How To Protect Yourself When Using Elance Outsourced Software Design:

For Buyers and Providers, Elance is a great online software or web-based project platform. From the Elance website: "Elance instantly matches employers with a ready and qualified workforce of more than 100,000 rated and tested professionals with technical, marketing and business skills, and provides the tools to manage online and pay for results."

Like any other activity on the web, you have to be careful when dealing through the anonymity of the Internet. This web page is intended to help anyone - whether a buyer or provider - who is thinking of using Elance for any type of project. Hopefully it will better prepare you to get the most out of Elance while protecting you from possible unscrupulous buyers and providers.

As a buyer you must understand that providers submit proposals on many projects so yours may be lost in a cloud of proposals. Do not be put off by this - it is quite normal. Just be fair. Ask the questions you need answers for but don't waste their time - it is a two-way street.

The key to a successful project is communication. No matter what the project type, clearly defining scope and sticking to the agreed terms benefits both buyer and provider. Nearly all of the clarification of scope should be done before the project is awarded. The only back-and-forth that happens during a project should be related to getting it done. Of course there is always some scope-creep that comes up during development. If it requires significant extra work, it could be added to a wish list for a phase two of the project or quoted separately as a new line item.

The biggest problem in most projects is defining the basic project requirements and then avoiding/identifying scope-creep. The following points are designed to help buyers from the initial project posting right through to awarding the project. All of these topics are geared to ensure that you are protected against unforeseen expenses and project delays down the road.

The Initial Elance Bidding Process:

Most initial postings on Elance are usually not very detailed. Having said this, you will routinely see vague project descriptions that have received bids! As a rule, the more detailed your project outline is, the better your responses will be.

1. Be clear and detailed about the type and scope of your project.
2. Use the Elance job interview to guide you in creating your post.
3. Inform potential providers that you will be providing a detailed requirements document before bidding closes.
4. You can do a quick scan of bids and filter out the down right silly responses.
5. You can also send invitations to providers to request that they bid on your project. Search through the Elance list of providers and invite any that catch your eye.

Narrowing DownThe Field Of Providers:

You will get a lot of different people initially quoting on your job. No matter what type of job you are advertising, I would send out a short questionnaire to vet each candidate against common points. See my example website pre-questionnaire. If a provider does not reply - they just helped you to trim your list.

1. Be fair - don't send out a 25 question questionnaire for a $75 job. It just wastes everyone's time.
2. Avoid low-ball bids - some candidates will bid very low just to get the job. Do not be fooled! If they are much lower than the average, throw out the lowest bids immediately. This will save you time and grief.
3. Carefully review the provider's profile. Do they look like a good fit for your project? Look at the size of the company, where do their strengths lie, review their samples and read some of their reviews.
4. Pay close attention to the work that they have done in the past six months. How many projects are actually completed? If they have done sixteen projects in the past six months but only three are complete - this could be red flag that they are slow or far too busy to handle your project.
5. Get your providers to quote their hourly rate for the project and then a total number of estimated hours with a detailed breakdown of where the time will be spent. This will help you to compare all candidates side-by-side.
6. Compare the quoted hourly rate against the rate posted in their profile - if they are different ask why. Do not be convinced by excuses like "We really want to work with you" or "This project is very unique". If a provider's quoted rate is lower then their rate posted in their profile - this could be a red flag - they may come back on you later and eventually you will end up paying the full price (or more) at the end of the day.
7. Do some quick math to determine what the average hours-to-do-the-job estimate is and as well as the average hourly rate. This will be a good guide for figuring out which bids are dramatically out of range. Bear in mind that labour rates may differ from one country to another.
8. Based on the provider proposals, questionnaire answers, profile information and your hours and cost averages, create a short list of potential providers. I like to narrow my list down to around five to ten providers.
9. Send each provider on your shortlist a non-disclosure agreement and request that they sign and return it. Elance has provided a nice standard form here. Remind them that you will be providing a detailed requirements document before you award the contract.
10. Create a requirements overview document that will give enough detail for providers to quote on your project but not enough so that you risk losing control of your intellectual property. This is the Internet…
11. Send the requirements overview document to your shortlist (always use the Elance Workroom to post documents) and request that they review it and adjust their proposals if required.

Awarding Your Contract On Elance:

How you arrive at your final decision is up to you but once you received the revised proposals, you should have ample information about your shortlisted candidates to make a reasonable comparison between them all.

