We were recently asked by a client to negotiate a fee for some refurbishment work on a domestic property and when we stood our ground, we ran the risk of losing the project work to a cheaper consultancy. We were not worried by this, in fact, it felt good standing our ground and repeating to the client the amount of effort we considered that we needed to put into the project. When the client agreed with the effort, they attacked our hourly rate for the work. They were relentless in attempting to make the job cheaper and cut the costs associated with the professional services element.
So when recently got my car services by a large garage, and I looked at the bill I was shocked to find that a service technician costs more per hour than our normal hourly rate, in fact it was 25% higher. OK, there is overheads they carry, perhaps more than us, there is training to cover, again, perhaps a little more than us as car models change a lot, but would I negotiate the price of the work done on my car if I did not have the knowledge to service it myself.
Why so why would my client expect a discount ?
The expectation to discount fees means that either one of two things happen for a consultant to concede to discounting their services.
- Firstly either the effort put into the project is reduced, spending less time working out the specifics of design, or not working that little bit harder to reduce the beam size resulting in savings for the project.
- The second element may be not be including a printed copy of drawings or design calculations sent to the client, requiring the client to print off copies for builders, planners or for their own records so the scope has change as has the relationship with the client.
We took the view a few months ago that discounting our project costs was a bad idea. Discounting after a price has been submitted to a client devalues the effort we put into the pricing or bidding the work, and can start the relationship with each other off on the wrong foot.
Our pricing is generally based on the hours of work we expect to put into the project for the work to be undertaken and a reasonable hourly rate for professional services we offer. It is set by the local marketplace, our competitors, and the sort of work we undertake.
In 2002, David Maister, a leading coach and mentor for the professional services business wrote about the three things which he considered critical in breaking the barriers associated with the fees clients pay.
- Perception of the value a consultant brings to the project and the demonstration of that value to the client
- Aligning fees with clients expectations from the start on the project, does the client expect a cheap job when a more complex one is required
- Demonstrating fee structures against the work conducted or deliverables issued, is the work to be done in phases so the client does not to spend money upfront or defer payment ?
In considering these three key areas, it is clear that a consultant must listen to the client and structure their proposal to the project and the clients expectations. If this is done correctly then there should be no question of fee discounting or reducing the content or scope.
In the past we have offered significant savings to the clients on the overall costs of projects if time is spent upfront to ensure that the design or process of construction is fully considered. An extra day spent considering the construction sequence for a concrete pour or detailing a steelwork structure to speed its time for assembly will pay dividends when site work commences and there is a potential for delays due to unforeseen issues.