NON-TIME-RELATED CHARGES

Consultancy practices can generate income by charging for items related to an assignment, other than the time spent on it. Items that might be charged in such a way include:

• proprietary software;

• use of a proprietary methodology;

• use of psychometric tests and other survey instruments;

• results of research (for example, market research survey);

• organizing conferences or training that the client attends.

For the most part, these represent income from the sale of intellectual property. The consultancy will have invested time and effort in creating the item (or it may have bought a licence from someone who has done so) and is cashing in on this capital.

Sometimes a firm will make a standard charge of a percentage of the fee for 'administration, telephone calls, etc'. This will only approximate to the actual cost, but obviously involves less work than monitoring and costing every administrative expense. The basis of charging expenses should be clear to clients. The danger in making a standard charge is where it is part of the terms of business, which the client has not read properly, so that the first he or she learns about it is when it appears on an invoice from the consultancy.

I have to confess to a personal dislike of this basis of charging for administrative and office expenses; I believe the fee rate should cover all routine costs, with additional charges being made only for exceptional costs on an agreed basis. For example, a consultancy might charge for producing a specialist CD ROM to support a project.