What drives the total cost of a contract
Budget conversations about contractors tend to start and end with the day rate. The day rate matters, but the total cost of a contract depends on several other things, most of which you control:
- Working pattern and duration. Days per week multiplied by weeks gives the contract days. A three-day pattern over sixteen weeks and a five-day pattern over ten buy similar days with very different calendars.
- Onboarding. Every new engineer spends time getting access, environments and context. Those days are paid at the full rate but produce less. Slow access processes are one of the largest hidden costs.
- Handover. Documenting, pairing and transferring ownership take contract days that are not delivery. They are worth paying for; unplanned handover usually costs more.
- Management time. A manager directing and reviewing the work every week has an internal cost.
- Agency or partner margin. If a quote excludes margin, it needs adding before comparing it with a direct quote.
- Tooling and access. Laptops, licences, environments and background checks.
- Responsibility and seniority. A contractor trusted to make architecture decisions, or to work with little direction, changes how much management time and rework you need. This is the main reason two rates are hard to compare directly.
How the model calculates
- Contract days = days per week × weeks.
- Fees = contract days × day rate, with any agency margin added.
- Total cost = fees + manager hours per week × weeks × manager hourly cost + tooling.
- Productive days = contract days − onboarding days × (1 − onboarding productivity) − handover days.
- Cost per productive day = total cost ÷ productive days.
- Overhead share = the lost onboarding value, handover days, management time and tooling as a share of the total.
The model warns when inputs do not add up, for example when onboarding and handover exceed the contract length, or when manager hours are entered without a cost.
Comparing two quotes fairly
Total cost answers “what will we spend?”. Cost per productive day answers “what does each useful day cost?”. When the two point to different quotes, the cheaper total is often simply buying fewer productive days. Neither figure says anything about the quality, seniority or responsibility each quote buys, so read the result alongside your contractor selection checklist.
Illustrative example
Illustrative example using the model’s starting values; no rates are implied. Quote A is three days a week for sixteen weeks: 48 contract days. With five onboarding days at half productivity and three handover days, 42.5 days are productive. Onboarding and handover together take 5.5 day-equivalents, about 11% of the fees, before manager time is counted.
Quote B is five days a week for twelve weeks: 60 contract days, with the same onboarding and two handover days, leaving 55.5 productive days. B buys more productive days, but whether it costs less per productive day depends entirely on the two rates and on the manager time each needs. Enter both, and the model shows which way it falls.
Why there are no market rates here
Published “average day rates” for AI engineers are usually unsourced, out of date or mix very different roles. Using one as a benchmark would make this tool look more authoritative than it is. The only rate the model knows is my own published day rate, which the button fills in on request; for anyone else, use the quotes you actually receive against your brief.
What to do next
If you have not decided whether an individual contractor is the right model, use the engagement comparison. To make your quotes comparable, send every supplier the same brief from the contract brief builder. My own engagement models and rates are set out on engagement models and pricing, and the roles I take on are under contract AI engineering.