With more than £8billion spent on management consultants by UK organisations each year, and between three and five per cent of a typical company’s costs now going on consultancy services, the economic downturn is driving companies to look at alternative means of paying for consulting projects.

A new report launched today by sourceforconsulting.com outlines the benefits of using ‘risk-reward’ payment.  This is a comparatively rare method for paying for consulting projects, but the report explains that three quarters of procurement teams expect the proportion of expenditure on consultants paid for on this basis to grow in the future. 

Fiona Czerniawska, one of the founding directors of sourceforconsulting.com and a worldwide authority on the consulting industry commented: “Short-term economic drivers are not the only reason why buyers want to move away from traditional time and materials or fixed-price deals: they also want to make consultants more accountable for their work.”

So far, there has been far more talk than action, at least in Europe. Ten years ago, risk-reward deals were widely touted as the next big thing in consulting, but the evidence suggests that such deals account for around ten percent of consulting work in the private sector and less than five percent in the public sector in the UK. 

David Cox, Managing Director of the consultancy arm of Mott MacDonald, who sponsored the report, draws comparisons to the engineering world where risk-reward deals are much more prevalent: “The engineering industry has used risk/reward relationships to deliver complex programmes such as oil platforms in the North Sea, Heathrow Terminal 5 and the upgrade of the rail infrastructure.  Payment terms are geared around successful delivery, not time spent”

With contributions from around 30 organisations, and case studies including BBC, National Grid and Redcats, the report examines whether risk-reward arrangements for consulting projects can work and, if so, how. 

For a copy of the report, please email Ed Haigh