If you have limited experience hiring proposal consultants and are wondering how they charge for their services as they help you develop your winning proposal or are curious if there are better ways to negotiate and work with consultants, read on.
Some proposal consultants charge by the hour. Most capture and proposal consultants charge strictly by the hour. This means that if they work only one hour a day, they will charge you only for that hour. If, on the other hand, they work 14 hours a day, they will be paid for the 14 hours, unlike exempt employees of the company who are paid 8 hours a day no matter how long they work. Many consultants in this profession prefer to work this way because they come from a business environment in which they are used to working 80 hours a week and being paid 40 hours.
Recruitment and proposal consultants who charge flat rates. Other capture and proposal consultants will establish a flat daily rate generally based on cost of 8, or more commonly, 10 hours of your work. This is what you will pay them no matter how many or how many hours they put in. You may want to set limits on the minimum number of hours worked. For example, you can set a minimum of 6 hours worked to count for a full day, so that you don’t end up paying a full day rate for half a work day. If the consultant has that fixed rate for the day, it is also advantageous for you to enter increments for the day. You can negotiate for them to divide that day in half if they worked less than 6 hours, or even charge you a quarter of a day if they worked less than 2 hours.
Some long-term consultants will agree to a weekly maximum of hours that they can charge and will stick to that maximum regardless of workload. For example, they can agree not to exceed 70 hours per week, even if they do not have a fixed daily rate. This helps you control the budget for the proposal, but some consultants, if the task requires 14-hour shifts without weekends (since you are under-staffed in your effort), they may not agree with this approach.
Success rate for winning proposals. Then there is the trade-off of the success fee. This approach can work in two ways.
1. One way, which is ideal for a startup that has limited money, is to get a consultant to agree to work for free. In this approach, the consultant assumes all risk. If the contract is won, the consultant receives a substantial success rate. If the contract is lost, the consultant gets nothing. This type of compensation is an entrepreneur’s dream. There are too many variables in this approach that a consultant cannot directly affect, especially if they are not involved in months and months of positioning prior to the necessary proposal called capture.
The consultant also runs the risk of not seeing the money until the award. Even corporations now take their time to make decisions, but the situation is worse with government contracts. Some government agencies can take months or years to make a decision on the concession, and this decision can be the subject of protests to begin with, generating a reward. Just think or look for the Northrop Grumman Air Tanker Award and the recent TSA ITIP contract direct selection protest, and you’ll know what I mean.
Another risk that the consultant assumes is that the management of the company, once the contract is won, may find a way not to pay them because the people who made the commitments have been replaced by others, or the established legal agreements are difficult to do. enforce. . The earnings expected by the consultants can also be reduced because the client can reduce the scope of work, thus reducing the total amount of the award, or divide the contract into option years, where the next award of the option is not guaranteed. There are also aspects of the success fee for winning government contracts that are prohibited by the Federal Procurement Regulations (FAR).
These days, no one has heard of proposal consultants agreeing to work for a success fee. I am often approached by entrepreneurs suggesting that we work this way, and I simply explain exactly what the risks are to me. Once they understand, they realize that there is no way to structure a win-win relationship using this approach.
2. Another way to do the fees for success is to implement a combined approach, similar to the way lobbyists are paid. In this way, a consultant is paid a discounted rate per hour, per day, or per week for the hours. Then when the project is awarded, the consultant gets a success rate that is substantially higher than what they would have earned by charging their full fee. It is less expensive for the company up front and it is less risky for the consultant. There are some people in the proposal industry who will agree to work this way.
Fixed fee for proposal work. Some companies are looking to negotiate a fixed fee for the effort of the proposal. As with all fixed fee contracts, the key for the consultant is to estimate accurately and generate sufficient margin for contingencies. Companies are unwilling to include a contingency margin, because this approach is intended to save them money in the first place. For a consultant, this is a risky proposal, especially in government proposals, where deadlines are extended all the time and requirements are changed in the middle of the process of preparing a proposal. I have not heard of a fixed fee consultant, although many companies tend to see it as a viable option.
Package prices for proposals. One variable in a fixed fee approach is package price, which could be structured in a way that takes both budget and risk issues into account, and tends to cap certain charges that can get out of control. Some proposal houses offer this option when they have many established processes and templates aimed at streamlining many time-consuming tasks, have salaried staff, and can accurately estimate effort and renegotiate if deadlines are extended.
Other pricing models. There are also specific business models that some proposal houses use to receive payments that may involve working as a team with the company not only for the capture and proposal work, but also for the execution of the project if the proposal is won. There is also a retention fee approach that works much better for capture than proposal work.
Each method of paying consultants has its advantages and disadvantages and associated management techniques that I will discuss in later posts.