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Engagement of Consultants

Engagement of Consultants - Regulations and Procedures

Updated June 2004
1 Introduction

The engagement of a consultant(s) may take the form of a fixed period employment contract or the appointment of an external resource to fulfil the required task. This is an important distinction and, in the case of the former, falls within the University's employment procedures, ie, the post is advertised, shortlisted and interviewed prior to appointment. This process is managed by the Personnel Office.

In cases where the University is buying in expertise from a person or firm, this engagement falls under the University's Purchasing Regulations.

2 Identification of Need

Consultants may be required for a number of reasons, for example, to supplement in-house activities or to aid in the development and implementation of new strategies or systems. In some instances, the services required may be very specialised and unique to a particular consultant.

It is important that the need to engage consultants is correctly identified and it should be determined in the first instance if the expertise is available from within the University. There is always a possibility that the service may be available from another unit or office. If this is the case, then there is a requirement to establish and agree certain protocols to govern the working relationship between, and the respective responsibilities of, the consultants and the unit to which the service is to be provided. The Research and Regional Services Directorate can provide the necessary advice in this regard.

If internal expertise is not available, then an external source may be investigated.

3 Project Outline

As early as possible in the engagement process, a 'Project Outline' should be prepared and should include, for example, some or all of the following:

  • a description of the project
  • the objectives and expected results
  • details of any area(s) within the University which may be able to provide all or part of the desired consultancy service
  • a résumé of the project's background complete with supporting documentation
  • the proposed start date and duration of the project (this should include timescales for key milestones throughout the project)
  • interim and final reporting dates including information on the report's format, reporting dates and to whom the report is to be presented
  • an indication of the level of assistance available to the consultant from the University
  • any constraints likely to impact on the completion of the project (eg availability of personnel for interview etc, although not financial constraints ie budget allocation however, a general indication could be given if applicants are seeking guidance on the value of earmarked funds)
  • names of the contact person(s) supported with addresses and telephone numbers
  • timetable of meetings etc which the consultant may be required to attend
4 Competitive Process

In order to identify the competitive procedure to be undertaken to procure the consultancy service, please refer to the Financial Thresholds contained within the University's Purchasing Regulations.

5 Identification of Potential Consultants

The purchase of any professional service is difficult, primarily because unlike a piece of equipment, what is being purchased is a service and is intangible. Whilst it is not possible to examine the actual service before it has been purchased and provided, it is possible to see the results of projects conducted on behalf of other parties and to use these as an indication of the consultant's capability to meet the requirement.

There are several ways of identifying potential consultants. The most appropriate one will, in part, depend upon the nature and value of the project.

6 Engagement of Ex-University Employees

No individual should be engaged as a consultant who has taken early retirement or severence pay, other than as part of the retirement package or through a competitive quotation/tendering procedure in line with University's purchasing procedures.

Where an individual who has left the University under circumstances of early retirement or voluntary severance has taken employment with an organisation which operates as its main business activity in the field of consultancy services, the presence of that individual should not exclude the firm from competing for the University's business.

7 Means of Initiating Engagement

An official University purchase order should be used for all consultancy service engagements and should be supported by a letter of engagement which will clearly define the terms of the engagement, the required output, timescales, terms of payment etc.

8 Professional Indemnity Insurance

All consultants engaged by the University will be expected to have Professional Indemnity Insurance to cover them against any liabilities which they might incur arising out of a contract. Depending on the nature of the contract, it may be necessary to set a minimum Limit of Indemnity which will be specified in the tender of Request for Quotation document and/or agreed prior to the awarding of the contract. Consultants should also be advised to discuss with their Insurance Brokers the Indemnity Limit appropriate for the contract.

9 Consultancy Pricing Practice

Consultants use a variety of means of generating the costs to be charged for their services. In general the consultant should be engaged, partly or wholly, on a 'success fee' basis. It is recognised that there will be instances where the total value of the project would make it unrealistic to expect the consultant to bear the on-going costs without some level of payment. However, these staged payments should reflect the developing nature of the work undertaken with perhaps a nominal sum being paid on a regular basis, say monthly, and larger payments being made upon the attainment of pre-determined goals. As with the purchase and commissioning of large pieces of equipment, a sum should be retained until the consultancy has been completed and 'signed off' by the unit.

Consultants use a number of pricing practices:-

PRICING PRACTICE COMMENT
Time-based fee

This practice is preferred by the consultant as the client is charged for the actual hours worked. The structure does not provide an incentive for efficiency and effective cost control.

Lump sum fee

The consultant quotes a fixed sum for the completion of the project. A potential problem is that if the fee is too low, the consultant may have a tendency to skimp on the service provided.

If this practice is used, provision should be made to adjust the fee if there are significant changes to the scope of the services required. This adjustment should work both ways ie to decrease as well as increase the final fee.

Target fee

This is normally charged on a time charge basis for an agreed number of hours/days. Work after this agreed period will be charged at a reduced rate. This provides a basic fee with an incentive to keep any overrun to a minimum because of the lower payment rate.

Fee contingent on results i.e. 'success fee'

The fee is only payable when the specified requirements of the project have been fulfilled.

The size of the fee will depend upon the outcome of the results for example, cost reductions achieved from implementation of recommendations/actions; the successful implementation and operation of the project etc.

Percentage fee (Ad Valorem)

This practice is common in architecture and engineering consultancies. The consulting engineers' fees are calculated as a percentage of the total project cost plus a reimbursable direct cost.

Retainer fee

This is generally based upon a fixed number of days of consultancy.

(Note: that the client pays regardless of there being sufficient work for the consultant to do.)

Reimbursable expenses

This includes cost of travel, accommodation etc. As a general rule expenses are charged in addition to the fees.

Where possible, it should be agreed that expenses are reimbursed at the University's subsistence rates, not the consultant's. Central University contracts for travel, accommodation, etc should be used where possible.

It is important that the most appropriate pricing practice is used for the individual project - the aim being to ensure optimum value for money for the services engaged. This means determining the pricing practice which keeps the financial costs as low as possible while ensuring that the consultant has sufficient incentive to complete the project within the prescribed time limit and to the required depth of investigation.

It is essential that the documentation indicates clearly the policy to be used in respect of reimbursable expenses. Should the consultant not be prepared to price on the preferred basis stated in the documentation, it will be necessary to determine the basis for equality of comparison of any priced proposals.

10 Termination

Provision should be made in the contract documentation for termination of the engagement should the consultant fail, or appear to be unable, to fulfil the task which is the subject of the engagement. The matter of compensation/penalties should also have been addressed at the initial stages, rather than when a problem has arisen.

11 Post-Consultancy Review

After the consultancy has been completed, a Post-Consultancy Review should be conducted. The depth of the review will, to a certain extent, depend upon the strategic and/or financial importance of the consultancy project. In the review, the following questions should be considered and answered:-

  • Did the consultancy meet the requirements of the initial proposed need?
  • How could the specification be changed if conducting a similar project in the future?
  • What were the actual costs of the project and did they fall within the original estimated value? If not, why not?
  • Did the use of the consultant aid and/or improve the activities of the unit's own staff resources?
  • Where the project was for the development of a strategy, did the University implement the consultant's recommendations? If not, why not?
  • Could the project have been handled as well using the University's own staff?
  • Would you consider using the consultant again? If not, why not?


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