Pay For Performance (Hourly or Day Rate) Payment Structure
Possibly the most commonly used payment structure when engaging with a specialist or consultant. Pay for performance (PFP) is exactly as stated, the client pays the specialist for each hour or day they work on the project, the specialist provides either a breakdown of the work completed or a timesheet along with their invoice.
Rates for engagement of this type can range wildly from £500 per day (£62.50 per hour) up to £1500 per day (£187.50 per hour) and upwards for the services of large international consultancies. It is important to understand that there is not necessarily a correlation between the price paid and the service received “you get what you pay forâ€.
Large consultancies market their services towards multi-national organisations with significant consultancy budgets. Smaller more local consultancies or agencies can provide a more bespoke and inclusive service better suited to smaller organisations at a fraction of the cost.
The important point to make is for any business looking to engage with a specialist to research the available options and speak with the specialist. A consultancies reputation may be impeccable, however if there is no rapport, the results may not be as good as with a company which spends the time to truly understand the client.
There are a number of scenarios when PFP is the most suitable payment option including:
Business transformation
Business transformation is inherently open in scope, requiring frequent adjusting to the strategic plan reacting to changes or developments in the introduction of new practises. Because of the flexible nature of this type of project, the specialist is unable to plan with sufficient detail and constraint to adopt a restricted payment structure.
Process Development
Process development is similar to business transformation but on a more focused level, mainly concerned with individual manufacturing or business functions. As with Business transformation, the flexible nature of the project suits PFP payment structures.
With any outsourced business relationship there are many opportunities for the engagement to fail or become out of control and financially wasteful. It is important to ensure the relationship is governed by a clear and robust set of contractual conditions. The relationship should be monitored and reviewed on a regular basis with key payments attached to fundamental project milestones.
How SCB Procurement Solutions Support Hourly or Day rate
At SCB procurement, our aim is to ensure our clients are as profitable as possible and we will always look at options to maximise the return on the financial investment they have made in us. We will consider other payment structures which assist with this whenever possible, however for certain types of projects, PFP structures allow for the project to evolve and flex according to the requirements of the client.
