We are a professional services organization within a software product
company.  Our products are all large scale applications in the electronic
payments field.  Every implementation is heavily customized to suit the
business needs of the client.  We are having internal discussions on
what activities should or should not be billed to the customer; mostly
surrounding project management but the discussion extends to all PS
staff as well. 

For example, our delivery methodology specifies that we have weekly
meetings with our senior management to review the status of projects. 
Project Managers prepare for and conduct a portion of the senior
review.  Should that PM time be logged against the customer project
and billed to the customer? 

Another example:  PMs spend time preparing invoices, addressing
billing questions, entering/checking/verifying/editing data in our
Oracle financial and project accounting systems.  Do other companies
bill the customer for this administrative time logged by PMs? 

Another example:  Since our applications are customized for every
implementation, there are inevitably software bugs.  Those software
bugs lead to internal review meetings, delays in delivery, and rework.
Although we would not bill for rework, should the time the PM spends
coordinating all the internal activities be charged to the customer? 

One last example:  our delivery methodology calls out specific
activities & deliverables such as Quality Gates, Quality Audits, Post
Mortem analysis, Executive Review sessions with customer execs,
weekly status reports and many more.  Where do other companies
draw the line between when an activity is billed to a customer because
it is part of the customer project, and when the activity is not billed
because it is an internal action that the company elects to perform that
is only tangentially part of the customer project?

This may seem like a simple question but it is really quite complicated. 
We are finding that making the transition from a pure software vendor
(our old model) to a services company (the new model) is not that
easy.  Maybe you have experienced the same thing. 

People are lining up on both sides of the aisle.  On one side are the
people who think we should bill every hour of time that we think about,
do something about, talk about or work on a project.  On the other side
are those who think that some of the things we do are driven by our
own internal desire for process, methodology and data, and, if an
activity is internally driven, we should not bill the customer as it is a
‘cost of doing business’. 

I’d be interested in any opinions or examples you have on the topic.

Thanks.