself to be talked down to $50 because:
a) I have a lot of friends still at the company and I don’t want them to get screwed over,
b) being project lead on a conversion will look cool on my resume,
c) I feel it is my duty to fight evil wherever I see it,
d) I can make as much in 3 days as I’ll get from unemployment for a month,
and,
e) I really suck at negotiating.

If I do any more contracting after this, my rates will definitely go up. Mostly I’m looking on this as a way to make some okay money while I look for a regular job. I’m just not cut out to be a consultant. I have a terrible memory and have enough trouble remembering what one company’s software is doing, much less a bunch of clients’ stuff.

To answer your question, this is hourly until they can fly on their own. I expect it to take 3 or 4 months.

I’ve thought about learning some other language(s), but I’ve been doing RPG for 24 years now, I’m damn good at it, and I don’t have all that long 'til retirement, so I think I’d rather find that ‘last job’ that I can retire from gracefully, if you take my meaning.

Thanks for your comments.

Bumbazine You’ve got mail. I’m finally in the office, and sent a couple of docs your way.

Hope they help! Good luck on the job.

Ugly

Oh, one more thing. This isn’t a tip, but a story you might appreciate.

A while back I did some work for a local police department. I was talking about having to change some things in RPG. The conversation went on for a while before the lieutenant said “…okay, I figured out that you’re not talking about rocket-propelled grenades, but…”