At RIVA, the fees we charge our clients are very competitive. We don’t have huge overheads or large ‘back of house’ costs that we need to cover within our clients fees, and we are not exclusively profit driven. And never will be.

We are also 100% committed to transparency and the fees we quote are agreed and fixed in advance of any project commencement. Nothing hidden, no extra’s. Very simple, very open and very fair!

However, there are varying fee models out there available from different consultancies and frameworks – some may look attractive at first, but may have large hidden costs that schools ultimately pay, even if they don’t realise this! So – what should schools look out for?

Here we explore how procurement projects may be ‘paid for’, highlighting the risks of certain models. We also and include QUESTIONS that every school should ask if any of the below fee models are offered, before agreeing:

1 – No fee is charged (the fabled ‘free lunch’)

There’s no such thing as a free lunch! An old hat saying – but the sentiment remains, in today’s world. If you are offered services for free, be very wary, as the consultant’s costs will likely be hidden elsewhere meaning you may never know how much you are effectively paying – and this will usually be much more than any fixed agreed option!

• QUESTION: If your services are ‘free’ – how do you cover your costs?
• QUESTION: Is the winning contractor expected to pay you a fee, even if it’s not transparently included in the bid cost?

2 – The winning contractor pays the fee

Consultants may suggest their services are free to the school, as the winning contractor will pay them their fee.

This can be a fair model when:

1 – The consultancy fee is agreed with the school

2 – The winning contractor includes this fee in their bid costs transparently – therefore effectively charging the fee back to the school.

To be clear – this is a ‘cash flow alleviation’ option for a school as the fee is included in your costs over a 3 or 5 year budget. This is not a free tender – but it does mean no up front costs or one off invoices and means complete transparency, too.

Often contractors are required to pay the procurement fee but are instructed not to include it in their bid cost. In reality they will ‘hide’ it somewhere and pass this cost back to the school.

• QUESTION: Are you happy to confirm and agree the total procurement fee that the contractor will pay, in advance ?
• QUESTION: Are you happy to agree to the contractor including the fee in their bid cost, clearly and transparently?

3 – The fee is charged as a percentage of the contract cost 

This fee model can be very costly as whilst the contractor typically pays this, it will be included in their bid costs somewhere and this will be a percentage of the full 5 year contract cost. Percentages can run from 0.5% to 5% so depending on the size of your contract, this can run into the tens of thousands of pounds that a school will be paying via the contract!

• QUESTION: Can you please confirm the exact percentage charged to the winning contractor
• QUESTION: Can you please confirm that the contractor’s fee will be included in their bid costs transparently?
• QUESTION: Based on your knowledge of our contract – what is the estimated fee the contractor will be liable for?

4 – The fee is based on ‘gain share’ or ‘profit share’ 

Often consultants may position their fee based on a ‘profit share’ percentage as a positive thing as there is no charge to the school, unless savings are made. The consultants fee would be for example 50% of any savings made as a result of their procurement work.

We don’t like this model as:

1 – It gives the consultant a vested interest in appointing the cheapest contractor so as to ‘save’ as much as they can for the client and therefore increase their consultancy fee.

2 – We don’t believe procurement should have an exclusive focus on cost saving. This is of course always a top priority, but this model can sway the focus from non financial improvements and we feel the mix here is imperative to a successful procurement outcome

3 – We don’t believe in effectively penalising a school for having a current contract in place that is performing poorly financially and costing over the odds!

• QUESTION: Would you be prepared to cap the ‘gain share’ fee you charge me at a reasonable level, for this project?

Do not be concerned about asking questions about fee models. If you have found the right consultant to partner with for your procurement project, they should be willing to work together in partnership with you and your school, and should have no issue in being transparent with their fees!

We work on fixed fee models only. Once our fees are clear and are agreed with a school or trust in advance of any project commencement. We can be flexible with our payment terms to alleviate cash flow for our clients, but the one thing we won’t waver on is transparency. Ever!