I'm three months into a FirstEnergy audit for a manufacturing client in Akron. Just found a major demand ratchet issue that could save them $180K annually, but it's outside our original scope. Client wants to expand the LOA to include this work but also wants to renegotiate our fee structure. Anyone dealt with scope creep like this? I don't want to walk away from the big savings but also don't want to set a bad precedent.
Client wants to change LOA mid-audit - advice needed
Jim, I've been there. Georgia Power territory here, similar situation last year. The key is having clear language in your original LOA about additional scope work. If you didn't include that, you're negotiating from a weak position. I'd suggest an amendment to the existing agreement rather than a complete renegotiation. Charge your standard rate for the additional work and don't let them use the big savings as leverage to cut your percentage.
Rachel's right about the amendment approach. I always include a clause that any work outside the defined scope will be billed at standard rates. For FirstEnergy territory, demand ratchet issues are common enough that you should have included it in the original scope. That said, $180K annual savings is huge - don't let them nickel and dime you on this. I'd do an amendment at 25% contingency for the demand work only.
Just went through this exact scenario with PECO. Client found additional savings opportunities and wanted to expand scope. I created a separate mini-audit agreement just for the new work. Kept it simple - flat fee for the analysis, contingency on actual savings. Protects both parties and keeps the original agreement intact.
Thanks for the feedback everyone. Phil, I like the separate agreement idea. Keeps things clean and avoids any confusion with the original scope. Derek, you're probably right that I should have caught the demand issue in my initial assessment, but their load profile data was incomplete. Going to propose a separate agreement for the demand analysis at 20% contingency. If they balk, I'll stick with the original scope and let them hire someone else for the additional work.
Jim, whatever you do, get everything in writing before you proceed. I've seen too many auditors do additional work on a handshake and then fight over payment later. CPS Energy territory has some unique demand provisions that clients often don't understand. Document the scope, the fee structure, and payment terms clearly. And make sure they acknowledge that this is separate from your original engagement.
Angela makes an excellent point about documentation. I've started using a simple addendum form for scope expansions. Just one page that references the original agreement and clearly defines the new work and terms. Saves time and reduces confusion later.
Update for anyone following this thread - client accepted the separate agreement at 20% contingency. We're filing the demand ratchet correction with FirstEnergy next week. Should result in about $15K monthly savings going forward. Thanks again for the advice on keeping it separate from the original LOA.