# Custom Client Exception — Deal Economics Assessment ## 1. Executive Decision HOLD — INSUFFICIENT EVIDENCE The client requests exclusive features under a two-year contract worth $360,000, without a customization fee. The known implementation cost is $27,000. The request also creates 480 maintenance hours over the contract term. Only two engineers are available. The deal may satisfy the required 55% contribution margin, but existing delivery costs, maintenance labor rates, and available engineering capacity are unknown. Recommendation: Do not approve exclusivity or commit to delivery until the full margin calculation, capacity assessment, and contractual boundaries are established. ## 2. Exception Cost Model Two-year contract revenue # $360,000 Confirmed implementation cost # $27,000 Maintenance commitment ## 480 hours Required contribution margin ## 55% | Cost component | Frequency | Quantity / driver | Cost | Evidence | | -------------------- | --------- | ---------------------- | ---------- | --------------- | | Custom engineering | One-time | 300 h × $90 | $27,000 | Confirmed input | | Maintenance | Monthly | 20 h × 24 months | 480 × rate | Rate unknown | | Additional support | Unknown | No service estimates | Unknown | Unknown | | Other delivery costs | Unknown | Standard service costs | Unknown | Unknown | Assuming the $90 engineering rate also applies to maintenance, maintenance costs $43,200 over two years. Combined identifiable costs become $70,200. This assumption must be validated. ### Economic comparison | Metric | Standard offering | Proposed exception | Incremental difference | | ---------------------- | ----------------- | ------------------ | ---------------------- | | Net revenue | Unknown | $360,000 stated | Unknown | | Implementation cost | Unknown | $27,000 | Unknown | | Maintenance cost | Unknown | $43,200 assumed | Unknown | | Other delivery/support | Unknown | Unknown | Unknown | | Contribution | Unknown | Not established | Unknown | | Contribution margin | Unknown | Not established | Unknown | Under the illustrative maintenance rate, identifiable costs represent 19.5% of revenue. The remaining 80.5% is not a verified contribution margin because standard delivery, infrastructure, and support costs are missing. At a 55% contribution-margin target, the maximum permitted attributable cost is $162,000 over two years. After the illustrative $70,200 cost, only $91,800 remains for all other attributable delivery and service costs. The financial approval condition is: \\[ B+27{,}000+480r\leq162{,}000 \\] Where \\(B\\) represents other non-overlapping attributable deal costs and \\(r\\) is the loaded maintenance hourly rate. ## 3. Margin Leakage & Support Exposure | Finding | Evidence | Consequence | Recommended control | | ---------------------------- | ------------------------------ | ------------------------------------------------------ | ---------------------------------------------------- | | Unpriced customization | No customization fee | $27,000 implementation cost without dedicated recovery | Negotiate implementation fee | | Recurring maintenance | 20 hours monthly | Persistent operating burden | Cap included hours and price excess work | | Exclusive functionality | Client-specific feature demand | Potential upgrade and compatibility burden | Define scope, exclusivity period, and change control | | Limited engineering capacity | Two engineers available | Delivery delays or displaced roadmap work | Require capacity approval | The first two obligations are evidenced. Future upgrade work, additional support, and opportunity costs are potential exposures, not established losses. ## 4. Scalability Assessment Current classification: CUSTOMER-SPECIFIC, with repeatability unresolved. Exclusivity may prevent reuse of the capability across customers. The arrangement also reserves ongoing maintenance capacity for one account. The identified workload totals 780 hours over two years: 300 implementation hours plus 480 maintenance hours. The available productive hours of the two engineers have not been supplied. A scalable version would require configuration-driven functionality, reusable components, an explicit ownership model, and bounded support commitments. Actual reuse cannot be claimed without technical evidence. ## 5. Commercial Options | Option | Economic impact | Delivery/support impact | Recommendation | | ------------------------------ | ------------------------------------------------- | -------------------------------- | --------------------- | | Accept unchanged | Unpriced implementation and recurring maintenance | Open capacity questions | Do not approve yet | | Charge customization fee | Recovers some or all additional costs | Same implementation workload | Preferred negotiation | | Increase recurring price | Funds ongoing maintenance | Improves support sustainability | Evaluate | | Restrict exclusivity and scope | Potentially lowers cost and future obligations | Reduces maintenance exposure | Preferred safeguard | | Standardize functionality | May improve future reuse | Requires product assessment | Conditional | | Decline exception | Avoids bespoke obligations | May affect customer relationship | Fallback | A $27,000 customization fee would recover the stated implementation cost, assuming no additional costs. It would not automatically achieve a 55% contribution margin. The minimum incremental fee needed to achieve the overall target, assuming no added costs caused by charging the fee, is: \\[ F\_{\min}=\max\left(0,\frac{B+27{,}000+480r}{0.45}-360{,}000\right) \\] The required fee cannot be finalized until \\(B\\) and \\(r\\) are verified. ## 6. Decision Conditions & Evidence Gaps Approval requires four conditions: - Finance validates the full two-year contribution model, including standard delivery costs and the maintenance labor rate. - Engineering demonstrates capacity to deliver the 300-hour implementation and sustain 20 monthly maintenance hours. - Commercial and legal functions define exclusivity rights, duration, acceptance criteria, service boundaries, and paid change requests. - The commercial owner establishes whether the customer would accept the standard product without the exception. The critical unknowns are the baseline economics, maintenance rate, remaining engineer capacity, and client's willingness to renegotiate. These determine whether the correct final treatment is approval with conditions, repricing, redesign, or rejection. ## 7. Prioritized Action Plan 1\. Validate complete deal profitability Owner function: Finance Produce a documented 24-month cost model. Complete when the 55% margin can be tested using supported inputs. 2\. Verify implementation and maintenance capacity Owner function: Engineering Produce an engineer allocation and maintenance ownership plan. Complete when feasibility and conflicts with existing commitments are established. 3\. Prepare revised commercial terms Owner functions: Sales and Legal Prepare a priced, scoped alternative with bounded exclusivity and support. Complete when terms are ready for customer negotiation and internal approval. Final commercial recommendation: Hold approval of the proposed free exclusivity arrangement and negotiate a bounded, explicitly priced customization package once full deal economics and engineering capacity are verified.