Silva Consultants | 07/19/13 05:42am
I'll be the first to stick my neck out here...:)
Consulting fees to prepare an RFP for security/surveillance projects is typically 5% to 20% of the total installed system cost. The percentage is smaller for larger projects and larger for smaller projects.
For a $100,000 project, a fee in the $15,000 to $20,000 range (15-20%) would be common. On a $1 million dollar project, a fee in the $50,000 to $75,000 range (5% to 7.5%) would probably be in the ball park.
Many consultants have a minimum charge because there is a certain minimum effort required to prepare any type of RFP regardless of how small the system is. So for a very small system, you might end up paying almost as much in consulting fees as you would for the system.
Factors that can affect consulting fees can include:
- Amount of assessment/needs analysis that must be before the RFP can be written.
- Are we specifying entirely new systems or having to upgrade/integrate existing systems?
- Style of specification writing desired or required by law (proprietary, descriptive, performance)
- Numbers and types of systems (video, wireless, access control, alarm, etc.)
- Number and level of detail required in RFP drawings, if any.
- Location of project (is out-of-town travel required)
- Type of support services desired during procurement (pre-bid conference, bid analysis, contract negotiation, etc.)
- Type of support service desired during construction (attend construction meetings, submittal review, periodic site inspections, process change orders, review payment applications, final testing and punch-list, etc.)
Michael, this helps and puts the discussion to a strong start!
My first / main question is: How many hours does this assume? For instance, the 100k project? Is that 100 to 200 hours or so?
As you mention, certainly it depends on the scope / what's included.
Could an end user hire a consultant say for 10 or 20 hours to provide guidance? Even that would seem to provide a lot of value compared to the crazy hodgepodge approach we see in many RFPs?
Silva Consultants | 07/19/13 12:50pm
In answer to your first question, I would estimate somewhere between 80 and 120 hours of effort for a $100K project. This would include doing a basic needs analysis, preparing the RFP and drawing attachments, attending the pre-bid conference, and assisting with evalution of the proposals. Construction phase services would be extra.
In answer to your second question, yes, I often get called in by clients who want advice on how to prepare their RFP or specs themselves, or to review documents that they have produced in-house. The 10 to 20 hour figure that you stated is about right for this type of effort.
I had an interesting experience along these lines a few years ago. I got a call from a security manager at a research company asking if I could help her to review a RFP and specification that she was about to issue. I met her at her office and she handed me some documents to read. After a few minutes, she asked me what I thought of her spec. I answered: "It's very well-written; I wrote it myself....". As it turns out,. this woman had gotten hold of a copy of a spec I had written for another client a few years back and had simply done a quick edit to make it her own. The woman was very embarrassed, apologized and I quickly left. She didn't hire me and I don't know if she ended up using my spec or not to issue her RFP.
Wow, that's quite a story!
I am curious. Is there copyright issues involved there? Does the consultant typically retain copyright or the end user? Can the end user who purchases a consultant's service than freely share with others?
Specs are so routinely chopped and re-used, I have never given much thought to this aspect.
Silva Consultants | 07/19/13 03:43pm
Many consultant and engineer contracts are modeled loosely after architect (AIA) contracts. These contracts typically state that drawings and specifications are "instruments of service" and that the creator (architect or consultant) retains copyright. The owner is granted rights to use the documents on one specific project and may not reuse them on other projects without further compensation. Should the owner choose to reuse documents without permission, the document creator is absolved of all liability from such reuse.
Some contracts I have entered into with large corporations or government agencies state exactly the opposite: drawings and specifications are considered "works for hire" and the owner retains copyright and can do as he pleases with the documents.
I have had my specifications, drawing details and policies and procedures manuals copied without permission by end-users, integrators, and even other consultants. So far, I have not felt inclined to take legal action against any of these folks, figuring it would not be worth the hassle and expense.
I'm not getting paid enough :-(
"On a $1 million dollar project, a fee in the $50,000 to $75,000 range (5% to 7.5%) would probably be in the ball park." - I spent approximately 60 hours just writing the RFP on our project, not including the RFI, system evaluation criteria and the actual evaluations. And although I can't reveal the total project cost, if I received 5% to 7.5% of it for my work, it would be around two year's salary. A couple of those and I could retire... ;-)
For a $450K airport CCTV upgrade project that we did the design for as a subconsultant, our fee was about $35K including preparation of drawings, specifications, answering RFI's, reviewing submittals, attending construction meetings and being present for testing and turnover. Not sure if we broke even or not. A lot depends on the customer, the primary engineering firm, and the integrator. Get the wrong ones and it can cost you.
In your experience, where is the line between the RFP's consulting costs being higher than the savings achieved by going into the competitive process? What % variations are you seeing among the competent respondants to well specified RFP's? (I know this will generate broad, opinion based answers - but then every situation is different anyway)
I think the primary issue is protection, not cost. For the end user, having no or poorly written RFPs can result in dire consequences. I've seen any number of projects that didn't meet expectations. I believe that the lack of clearly defined objectives and requirements is the cause of many of these issues. A well-written RFP can help insure the end result meets the needs of the buyer and offers legal protections if things go wrong.
