eLearning Developer

Troublesome Contractor Case Study

Recently I retained the services of a freelance Flash eLearning developer. After checking out two references and receiving a sample of work, I engaged this person on a short-term scope of work (SOW). During our conversations I mentioned that I pay my contractors quickly because that is the best way to retain good people. After working with this contractor for a few weeks, it became apparent that he simply was not going to work out. Despite the adequate work sample and glowing references, he simply was too slow and the quality of his work was sub-par.

This contractor submitted a total of 3 invoices – the first two of which were processed within a week upon receiving them. The final payment took slightly longer to process (two weeks). Knowing that that he was not going to receive additional work and frustrated that he was not net paid for his final invoice, he performed the following actions:

• Downloaded all of the project files (including those for projects he was not assigned
• Threatened in email to call the client (with which he had no previous direct contact) and place a “lien” on the project if he was not paid within 4 business days.

This unusual approach to collections was most unexpected, especially since the facts were…

1. His invoice was barely 2 weeks old
2. The invoice did not include a due date
3. The invoice did not include an amount (just hours worked)
4. The invoice did not include late payment penalty terms
5. The invoice did not include an invoice number
6. Our contract included an arbitration clause stating that disagreements must go through arbitration

Lessons Learned

I have worked with dozens of contractors over the years. I have never heard of a contractor threatening extreme measures to require payment on an invoice like the above. Clearly this person lacked even the most basic business skills like invoice writing, accounts receivable collections, basic professional decency, etc. Looking back, there were warning signs that this contractor lacked professionalism at best, and potentially unreasonable and unstable at worst. Following are some valuable lessons that I learned and share with you now so that you may avoid the problems I encountered.

• Checking References: Be sure to receive references from people who worked with the contractor in the same capacity as you wish to. For example, be sure that you do not receive references simply from work colleagues who may be biased for this person or actually hoping to push him or her out of the company.
• Confirm Professional and Experienced Freelancer: Ensure that the contractor has experience functioning as such. Confirm that s/he has a Federal EIN and operates at a minimum under an LLC, and require references from other independent companies that have retained this person.
• Clearly Define Payment Terms: Avoid making statements like, “we pay quickly”. Instead, state that all invoices will be paid according to NET 30 or whatever your terms may be.
• Control Access to Files: Only allow contractors access to those files that they require to do their work. Do not allow unfettered access to project files.
• Don’t ignore warning signs: If you receive an invoice that lacks even the most basic elements (total amount due, due date, invoice number, etc.), that is a  sign that this person may not have the fundamental business skills necessary to operate a healthy freelance operation. This contractor also had sent email from another employer’s email domain. While I immediately advised him that this was not appropriate, the fact that this had to be pointed out to him was another warning sign. Listen to your gut instincts and avoid problems before they start.
• Don’t debate or argue with an unstable person: If a contractor is not going to work out for any reason, the best course of action is to pay out the scope of work as quickly as possible, limit access to all FTP and other electronic resources, and do not engage in debate around the merit (or lack there of) of any threats the vendor may make. I tried to explain to this person that he had no right to contact the client. I clearly laid out the facts and described why his course of action was inappropriate and unfounded. He was not interested in facts and did not back down from his threat to call the client if his terms were not satisfied. You know what they say, “Don’t engage in a battle of wits with an unarmed man.”
• Involve legal council immediately when threatened: Be sure to have your legal council size up any threat you may receive and type up a response indicating your legal position and the action you will take should the former contractor attempt to damage your relationship with your client or otherwise materially harm your organization.

Hopefully the tips above will help you avoid the problem I experienced. Giving this contractor the benefit of the doubt, I don’t believe he intended to cause so much trouble. He just felt he deserved to be paid immediately upon submitting his final invoice and was worried needlessly that he may not receive his final payment. Still – his fears were unfounded and his actions were bizarre and indefensible. Rather than protract the issue, I ensured him that the payment was indeed processed and cautioned him against contacting the primary customer. I am grateful for the education I have received here – although it was not an enjoyable experience

Other Resources:

Writing up Independent Contractor Agreements

So how much does it cost to hire an outside eLearning company? It depends. There are many different kinds of eLearning companies. There are large content development companies that have substantial staffing and associated overhead to cover, a panoply of “one-man-band” eLearning companies run out of garages around the world, and mid-range “boutique” companies that offer competitive pricing due to low overhead, but that have adequate resources and experience to tackle a wide range of projects. The hourly rates a company may charge is largely dictated based on several key factors:

• Fixed Bid vs. Hourly Costs
• Large brick and mortar vs. Virtual companies
• US-based vs. India or “off-shore”

Fixed Bid vs. Hourly Costs

Many companies will not disclose the actual time and tasks that make up an eLearning development project (fixed bid). While a fixed bid ensures that the vendor cannot go over budget, a conflict is created whereby the vendor’s goal is to keep costs and scope as low as possible, even though the client may discover down the line that it wishes to increase the project complexity. The answer to evolving client needs is often “That’s out of scope so it will cost you more”. This can be frustrating. Whenever possible, work with vendors that offer development programs based on actual work effort. Estimates should be given based on a solid understanding of client expectations, and every effort should be made to come in on time and budget.

Large brick and mortar vs. Virtual companies

There are several large US-based eLearning companies that charge higher hourly or fixed bid project rates because they have a large full-time staff overhead to cover. If a company is not working at 100% capacity, they have to charge hire hourly rates to cover their ongoing costs. For example, even though they may have costs of $40 per hour for an instructional designer, this designer may not be working at 100% efficiency on paid projects. Therefore, the firm may have to charge and extra 15% or more on this person’s time. On the other hand, many one-man-band or small companies essentially hire freelance talent to work on projects on an as-needed basis. While they may charge lower rates, their quality and ability to meet deadlines is suspect.

US-based vs. India or “off-shore”

Many off-shore companies will claim rates of $18-$25 dollars US for eLearning development. Many India-based eLearning development companies are actually quite talented, but low hourly rates do not tell the whole story. While the hourly rates may be low, the actual project costs can end up being much larger as a result of several factors:

• It is not uncommon for any firm that has a signficant time and cultural difference from you to take 3-4 times the number of hours to produce the work you desire. This is not an India-specific issue, but a global fact of doing business.
• Significant time, cultural, and language differences should not be under estimated. These factors remain considerable impedances to eLearning project management including time, cost, and quality.

When comparing eLearning companies, check their portfolio of work and confirm with satisfied clients that the project came in on-time, on-budget, and with minimal frustration.