How do capture and proposal consultants charge for their services?

If you have limited experience hiring proposal consultants, and
wonder 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 on an hourly basis. The majority of capture
and proposal consultants charge on a strictly hourly basis. This means that if
they work only one hour in a day, they will charge you for only that hour. If,
on the other hand, they work a 14-hour day, they will get paid for all 14 hours,
unlike exempt company employees who get paid for 8 hours each day no matter how
long they work. A lot of consultants in this profession prefer to work this way
because they come from a company environment where they are used to working
80-hour weeks and being paid for 40 hours.

Capture and proposal consultants that charge flat rates. Other capture and proposal
consultants will establish a flat daily rate usually based on the cost of 8, or
more commonly, 10 hours of their work. This is what you will pay them no matter
how few or how many hours they put in. It is wise for you to set boundaries on
the minimum number of hours worked. For example, you may set a minimum of hours
worked at 6 hours to count a full day, so that you do not end up paying a full day’s
fee for half a day’s work. If the consultant has that flat fee rate for the
day, it is also advantageous for you to introduce increments of the day. You
can negotiate that they split that day in half if they worked under 6 hours, or
even charge you for a quarter day if they worked under 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 the workload. For
example, they may agree not to exceed 70 hours per week, even though they do
not have a flat daily rate. This helps you control proposal budget, but some
consultants, if the task requires 14-hour days with no weekends (since you have
greatly understaffed your effort) may not agree to this approach.

Success fee for winning proposals. Then, there is success fee
compensation. This approach can work two
ways
.

1.One
way, which is ideal for an emerging business that has limited money, is to get
a consultant to agree to work for free. In this approach, the consultant bears
all the risk. If the contract is won, the consultant gets a substantial success
fee. If the contract is lost, the consultant gets nothing. This type of
compensation is a business owner’s dream. There are entirely too many variables
in this approach that a consultant cannot directly affect, especially if they
are not involved in months and moths of necessary pre-proposal positioning
called capture.


The consultant also bears the risk of not seeing the money until the award.
Even corporations now take their sweet time to make decisions, but the
situation is worse with government contracts. Some government agencies may take
months or years to make an award decision, and this decision may be protested
to boot, causing a recompete. Just think back to or look up Northrop Grumman’s
aerial tanker aw ard and the recent downselect protest of the TSA ITIP
contract, and you will know what I mean.


Another risk the consultant bears 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 legal agreements put in place
are hard to enforce. The consultants expected profit may be also reduced
because the customer may cut down the scope of work, thus lowering the total
amount of the award, or break the contract into option years, where the next
option award is not guaranteed. There are also aspects of the success fee for
winning government contracts that are prohibited by the Federal Acquisition
Regulations (FAR).

These days, no one ever hears of proposal consultants who will agree to work
for a success fee.
 I often
get approached by entrepreneurs suggesting that we work this way, and I just
explain to them exactly what the risks are for 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
success fees is to put in place a blended approach, similar to the way
lobbyists are paid. This way, a consultant is paid a discounted hourly, daily,
or weekly rate for the hours. Then, when the project gets awarded, the
consultant gets a success fee that is substantially larger than what he or she
would have gotten by charging their full rate. It is less expensive for the
business upfront, and it is less risk for the consultant. There are some people
in the proposal industry that will agree to work this way.

Fixed fee for proposal work. Some
businesses look to negotiate a fixed fee for the proposal effort. Just like in
all fixed fee contracts, the key for the consultant is estimating accurately
and building in enough margin for contingencies. Businesses are unwilling to
include a contingency margin, because this approach is meant to save them money
in the first place. For a consultant, this is a risky proposition, especially
in government proposals, where deadlines get extended all the time, and
requirements get modified in the middle of a proposal preparation process. I have not heard of any consultants
who work on a fixed fee basis, although a lot of businesses tend to think of it
as a viable option.

Package pricing for proposals. One
variable of a fixed fee approach is package pricing, which could be structured
in a way that takes into consideration both budgetary and risk issues, and
tends to put a cap on certain charges that may get out of hand. Some proposal
houses offer this option when they have a lot of established processes and
templates meant to streamline many time-consuming tasks, have salaried staff,
and are able to accurately estimate the effort and renegotiate if deadlines get
extended.

Other pricing models. There are
also specific business models that some proposal houses use to get paid that
may involve teaming with the company not only for capture and proposal work,
but also for project execution if the proposal is won. There is also a retainer
fee approach which works much better for captureFind Article, rather than proposal work.

Each
method of paying consultants has its advantages and disadvantages and
associated management techniques that I will discuss in the later posts.