How to Buy Consultancy Services
So, you’ve decided to appoint a consultancy firm to help meet your business needs. Perhaps this is to assist with organisational strategy, with a service review, or maybe your procurement processes. Now it’s time to appoint the right company. Alongside the questions of quality, skill, experience and expertise is that all important bottom-line issue: how much will it cost me?
Or, more importantly, how can I be sure that I am getting value for the money that I am spending?
In this post, Tenet Education Services will give you a run-down of some of the key costing models to look out for when purchasing consultancy, along with some handy advice on how to judge which consultancy firm is the best fit for your organisation.
Costing Models: Do They Add Up?
There are two main cost models typically used in the procurement industry today:
- Fixed-Fee Model: where the cost is paid by the school/college directly to the consultancy.
- Rebate Model: where the cost is paid by the contractor awarded the contract directly to the procurement consultant. This is commonly done via a rebate, which can be around 5%.
Fixed fees are usually calculated based on an agreed daily rate; an experienced consultant will be able to estimate the number of days they will need to invest into a project, and provide a transparent cost that is exactly what it says it is: ‘fixed’. Therefore, once a price has been agreed, no further costs should be payable.
Rebate models are based on a percentage of the contract value and usually paid quarterly or annually. These can sound attractive to a school or college, because they are often sold as a ‘free’ service. However, this can be misleading. The reality is that the contractor who is awarded the contract, and therefore accountable for paying the consultancy firm, will include their rebate cost with your contract price. Therefore, it is no longer a ‘free’ service; instead, it is a hidden on-cost that sits on top of the price you should be paying for the service.
Which of these models represents best value to the customer? Let’s look at two examples.
The illustrations shown here demonstrate the savings that are achieved by customers using a fixed-fee model. For illustration purposes we have based our calculations on a secondary school who has an outsourced service costing £100,000 + VAT per annum. All costs are exclusive of VAT.
As you can see from both examples, the fixed-fee model represents a lower whole-life cost, is more transparent, easier to plan for upfront, and is levied in year one of the contract only. At Tenet Services, we always employ the fixed-fee model to ensure that our customers receive the best value for money.
- Top tip: always ensure that costing proposals are fully transparent, include a breakdown of pricing, and are fixed with no hidden or additional costs.
Quality Evaluation: Who is Right for You?
It is not just cost that plays a key role when selecting the right service provider; after all, value for money is a combination of both quality and price. Here are some of the essential factors to consider when evaluating potential consultancy candidates:
1. Professional Training & Qualifications
Does the consultant hold a professional qualification that is recognised within the industry?
2. Relevant Experience
The consultant may be an expert within their chosen field, but what about your sector? Are they education specialists, who understand the nuances of our industry?
3. Insurance Cover
Does the consultant have up-to-date professional indemnity insurances to a satisfactory level?
4. Contingency Plans
Does the consultant have contingency plans in place? What if the lead team member had to take unplanned leave, would your project be delayed? Always check that your contractor has robust plans in place, and additional resources should the worst-case scenario occur.
5. Added Value
Can your consultant offer added extras that will give additional value to your organisation? This could include access to an IT system or online resources that will make the job easier. For example, Tenet Services offers their customers access to e-sourcing software, which streamlines the tendering process and reduces time and resources.
At Tenet, our expert procurement specialists possess relevant industry qualifications, education sector experience, complete insurance cover, and have a full team on hand to provide extra resources when required.
Why not give us a call to see how we can help you save money? Contact us today on 01376 511 411 or email [email protected]