Whistle Blowing on Professional Services Fees
Quality, Consequences and the Construction Industrial Complex (part 67) – All IMHO:
What discount can you provide for all eight buildings? I have lost count how many times I have had this conversation.
Today I will be a whistle blower. What follows is the hard reality that professional services firms will not tell you when they respond to this question.
The person that asks this, does not understand professional services as there is a basic assumption of economy of scale with professional human capital. The fact is, if you are an Architectural, MEP Design, Commissioning or Project Management firm, there is an increase in overhead, supervision and coordination required to move from a 1 building to 8 building scope of work.
With professional services, particularly highly skilled and technical services, there is an inverse economy of scale for larger more complex projects. This is compounded by the increasing skill shortages within the property industry.
What seems to drive the commoditized procurement of property industry professional services is that;
- many buyers of professional services have no real idea what they are buying and are not affected by the consequences of bad buying decisions;
- a top down management and macho business culture;
- buyers and PQS are acknowledged and rewarded based on price not value.
Professional services firms sell Knowledge, Time and Integrity. Thats it, they are selling skilled people, they are not selling widgets! So what really happens in response to the discount question?
Knowledge
This is reduced by the use of junior and increasingly unsupervised people. Each time the fee is reduced the level of seniority working on the project falls away. Sure, a “Partner or Director” will attend a few meetings and “supervise’ (but not really if there is a large discount), as in the Wizard of Oz, when the curtain is pulled away all is not as it seems.
Time
This will, for sure, will be reduced for every level of discount provided. Corners will be cut and solutions copy and pasted.
Integrity
Firms want to work and survive so they sometimes take on projects that are sub-economic. IMHO, there has to be a compromise on integrity when this happens. Reduced knowledge without integrity is dangerous.
Ask yourself this, would you send out an RFP for a doctor to deliver your child? Then discount the fee because you have twins? Then demand a further discount when you realize it is triplets? What would you do when the doctor then sends in a junior midwife to do everything and he supervises over the phone from home? This is the reality of sub-economic professional fees, you get what you pay for. My evidence? The high numbers of change orders, defects and poor performance on new buildings.
Did I just say all this? I am a whiny old man, however as a professional, I want to deliver high quality services. So Building Whisperer, what is the answer? I guess my answer was detailed in post #39 (see the link below).
Related posts:
#39 – Balderdash, Commissioning RFP’s & The Benefits of Clarity ( https://www.linkedin.com/pulse/balderdash-commissioning-rfps-benefits-clarity-adam-muggleton?trk=mp-author-card )
#38 – Commissioning certifications are being diluted to almost zero value ( https://www.linkedin.com/pulse/commissioning-certifications-being-diluted-almost-zero-adam-muggleton?trk=mp-author-card )