Piece of mind is just as important cost savings - perhaps more.
Silva Consultants | 07/20/13 06:41pm
In my experience, you will generally see a tighter grouping of bid prices when you have a well-written RFP than when you don't. Many of my clients have stated that they felt my services have more than paid for themselves in terms of both cost savings and reduced aggravation. What you also hopefully avoid is a situation where a proposer seriously underbids a job because he misunderstands the requirements and the owner can't pass up the low price and accepts the proposal. After the project begins, the integrator realizes his mistake and either cuts corners or tries to recoup his losses through change orders. It is my contention that a well-managed RFP process actually benefits the integrator as much as it does the owner. There is a much more level playing field when everyone is bidding "apples-to-apples" and the qualified integrator doesn't have to worry about being underbid by an unqualified competitor.
Do most companies that offer design services have E&O insurance or do they just wingit and hope everything turns out ok? We were retained for a large football stadium and they required E&O and it was very costly. Any thoughts here?
I believe a well considered RFP by a knowledgible consultant ultimately saves the client money in the long run by keeping the number and size of the variations to a minimum.
In my part of the world there are a few integrators who look at "what's not included" in the RFP, win the contract then cream it on the variations.
Michael, thanks. So is E&O insurance paid per year or per project or? Any rule of thumb about the amount paid?
It's paid per year and the % matters by how much your exposure is and the level of the professionals working for the firm.
Silva Consultants | 07/21/13 09:44pm
E&O premiums are typically based on the consultant's gross revenue (billings). My experience has been that annual premiums average about $1,500 per $100,000 of revenue billed, so a consultant who was billing a half-million a year might pay $7,500 per year for insurance. You make a revenue projection at the beginning of each policy period and then get audited near the end of the year. If your actual revenue was more than projected, you get billed for the difference. If revenue was less than projected, you don't get a refund. (Never thought this was fair...)
You can buy E&O policies on a "per job" basis, but as I understand it, these are only written if you have an underlying E&O policy in place. The primary purpose of these "per job" policies is to specifically cover the needs for higher limits and/or jobs that extend over a long period of time. They are also used to insure joint ventures created to perform a specific project.
Consultants who happen to be registered architects or licensed professional engineers (PEs) generally have a wide choice of E&O policies available to them. Consultants who came up through the security/surveillance industry but who are not PEs can have a tougher time finding insurance, and if they can find it, often pay higher premiums. Security/surveillance consultants who are not PEs are not recognized by most E&O insurance carriers.
A little outside the core discussion of costs for a good RFP, but I often wonder about the definition of "consultant". As the migration to IP based CCTV systems progressed, many end users turned to datacom/telephony engineering firms, even A/V consultants, asking them to "add a security package" to their designs. Our rep firm often gets called by these firms for advice, and we find ourselves producing designs based on the products we are most familiar with. Many times, we advise that a "real" security consultant be retained, if the project passes our comfort level. We have worked with many security consultants and have a list of those we feel are competent, and we often refer work to them. As an aside, we advise engineers to check their E&O and insurance policies and local licensing requirements to ensure they are covered when they cross over into the security design arena.
We require our sales and engineering staff to balance the needs of the manufacturers we represent to sell their products against the needs of the engineer and his/her customer. Our relationship with these enginering firms is all-important, and we strive to never push a bad position. There are no real guidlines regarding our acting in a consultative selling role, for free, hoping to earn the trust of these engineers, in order to establish an open forum to present our products to them. it comes down to a question of ethics and I am often dismayed by some of the designs we see...designs for systems that we know won't meet the stated goals of the user, or are hopelessly outdated. There are good and bad reps, just as there are good and bad consultants, and poor designs hurt us all. I feel that, for those customers who cannot or will not engage a professional security consultant, our assistance at least ensures a better design than if they just "wing it" We also promise an unbiased review of submissions, and often suggest they use a competitor's equal product.
I would love to see a standard of conduct, or at least some guidlines for those if us who get called into these situations.
Next time ask this question:
What does it cost an integrator to respond to a complex RFP?
I can relate to and agree with Michaels comments on this subject. I'm a consultant working in Australia and have also done some international work. The majority of clients (some such as Carl excluded of course) dont understand why they require CCTV in the first place, and therefore what function it needs to perform. This is the first hurdle for a consultant - in Michaels words, the needs analysis, or in my words the risk assessment and functional requirements brief. A reputable consulltant should define the project requirements in measurable and defensible terms before proceeding with the design. This provides clients with assurance that their project is on track to achieve its goals. I've been a consultant for over 14 years and have a technical background in electronic security. In my experience too many clients end up with systems that fail to meet their needs, excessive project costs and poor project management experiences because of the absence of this stage, and the resultant poorly researched and written specifications. Unfortunately this reflects badly on the industry as a whole.
John, This was a great read. Thank you.