Tips and Traps

Tips and Traps
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Public servants are sometimes not aware of the fact that consultants normally consider time spent in meetings with the client to be billable . If the contract specifies that a certain number of consulting days (usually taken as 7.5 hours per day) will be spent on the project, then any anticipated meeting time should be taken into account in setting the budget for the project. Top tier firms will not normally bill for time spent travelling to a meeting unless travel occurs during business hours and precludes the consultant from undertaking other work, although air and taxi fares and accommodation are considered to be legitimate expenses to be reimbursed by the client. (Consultants are generally reimbursed at non-SES rates. Unlike some Public Servants, they do not normally receive a daily Travelling Allowance.) Items such as faxes sent to clients, telephone calls , use of couriers and other out-of-pocket expenses are also considered to be expenses that are recoverable from the client. And don’t forget to allow for time spent on project management tasks or the use of materials (printing multiple copies of reports can be expensive). Because practice differs widely between consultants, it is worth checking on each bidder’s charging policy for all of these items. Bidders are likely to be more accommodating if you do so before the selection process begins.
Whether you should expect to pay a fee each time that you deal with a consultant depends to a large extent on your relationship. There are no hard and fast rules, but the following provides some general guidance:
- If you want to test the feasibility of a project and phone a consultant to ‘pick their brains’ in a general way, they will normally treat the enquiry as part of their marketing activity. But the consultant is likely to follow up in a few days to see if you want some work done. So be careful not to raise undue expectations during the first query.
- Frequent calls for (free) opinions to a tax consultant, on the other hand, would probably come to be seen as unwelcome if no work flowed from the queries.
- Asking a consultant for a ‘one page outline’ on how to deal with an issue is likely to be seen in the context of a proposal. A ‘proposal’ comes closer to generating an expectation that work is available. It is worth making clear that you are still only in the stage of considering the possibilities. Except in very large projects, proposals are provided free, although consultants themselves will consider whether it is worth their while preparing them for a specific enquirer. Unless you offer definite work, however, do not expect a full analysis that solves your problem.
- Once you ask a consultant to put together a proper plan (even 3 or 4 pages), you start to cross the line into making serious use of a consultant’s expertise and time and a fee should be expected. Caution is therefore required to avoid entering into a contract (including an implicit, unwritten one) without considering fully the need for a consultant and the need for a tender process.
Some agencies appear to select consultants purely on the basis of quoted cost, apparently avoiding larger firms. Unless all factors, including quality of output, are taken into account, the chance of obtaining value for money, the primary consideration , will be diminished.
Where project outcomes are not entirely certain, or there is some likelihood that the analysis may point to further work, consider allowing for a contingency amount of about 10 to 15 per cent of total project budget. Under the January 2005 CPGs, any expectation of higher cost needs to be acknowledged at the outset in deciding whether a proposal exceeds the $80,000 GST inclusive threshold for covered procurement. Any proposed change in scope of the work involved should be discussed with the probity adviser.
Most consultants try to remain competitive . If consultants refuse to lower their fee in a competitive situation, their quote is likely to be fairly realistic for the proposed level of quality and time spent. If you are still not happy with it, ask an experienced colleague for advice, or even ask another firm (but being careful about commercial confidentiality). (Alternatively, explore the possibility of reducing the scope of the work if budgetary considerations are of concern.) A refusal to accept a lower fee may be an indication of a good consultant who is in demand and can earn that fee elsewhere. And if a consultant does accept a fee that is lower than they wish, they may later cut corners to ensure they do not make a loss.
Government agencies often seek to reduce risk to themselves by seeking a fixed-price contract . However, establishing the price in a reasonably competitive market means that the consultant is likely to insist on keeping strictly to the scope of the work defined in the contract, because there is little margin to adjust without incurring a loss. A client may therefore gain more certainty regarding the final amount to be paid to the consultant, but may bear a commensurately higher risk in terms of output if changes to the scope of the work are found to be required during the project. Because most projects require some adjustment as they proceed, neither side is likely to end up being entirely happy with the final outcome. Potential problems can be reduced, however, by ensuring clarity of requirement in the Request for Tender. Alternatively, provide in the contract for the ability to agree easily on variations (at the same fee) to work specified.
A major area of frustration to consultants is the unavailability of data or personnel promised by clients . The assumption that data are available is likely to be a significant factor in the framing of a bid: collection of original data is usually expensive. If there is any uncertainty about the quality or availability of data, bidders should be invited to inspect it for themselves as part of the tendering process, rather than specifying in request (tender) documentation that data will be made available. Similarly, if bidders were promised a contribution of personnel to help with the project, you need to make sure that they are available at the times when they are needed. If you do not make available data, staff, or other resources promised during the tender process, you should expect to meet any expenses incurred by the consultant in making up the shortfall. Delays are also likely.

Table 3 — Fees and Expenses: Risks and Mitigation

Type of risk	Likely consequence	Mitigation strategy
Fee is too low	Consultant loses incentive to produce quality or timely output Possible request for renegotiation during contract	Fair negotiation of fees, possibly ‘fixed price plus incentives’ version (see above). Request confirmation of fees during briefing sessions after bids are received Agree on method for agreeing variations to contract Periodic review during contract Build 10 to 15 per cent contingency allowance into agency’s budget for the contract
Insufficient provision for expenses	Budget overrun for agency Lower quality output	Request estimate of expenses over life of project as part of the bid Agree that only written variations to contract can result in extra expense Periodic review during contract Build 10 to 15 per cent contingency allowance into agency’s budget for the contract
Fees or expenses too high	Reduced value for money	Encourage competitive bidding Develop strong working relationship with consultant from the outset to encourage fair dealing (and possible refund) Request cost breakdown with all invoices (including record of hours worked)
Blow-out in project expenses	Reduced value for money Budget overrun for agency	Contract should specify that expenses will be acquitted on the basis of receipts An overall cap on expenses is an option to reduce administrative costs

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