I'm three months into a comprehensive audit for a manufacturing facility served by TVA. Original engagement was for a 24-month lookback at $125/hour. Now the client wants to extend the lookback to 36 months and add analysis of their cogeneration settlement agreement. This would essentially double the scope. My engagement letter has language about scope changes requiring written approval, but I'm not sure about the best way to handle pricing. Do you bill the additional work at the same hourly rate or adjust for the expanded scope?
Client wants to modify engagement mid-stream - what's your policy?
Ida, I'd stick with your original hourly rate for consistency. The cogeneration analysis might justify a premium since it's specialized work, but extending the lookback period is just more of the same type of work you're already doing. Make sure you get a written amendment to your engagement letter before proceeding. TVA customers can be great clients but they also tend to keep expanding scope if you let them.
I always price scope increases at a 10-15% premium over my base hourly rate. The rationale is that scope creep disrupts your workflow and timeline. Plus, the client has already committed to working with you, so they're less price-sensitive than they were initially. For cogeneration work, I'd go even higher - maybe 25% premium. That's specialized knowledge that not every auditor has.
Marc makes a good point about the premium. I typically charge my standard rate for pure scope extensions (like your 36-month lookback) but bump it up for new types of analysis. Cogeneration settlements are complex and you should be compensated accordingly. Just make sure your amendment clearly defines deliverables for the new scope. Duke Energy customers in my area love to keep adding "one more thing" if you're not careful about boundaries.
Thanks for the input, everyone. I ended up proposing $125/hour for the extended lookback period and $155/hour for the cogeneration analysis. Client accepted without pushback, which makes me think I could have gone higher on the cogen work. Live and learn. The written amendment is signed and we're moving forward.
Good outcome, Ida. For future reference, cogeneration work in the Southeast typically runs $175-200/hour given the complexity of TVA's and Georgia Power's settlement mechanisms. But getting the client to agree to expanded scope is the important part. Sometimes it's better to lock in the additional work at a modest premium than risk losing it by pricing too aggressively.