A tragic death and contingent fee procurement consultants…

I had one of those gulps of recognition the other day, as I saw a procurement and personal connection to a story on the front pages, more so because I'd already started drafting a series of posts on this topic.

You may have heard of the very sad death at Glastonbury Festival of Christopher Shale, chairman of the Tory party in David Cameron's Oxfordshire constituency. In reading about him, I discovered that he founded and made his fortune from a firm called Oxford Resources, a cost reduction and procurement consulting firm.

And I remembered, many years ago, coming across them, also working for a client where I was doing some consulting work. In fact, I visited their offices, in the stable block of a very nice country house near Oxford, which my contact said was owned by "the boss". Who I suspect was Mr Shale.

Which takes me into the area I'd planned to write about - use of 'contingent fee' consulting firms. Now my memory is that Oxford Resources were pretty professional, and did things properly - they genuinely saved money for clients and took a cut of those savings. But I've come across a few real charlatans in that business.

Firms who were far better at high pressure sales than they were at real procurement. Firms who found a cheaper deal, invoiced the client for their 50% of 3 years worth of savings, then ran a mile before the client discovered that the cheaper supplier was rubbish.  Firms who then relied on extracting their money via an onerous contract that the client wasn't smart enough to object to at the time of signing...

But such deals are obviously not all bad. Indeed, most experts will see linking payment to outcomes in consulting assignments (as far as possible) as a good thing.  So surely a share of savings project is just an extreme - or, arguably, perfect - example of this? Well, sometimes, yes. And in some areas - for instance, receiving repayments from errors, overpayment or duplicates in the invoicing process; or from incorrect utilities bills, it seems a totally appropriate way of rewarding the consultant.

But when it comes to more general cost reduction / procurement improvement, more care needs to be taken.There are ways in which assignments of this nature can work for both parties; but there are certain key points to note. In the next installment we'll look at what can go wrong, and how you can make sure things do work properly if you decide to go for this sort of arrangement.

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  1. Mike Pringle:

    I too met him in the 1990’s when I was at UB and he tried to sell me Oxford Resources services. We did not engage them (for the reasons outlined in your initial blog!). Notwithstanding, a true gentleman and a tragedy for all concerned.

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