1. Create a detailed version of your requirements document that will provide in-depth detail to your chosen provider so they can revise their final proposal if needed. Be aware that this document will be important evidence for you to establish the difference between the base project scope and new project scope. This is especially useful in cases where the provider is requesting that you pay additional amounts to cover what they perceive to be scope-creep. Take the time to carefully describe every detail you can think of and it will save you money over the course of your project. If you cannot do this yourself, consider hiring someone to do it for you. This small step can save you a lot time, money and aggravation.
2. Once you have decided to award your job to an individual provider, let them know that you are interested and send them the detailed requirements document and request that they review it and adjust their proposal accordingly. Ask for an itemized list detailing how the provider determined their price quote. Make sure that the provider addresses each one of your requirements line-by-line. Did their proposal address every single task? They should list each task, here is how we we'll do it, here is what it will cost, this is how long it will take to complete. Remember, the final proposal is a road map, a blueprint, and both provider and buyer should be able to follow it to the letter. The final proposal should include the SRS (Software Requirement Specifications).
3. If the final proposal is satisfactory, you should then prepare your project contract (acceptance agreement). Elance provides a good basic Sample Project Agreement & Statement Of Work. But wait! You should amend this agreement to incorporate all of the requirement details from the in-depth requirements document into the acceptance agreement. List in bullet-point form what you expect after the project is awarded. Also include a clause that stipulates that they understand the requirements and that the price is fixed unless you change the requirements. This may seem like a lot of work but it will avoid any scope-creep repercussions later in the project. If the provider accepts the terms once those requirements are listed out in the notes section or wherever you see fit, it's certainly binding on their end to produce the requested deliverables for the agreed-upon price.
4. When both parties finally sign the acceptance agreement , you are still not done! If you have selected an escrow project, you will need to create exact milestones for each payment. This will allow you to fund work (so your provider knows that the money is on hold) and then release the funds only when the work for that stage is complete. Be very exact and detailed when building your milestones. Describe exactly the work that needs to be designed, built, documented or delivered before you will release the funds for each phase of the project.
5. Many providers request that you pay some money upfront before they go to work. It is up to you but I am not comfortable with this. Nor am I comfortable with having to pay the final payment before the end of the work. Believe it or not - these terms are quite common. If your provider will not compromise you may be back at square one (you should be back at square one).
6. Once you and the provider have accepted the milestones and terms then you can get to work.

So Your Provider Wants More Money...

1. Ask for a full explanation for the change in price.
2. Make sure you know why it's costing more and what you are getting for that increase in price. Are your needs more complex than was originally thought?
3. Be sure your provider is addressing exactly what you need, and provides a detailed explanation of how those needs are going to be met.
4. If anything on the bill was listed in the original requirements document it should be included in your fixed-price contract - do not pay for it. I repeat, do not pay for it!

What To Look Out For During the project:

1. If your team suggests items or features that were not included in your original scope - you should immediately ask: Will this incur an additional cost? And, how much? Do not create or accept any new features without agreeing to a price first.
2. Do not release funds from escrow until the work is completely done! Once you release this money it is very difficult (if not impossible) to get it back.
3. Even if you think something is clearly within your scope it is a good idea to check as you go along.
4. Put everything (decisions, documents, emails) in writing in your workroom.

Red Flags To Look Out For:

1. In a Providers profile
   a. Many jobs in progress and not many complete
   b. Their posted hourly rate is more than what they have quoted you
   c. Many bad reviews
   d. Many jobs completed with few repeats
   e. Tested skills are below average
2. In a proposal
   a. Discounted pricing, hourly rates less than ones posted in profile
   b. Clear misunderstanding of project requirements and scope
   c. Terms that are unacceptable - and non-negotiable
   d. Anything that is forbidden in the Elance terms of service (like offering free or equity exchange services, offering discounts outside of the Elance system and so on)
   e. Low number of hours quoted (less than the average) . This does not nesseccarily mean that they are faster - it probably means that they have not quoted enough time to do the job.
   
3. In general communications
   a. Over simplification of your project with statements like "We understand you requirements fully" just from your initial job posting!
   b. To much or too little communication. Some providers are very busy and are tough to get a reply from. Some are just plain annoying with the non-stop requests that you award them your contract. In either case I would consider moving on.