Consultancy needs to be paid on value added if clients want the best solutions

Gurminder Sagoo
26 February 2014

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Last week's discussion about fee competition has prompted WSP Middle East business development and marketing director Gurminder Sagoo to argue that industry in general has to reverse the drive for cut throat fee competition if it wants to create the most beneficial infrastructure for an economy.  

Rolls Royce Engineering for Mini money…there’s a phrase that many of us are used to. In the past this has been banded around engineering offices to describe the check process that ensures that our offering meets a client’s and project’s needs. From a business development and tendering point of view, being able to understand client needs have in the past helped to define the right solutions at the right price for the projects we deliver.

The recent global recession has however thrown the rule book out of the window, and in many cases design consultancies have found themselves fighting for projects at cut throat rates. This was no longer a case of tendering with a technical offering matched by a suitable fee; this period saw the dawn of consultancies offering their very best both in terms of people and technical solutions at low fee levels and unmanageable meagre margins. The clients were getting a Rolls Royce offering for Mini money.

As we start to see the market move again, particularly through regions like the Middle East, how do we redress this trend; how do we start to drive a fee that reflects our technical capability and offering? Or have we gone too far to the point of no return and made a rod for our own backs?

Delivering Quality

One of the most enjoyable parts of the tendering process for me is developing a technical offering at the right fee; to understand a client’s needs and the challenges and then reflecting these within the written fabric of a proposal; working with our engineers to find cost effective and sustainable solutions and then spinning a golden thread throughout the proposal which hopefully embodies the client’s needs and fears and has the assessor captured and wanting to hear more and wanting you to deliver their project for them. The harsh reality is that currently our technical solution consistently takes second place to where we sit in the pecking order on fees.

Coupled with this, we find ourselves tendering for projects where the fees are defined by a construction value percentage, and a very low percentage at that. Therefore, it rarely matters what engineering value you may bring to a project, if you cannot get to that acceptable percentage fee level then you’re not in the game, you fall at the first hurdle, the value you may be able to bring to a project is not even measured…even if this may bring construction cost savings well in excess of your design fees.

Demonstrating the Value

Who loses out here? The consultancies unable to drive their fee down low enough to meet the first cut or is it the industry, the built environment, which through the hunger for low fee levels does not in many cases get the value from innovation which can lead to huge savings in construction and operating costs?

I have sat on many occasions undertaking proposal reviews and looked at our technical offering balanced against our fee, all too often the discussions revolve around getting the fees to the right level to get us through the first gatepost. In my view this is an opportunity lost, the discussion should be around what value we can offer our clients and how this is reflected in our proposed fee; how we can offer the client real costs savings through innovation in design and proposing the right solution which works for the development.

I have a list of solutions as long as my arm that clearly show how we have offered design solutions that have resulted in substantial construction cost savings, sometimes greater than the total design fees in many cases…yet there is no way of identifying these opportunities within tender fee submissions. Tender assessment panels do not appear to take this into account when measuring our fee against others and week in, week out we find ourselves deliberating on how to get our fee to that industry acceptable percentage.

Solution sits with clients

The solution has to sit with our clients and within their procurement departments…the best procurement specialists are able to balance fee against value and are able to guide their clients through the trade-off between relatively higher fees against the potential for a relatively larger reduction in construction and operating costs.

Pre-recession there were numerous ways of achieving this:

 Fee and technical scoring balances

Average fee values for more reality – the lowest and the highest being unsuccessful and then assessing the mean of all submissions 

Pain Gain mechanisms to drive whole project cost savings to the benefit of all parties

The onus has to be on driving project ownership through all project stakeholders and in a way which delivers value throughout the whole project and not just focusing on individual elements – a silo approach to tendering and project delivery does not result in overall project value and cost savings. Food for thought may be?