This is driving me crazy. Been working for three months with a large manufacturing client here in Buffalo who wants NYSEG bills audited going back 7 years. Potential recovery looks like $300K+. Everything was moving forward until their legal department got involved. Now they want me to accept liability caps, remove the contingency fee structure, and work for hourly billing only. Anyone else dealt with corporate legal teams that just kill deals?
Engagement letter killed by legal department
Carl, I've seen this more and more with larger corporations over the past few years. Their legal departments often don't understand the contingency model and treat utility audits like they would any other consulting engagement. My approach is to explain that utility bill auditing is essentially risk-free to them under contingency - no recovery, no fee. Sometimes scheduling a call between you, the plant manager, and their counsel helps bridge the communication gap.
Carl, this happened to me with a DTE Energy customer last year. Their legal team wanted me to carry $5 million in liability insurance for a $50K audit! I ended up walking away from it. Sometimes you have to decide if the headache is worth the potential fee. Have you tried explaining that most utility auditing firms operate on contingency specifically because it aligns your interests with theirs?
Had a similar issue with a major Ameren customer here in Missouri. What worked for me was providing references from other corporate clients where the legal departments had approved similar contingency agreements. Sometimes they just need to see that other companies have accepted these terms. Also offered to limit liability to the amount of fees actually paid, which made their lawyers more comfortable.
The liability cap thing is becoming standard unfortunately. I now routinely accept liability limits equal to the fees paid or $25K, whichever is greater. What I won't budge on is the contingency structure. If they want hourly billing, I explain that my rate is $350/hour and the project will probably take 120-150 hours minimum. That usually makes the contingency fee look pretty reasonable.
Thanks everyone. Donna, your point about the hourly rate comparison is smart. I'm going to present them with both options - 30% contingency with liability capped at fees paid, or $400/hour with 150-hour estimate. Let them do the math. If they still want hourly, I'll need half upfront which usually scares off the tire kickers.
Carl, that's a solid approach. One additional suggestion - if you do go hourly, make sure you have clear billing milestones and payment terms in writing. I've seen too many hourly engagements turn into collection nightmares when clients get sticker shock halfway through the project. The beauty of contingency is that payment happens when they get their refund check.
Another thought Carl - you might want to include a clause that allows you to convert to contingency if you find errors during the hourly phase. Something like "Client may elect to convert to contingency billing at 35% for any recovery amounts exceeding $X." Gives you both flexibility if the audit uncovers major issues.
Tina, that's a really creative idea about the conversion clause. I like that a lot. Quick update - presented both options to the client yesterday. Legal department is reviewing but the plant manager told me confidentially that the hourly estimate "made their eyes water." Hoping they come back with acceptance of the contingency terms.
Carl, sounds like you're handling it right. The key is making sure the business side understands the financial implications of both approaches. Legal departments sometimes get so focused on limiting liability that they forget about limiting costs too. Hope it works out for you - $300K recovery would be a nice win.
Any update Carl? I'm dealing with a similar situation on a potential Xcel Energy audit and curious how yours played out. These corporate legal teams all seem to be reading from the same playbook these days.
Great news! They accepted the contingency terms with liability capped at fees paid. Turns out the CFO overruled legal after seeing the hourly cost projection. Already started the preliminary data review and found what looks like a transformer ownership error that could be worth $40K alone. Sometimes patience pays off.
Fantastic outcome Carl! That transformer ownership issue sounds promising. NYSEG can be tricky about those calculations. Make sure you get their engineering drawings to verify who actually owns and maintains each transformer in the system. Sometimes the billing doesn't match the physical reality.
Congratulations Carl! This is a perfect example of why persistence and clear communication matter in this business. The fact that you already found a significant error validates their decision to move forward. Looking forward to hearing about the final results of your audit.