Procurement perspectives: justifying consultancy fees

| 0 Comments

StephenBauld_100.jpgBy Stephen Bauld

One might wonder why, as a consultant for over a decade, I would write about overpriced consultants. Being in this industry, I often hear stories about the high costs incurred when securing consulting services; these stories are widespread and frequent.

Indeed, it is surprising how many consultants are so sensitive to this issue. So much so that they actually make a point of declaring in their advertising material that "we are not going to charge you outrageous fees". Much of the adverse newspaper commentary in relation to the cost of consultants to government is exaggerated.

Firstly, the rates charged by consultants vary widely. Some consultants may charge as little as $500 to $1 000 per day. Conversely, a highly-specialised, internationally-recognised consultant may charge 10 or 20 times this amount.

On a large project, such as retaining a consultancy firm to assist with restructuring staff and salaries following an amalgamation of three cities, the consultancy costs could be well over $1 000 000. It would be hard to describe the first consultant cost as "outrageous" by any standard. Whether or not the second might seem high would depend on the range of services rendered.

Secondly, although consulting fees are relatively high compared to prevailing hourly rates for general labour, this is not a fair comparator to use when considering such rates. The high prices that consultants allegedly charge need to be considered from a proper perspective. No consultant takes home anywhere close to the hourly rate that they are likely to bill. A senior consultant with a PhD-level qualification in a scientific field, and who is recognised as a leading authority within their province of residence, is a highly-qualified professional with a great deal of specialist knowledge. At the very least, they might reasonably expect to earn an income at least on par with a senior lawyer in government practice. Even so, there is no doubt that there is a good deal of legitimacy in the widely expressed belief that payments made to consultants seem more than occasionally to be very high.

Too often the buyer responsible for a consultancy contract simply processes invoices as they are submitted, applying no further test than whether the work claimed appears to be within the scope of the contract. The review of billing (as well as the underlying work) needs to be more rigorous than this. Ideally, the payment process should involve an assessment by the ordering department as well as the purchasing department to verify whether the municipality is receiving value for money.

At one time, consultants were retained only to provide highly-specialised services. In the age of widespread downsizing, consultants are now employed to deliver many services that municipalities previously obtained on an in-house basis. Sadly, the elimination of internal expertise does not remove the need for expertise.

It would be unwise to cap rates at unrealistic (i.e. below market) levels. Generally, consultancy costs reflect market conditions. Rates of several hundreds of dollars an hour are now quite common in Ontario for consultants of all kinds. These rates should not be compared to the salaries of in-house staff.

They also include office costs, secretarial costs, telephone and office equipment-related costs and many other costs that the consultancy firm must pay. Major consulting firms almost always operate out of Class A office accommodation, which costs far more than the type of office facilities generally provided to the public service.

Another option which municipalities may wish to consider is creating a co-operative consultancy firm of some kind, owned and operated by a number of municipalities on a collective basis. This would be to perform work that is beyond the normal expertise of in-house professionals but which could be delivered through some sort of controlled arrangement across a number of municipalities.

Stephen Bauld is a government procurement expert. He can be reached at swbauld@purchasingci.com.

Daily Commercial News

Leave a comment


 

 

Career opportunites

GROUP PROCUREMENT MANAGER

  • Gauteng Permanent Procurement Management Supplier / Business Development
Operating out of Johannesburg, this is a key

Tutor and Coordinator

  • Gauteng Operations, Planning & Inventory Permanent Procurement Management Supplier / Business Development
Purpose of the job: To plan, coach, advise

Commodity Manager

  • <500 000 Commodities Gauteng Procurement Management
Are you a Commodity Manager looking for the

Supply Chain Professional

  • <500 000 Gauteng Procurement Management Supply Chain
I specialize in placing professionals in the Supply

Supply Planning

  • <500 000 Gauteng Operations, Planning & Inventory Supply Chain
Seeking dynamic candidates to take to the market

Industrial Engineer

  • <500 000 Gauteng Industrial Engineer Procurement Consultant
Are you an Industrial Engineer looking to make

Logistics Manager

  • >500 000 Gauteng Logistics & Warehousing Supply Chain
Seeking vibrant industry specific individuals seeking new opportunities

Operations Manager

  • <500 000 Gauteng Operations, Planning & Inventory Procurement Management
Looking for an Operations Manager to take into

Supply Chain Systems Administrator

  • >500 000 Gauteng Procurement Management Strategic Sourcing Supply Chain
One of South Africa's leading, mining companies is

Logistics Manager

  • <500 000 Gauteng Logistics & Warehousing Procurement Management
Are you an experienced Logistics Manager looking for

Continuous Improvement Manager

  • >500 000 Gauteng Procurement Management Supply Chain
I specialize in placing professionals in the Supply

Warehouse Assistant

  • <500 000 Gauteng Logistics & Warehousing Operations, Planning & Inventory
I am currently looking for ambitious Demand Planner,

Internal Procurement Officer

  • <500 000 Gauteng Permanent Procurement Officer / Specialist Strategic Sourcing
Position Available: Internal Procurement Officer Status : New ...More

Supply Chain Officer

  • <500 000 Gauteng Procurement Officer / Specialist Supply Chain
Seeking dynamic candidates to take to the market

Supply Chain Planner

  • <500 000 Free State Operations, Planning & Inventory Supply Chain
Seeking dynamic candidates to take to the market

Senior Buyer

  • >500 000 Buyer Gauteng Procurement Management
Tech-Pro specialises in placing professionals in the Supply

Industrial Engineer

  • <500 000 Gauteng Industrial Engineer
Tech-Pro specialises in placing professionals in the Supply

Warehouse Manager

  • >500 000 Gauteng Logistics & Warehousing Operations, Planning & Inventory Supply Chain
Seeking hands on individuals that come from an

Manufacturing Purchasing Specialist

  • >500 000 Procurement Officer / Specialist Supply Chain Western Cape
A leading auto manufacture company based in Cape

Procurement Sourcing Specialist

  • <500 000 Gauteng Procurement Consultant Strategic Sourcing
A Leader in the Supply Chain industry is