June 2009

How to Compete for Fees

A challenge for the consultant is quoting fees, especially when you are competing with others.

We are confronted with the old dilemma…

• Low ball the fee based on minimal, but likely insufficient services
• Be realistic in the services actually needed and base the fee accordingly

There are always those who will minimize services, knowing that additional services will be required as the project unfolds. 

Unfortunately, some clients will not realize that scopes of services are not the same between competing proposals and go for the low fee.

How do we deal with this?

First, it is always advisable to meet with the client when delivering the proposal to fully describe the work required.  This is the time to stress each portion of the work and why it’s required.  Then, make sure the client understands the contents of your proposal.  And make sure that you have thoroughly itemized your services so the differences are clear.

A gentle reminder to the client to compare scopes of all proposals is advised.

Even if the client says he is going with the lower one, don’t take this as a final no.  Make a point of asking if the services provided are the same.  Or, alternatively, offer to remove items to be competitive.

A rule of thumb in negotiating fees is to always negotiate scope - not fees.  In other words, don’t lower fees arbitrarily.  Instead, remove scope to effect a fee reduction.

On occasion you are given a definitive scope of services to which you are asked to respond.  In this case, respond to the scope exactly as it is given, then in a separate section list those additional items that you believe are needed.

Also, be sure when you list a scope of services, be sure to list exclusions.  Exclusions are those items you identify as not included.  This may be because you believe the client may assume you are providing them, or they represent significant liability to you.  In the latter case, you want the high liability work to be contracted directly with the client and not as a subcontractor, through you.

Finally, there is the contract provision for additional services.  Always have a line item for “additional services.”  Qualify this by saying, “as requested by the client” and mention they will be performed at standard hourly rates.

By adding this provision you will cover yourself for the inevitable extra requests the client will have.  But always notify the client in writing (email will usually work, but keep a copy) that a particular request is in addition to the scope of work.  If the request is substantial, it may be advisable to provide a specific fee or budget.  This is to avoid unpleasant surprises.

Scope preparation is crucial to your project success.  When in doubt as to client expectations, leave something out of the base scope, but provide it as an option.  It is not unusual for a client to approve only a portion of the work tasks.  Therefore, be sure that each task can stand on its own, or make it clear that certain items are bundled.

Clients can be remarkably unsophisticated or non-attentive in dealing with scopes of services.  It is up to you, the consultant, to be on top of this.