Weird situation here in Boise. Potential client wants to hire us for a comprehensive audit of their Idaho Power account, but they want to exclude demand ratchet errors and power factor penalties from our contingency fee calculation. They claim these are 'operational issues' not billing errors. Anyone else encountered this kind of cherry-picking? The demand ratchet piece alone could be worth $30K over 3 years.
Client wants to exclude certain types of errors from contingency fee
Pete, that's a red flag for me. Sounds like they already know about these issues and are trying to get free consulting on everything else. I'd either insist on including all billing errors in the fee calculation, or charge them a flat fee for the audit with no contingency at all. Can't let clients dictate which savings count and which don't.
I had something similar last year with an OG&E customer. They wanted to exclude transformer losses from the fee calculation because their engineer 'should have caught that.' I walked away from the deal. If you start making exceptions, where does it end? Every error becomes something they 'should have known about.' Your expertise found it, you should get paid for it.
That's exactly my thinking Ramona. I suspect they've had internal discussions about the demand ratchet but haven't acted on it. Now they want to use our audit to confirm everything else is correct while getting free validation on the stuff they already suspect. I'm going to counter with full scope or flat fee only. Not playing games with cherry-picked contingencies.
Good call Pete. I've learned that clients who try to micromanage the fee structure before you even start are usually trouble throughout the entire engagement. They'll question every finding and try to negotiate every bill. Better to establish clear boundaries upfront or find a different client. Plenty of work out there for good auditors.
I agree with walking away if they won't budge. Had a similar issue with an MLGW customer last year - they wanted to exclude late payment charges from contingency because it was 'their fault.' Ended up doing a flat fee audit for them and found $85K in actual billing errors. Sometimes the flat fee approach works better anyway, especially when clients are being difficult about fee structures.