When I was with what is now called Accenture (which was then Arthur Andersens) our Managing Partner was adamant that if a project went over budget we had to ask the client for additional funds. Woe betide any manager who failed to get those additional funds.
Some years later when I had left Andersens and was Head of Strategy for a bank, I employed my former firm to do an IT strategy on a fixed price contract. We really mucked them about going through three Sponsors during the project. I calculated that it had cost them three times their fixed quote, so I got approval to pay them another $100,000 on top of their fixed price. But I was only going to give it to them if they asked.
So, in came the Managing Partner (who had been supervising the project) for THE conversation. The conversation moved close to the question and then veered away. This happened four times and the question was never asked — so I kept the money and was amused that the Managing Partner himself could not ask for more funds after all the times he had berated us to do so!
But it raises the question, when should you pay your consultants more and when should you refuse to pay them?
Underestimation If the consultants under-estimate the job then that’s their problem.
However, if this situation is going to put them out of business and you need their ongoing support, then you should act sensibly and commercially.
Client caused delays If you cause the delays and problems, then you should pay extra to cover the extra costs you have caused them to incur. Regardless of the terms of the contract this is both ethical and fair.
Unjustified charges However, if you keep getting unjustified extra consultancy charges that are out of proportion to the perceived effort and workload, then you need to take a stand.
Before they get the job the consultancy is often very careful in it’s pricing. After it has got the job it may try to leverage up the price. You need to manage this situation by calling in the consultants and getting them to justify IN DETAIL any and every extra charge. They’ll quickly find the cost of detailed justification outweighs any possible financial benefits of extra (or over) charging.
Another version of this overcharging is low productivity. Consultants are expensive and therefore should perform better than other staff. If they’re goofing off, having long coffee breaks, disappearing for hours around lunchtime, etc, refuse to pay for that time. It will cause them to very quickly sharpen up their act.
Uncommissioned jobs If they charge you for things you didn’t ask for — don’t pay.
But here you must have a clear process for ‘asking’ for work, as you can’t suddenly change the rules mid-term. If you’ve asked for it, however informally, then you should pay. If they don’t give you what you asked for, refuse to accept it or pay for it.
Partner costs Consulting partners have a habit of arbitrarily allocating their time to projects under their supervision in order to reach their required ‘consulting’ hours. Their costs can be substantial for little time. So, if you haven’t seen the partner for a while but their time is being charged to your project, challenge them to justify what they’ve done and what value they’ve delivered to you and your assignment. Assess if their claimed time and contribution is worth the fees being charged. Adjust their fees accordingly.
Working in your favour here is the consultant project manager who hates having the partner’s costs assigned to their project as it eats up too much of the budget. If you have a quiet word with the consultant project manager questioning the partner fees they’ll usually take the necessary action!
Remember you are the client and, therefore, you are in charge. Don’t put the consultants on any form of pedestal, whoever they are. Manage them and your costs.
If, as the client, you’ve asked for it, caused it or are in anyway responsible for it, you should pay even above a fixed price.
If the consultants have mucked-up, under-quoted, under-performed, been unproductive and overrun, then that’s their problem.
And, if the consultants are charging what appear to be unreasonable fees (even if they are allowed for in the contract), challenge them, make any possibility of sloppy or over-charging too dangerous for them. When they’re being watched closely they take more care with their invoicing.
If in dispute, pay what is not dispute and hold the rest until the dispute is resolved.
And, if they have under performed on the job — don’t use them again otherwise you’ll only encourage continued poor performance at your expense.