In our 25+ years of Telecom Auditing, all of our engagements have been on a contingency basis. While some clients have asked us about Time & Material (T&M) or Fixed Fee, they have selected Contingency after our discussions.
The key factor is RISK. Does the client prefer to be “at risk” with T&M or Fixed Fee? Or would they rather the auditor/consultant to be “at risk” with a contingency agreement?
T&M/Fixed Fee – The client assumes the risk in the unlikely event that the audit does not achieve sufficient savings and credits to at least “break even”. There are no guarantees. The client internal group will need to develop a business case to”spend” money. There is a “limit” on what the auditor can pursue (i.e. to avoid going over agreed upon hours). The client may balk at additional costs (i.e. travel, implementation support/hours, project management work, etc.). The focus tends to be on limiting the # of hours/work by the auditor/consultant.
Contingency Fee- The risk is placed on the auditor/consultant. If the audit produces no or limited results, then there is no or limited payment from the client. The business case is simpler, as there are guaranteed savings that is provable with the “before and after” bills. The client doesn’t need to “approve” additional hours if the auditor uncovers additional opportunities. The focus is on getting the most savings and refunds.
We are responsible for travel, implementation support, project management, etc. We do not charge for “additions”. This provides us with flexibility to maximize credit and savings.
The contingency model works best for clients whose decision makers do not have complete control and/or have limited resources. If they need to persuade others before going forward then the risk increases.
This, of course, is just our perspective. However, it does seem to resonate. Even clients who “never” do contingency agreements have ultimately agreed to do so.
Art Yonemoto is President of Yonemoto & Associates in Dublin, California. He has been conducting voice, data and cellular audits for over 25 years. Art’s clients have included IBM, Siemens, A&P, PeopleSoft, Kaiser, WQED, the Pittsburgh Post Gazette, NetApp, Dominion, YMCA, and Chesapeake Energy. Prior to beginning his consulting practice, Art worked for 14 years at ROLM Corporation (a subsidiary of IBM and Siemens) in various management roles.
Art has a Bachelor’s degree in Computer Science from UC Berkeley and a MBA from San Jose State University.
Art’s LinkedIn – https://www.linkedin.com/in/art-yonemoto-040b9a9/
Art’s Website – http://www.yonemotoassociates.com/