I need four resources for a paper on the issue of padding and/or
over-billing. What would be perfect is something that addresses
softare development specifically but if it ends up being lawyers or
mechanics or whatever that's ok. The perfect sources would contain
examples or case studies but this is not critical. I am argueing that
hourly billing in industries (like software) are prone to abuse
because the manager or client are unable to assess the amount of time
the project should actually take.

If you can't find that angle then just anything dealing with the
negatives of hourly billing will do.

Are you talking about the following scenario?

Software Development Company (SDC) contracts with Client to write
software to perform a specific task or function.  The contract states
that SDC will provide these services at $XXX per hour.  A dispute
arises about the fees charged by SDC.  The Client contends that they
were over charged by the number of hours actually worked by SDC
personnel; i.e., SDC submitted invoices where they overstated the
number of hours actually worked by SDC personnel.

If the above is what you are looking for, it is going to be difficult
to find actual sources.  Based on my experience in Silicon Valley,
most of these complaints are resolved out of court, and, therefore,
not a matter of public record.  Most of the time, the issues involving
SDCs usually involve failure to perform, i.e., the software doesn’t
work!  For example, look at the recent matter involving Oracle and the
State of California.

Hopefully, someone else will know of a case on point involving a
software company.  Otherwise, try calling a few lawyers and
accountants, law or accounting firms, bar associations or CPA
licensing organizations.  You might get lucky.

However, there are many cites regarding over / double billing. 
Usually, this is a basic accounting failure.  For example, the billing
software doesn’t include all of the terms of the contract.  Otherwise,
you are talking about fraud … which is a very difficult matter to
prove.  Try searching findlaw.com using terms, like: fraud,
over-billing, or padding.

Your argument:  The manager or client is unable to assess the amount
of time the project should actually take.

The issue is based on the contract.  Are they billing X hours times $Y
per hour?  Or are they billing a flat rate?  Or are they billing
actual cost, plus Z% for profit.  There are a lot of ways to negotiate
a service contract, but it usually boils down to one of the above.

In my opinion, over-billing, aside from billing software failures,
occurs for other reasons.  For example,

1.	Pressure on service-provider’s personnel (staff) to be billable. 
The more billable hours, the greater the profit.  Therefore, in a
fraudulent situation, the personnel will add billable hours to their
time sheet.

2.	Pressure on the service-provider’s management to be profitable.  In
a fraudulent situation, management will adjust the staff’s hours or
billing rates or the final bill.  (Consider the impact of
"value-billing".)

3.	Financial needs or greed of the Client.  In a fraudulent situation,
the Client’s representative receives an “off-the-books” payment or
other reward for awarding the contract or approving the payment of the
service-provider’s bill.

The above are just a few of my thoughts.  Possibly, not hopefully,
someone will find good resources for your paper!

You are exactly right about the scenario you proposed. And you are
dead-on with your three reasons. First, in full disclosure, I am a
Java contractor and have 7 years in the industry.

My take on it is this- 
The difference lies in the type of development. I’m talking about
outsourced developers that manage day-to-day software development and
maintenance for several clients. It is very similar to the way a law
firm works. Most of the “mini-contracts” are done like this

CLIENT: “Hey can you add x functionality to our system.” 
DEVELOPER “Sure, it will be approximately 5 hours of work.” at x rate.
CLIENT: “Great”
Little do they know it actually took the guy 30 min. to do it. The
manager of the developer will go to the ends of the earth defending
him because he doesn’t know it only took 30 min. either.

I think the law analogy is the way to go. The only reason there isn’t
a huge amount of discussion about this is that the tech industry is so
young and most development is done by people who, unlike lawyers,
don’t have the outright, massive bonus directly proportionate to hours
billed.

Most of the time no one knows except the developer. I think the
factors you raise are dead on but those factors are reactionary, sort
of cya move or a move to get you a promotion. When this new, more
malicious angle is taken, the developer is usually doing it to get
more free time to take on other side contracts or to play games or
sleep, whatever. If this happens by enough developers in a company
then it can become part of the culture. The place I worked three years
ago was like that. I think they have now taken steps to do away with
the process after a few of us complained and quit.

I think I may change this question to be directed more towards the
legal profession because I think the situations are similar and I know
there is a ton of articles about getting rid of hourly billing for
lawyers.

Thanks for your reply!

See my parenthetical comment below:

"2. Pressure on the service-provider’s management to be profitable. 
In
a fraudulent situation, management will adjust the staff’s hours or
billing rates or the final bill.  (Consider the impact of
"value-billing".)"

The legal and accounting professions often use the "value-billing"
method for invoicing.  For example, some lawyers have spent oodles of
hours developing a "pro-forma" commercial lease agreement. They know
that it covers most issues that will arise in negotiations AND it will
meet the requirements of local laws and regulations.  However, they
could not bill the first client for developing the "pro-forma"
agreement. Nor could they ever quantify all of their experience into a
meaningful billing rate.  As a result, it is often easier to quote a
fixed rate, based on the value of the services to be performed.

The above example applies to the preparation of routine tax returns,
financial statements or software code.


As a general rule, many professionals are drafting their engagement
letters (contracts) to state that it will cost $X to perform a
specific service, and add an additional clause that extra work
(research, client requests and changes, etc.) will be billed at $Y per
hour.

Aha!  The additional work is the issue!  Projects are seldom routine. 
Just ask Oracle what happened in their project for California.

Oracle and California could have avoided their problems if the project
had been properly managed, on both sides.  That also includes having
the terms of the engagement in writing and in great detail, including
'change orders'.

I don't think the software industry is at fault for being "young".  I
think the problem relates to the industry's lack of discipline with
respect to the administration of their engagements.  If you walk
through a project with an accounting, legal, or construction firm, the
managers and staff have been trained to watch for problems that will
affect their billings and advising their clients of the consequences.

In your example, 30 minutes billed out at the EQUIVALENT of 5 hours,
is fine as long as there is a written, fixed-fee contract and the
actual invoice does not reflect hours times rate.  The legal and
ethical problem, of course, arises when there is no written contract
and the invoice reflects 5 hours of work.

I'll be interested to see if you get much on the law firms!

PS  I've worked with and researched the "time sheets" and billing
situation and have utilized the "value-billing" method in a number of
industries, including software development.  I don't think that there
is any way to avoid time sheets.  It is a valuable tool for evaluating
staff AND clients.  I greatly prefer budgeting projects with staff
input, having contracts in writing, including "change orders", using
the "value-billing" method for routine work and billing by the hour
for extra work.

You wish to do a Google search for "Clifford Chance" Associates Memo
Padding

It's an interesting story about a recent memo from CC associates who
report the need to bill a minimun number of hours each year - about 50
hours per week from memory

The actual memo was on the www.ft.com/memo site for a while