1. Escalating Fees
Some consultancies charge a fee based on the estimated savings from the reduced costs of the new contract. The fee is usually 20-25% of the estimated annual savings, and is applied over the duration of the new contract.
For a 20% fee this means:
· If you select a 1 year contract, the fee is 20% of the estimated annual savings
· If you select a 2 year contract, the fee is 40% of the estimated annual savings
· If you select a 3 year contract, the fee is 60% of the estimated annual savings
So if the estimated annual savings are $4,000 the fee is:
· $800 + GST for a 1 year contract
· $1,600 + GST for a 2 year contract
· $2,400 + GST for a 3 year contract
Does this sound a fair fee basis for the work involved? We think not. The amount of work to process the RFP is the same whatever contract period is selected.
2. Questionable Estimated Savings
Is the estimated savings based on historic use a fair means of calculation? What if your company is expanding and more energy will be used? The savings won’t be there.
3. Our Fee Basis
A single one-off fee for the entire RFP process which is provided before the work is commissioned. There are no hidden costs. It is payable on provision of the new contract. It is independent of the contract period selected. We think that’s fair.