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Topics: Consulting, Cost Management, Resource Management
External Consultant bills to much
have you ever been in the situation that your external contributor always demands too many hours when you assign him a task, even when you know it would take far less when you do it by yourself. The problem is that we are implementing a SAP system where consultants are rare, so I guess he knows that we can´t do much about it if we don´t want to loose him. But on the other hand the steering committee expects me to control his bills and check for inconsistency. So I think either we take the risk and confront him eg with getting rid of him (which could be a huge risk for the project) or they accept the approach of the consultant. Do you see any better way to get out of this dilemma? The consultants works on demand, that is only then we need him. That´s probabely why he wants to get as much as possible out of it.

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Have you asked your SAP rep if they can recommend someone, or an agency? I don't recall the company name, but I when I was on a couple projects in Japan and Korea, we worked with a company that was able to provide consultants at a reasonable rate. The truly expensive consultants were the independents - not that they aren't worth it (sometimes they're not, and sometimes they are).

This is not very uncommon in the consulting world especially in a situation like yours. You have to handle the situation in a politically correct way so here is what I suggest you do:

1) Request weekly breakdown of the activities / tasks against time spent per task. This is a very reasonable request.

2) Sit with the consultant, discuss with them the tasks were you believe they spent excessive hours and hear what they have to say.

3) Try to explain to the consultant were you are coming from and why you think the hours were a lot more than anticipated.

This way, it’s a two way conversation so from one end, you get to understand why he is billing that many hours and from the other end, the consultant will know that you are closely monitoring their hours and might be more considerate in future billing.

4) Keep monitoring the hours and if you still find that things didn’t improve and there is excessive billing then you have to confront the consultant professionally and if things didn’t go well then at that point, you have three options:

- Replace the consultant but this will introduce major risk.
- Have someone internal to the organization assist him so you can reduce the amount of work the consultant has to do.
- Accept the additional cost - Sometimes you will encounter situations were you will pay premiums especially when there is shortage in a certain skill set.

Hope this helps.

Couple comments I can out forward with the extent of the information provided:
1) we are in a market economy which means that supply and demand dictates the price. In this case the demand is greater than the supply.
2) you should focus on value verses cost. Obviously you are getting value or this wouldn't be an issue.
3) get commitments and agree on effort prior to starting an assignment.
4) you say you can do it more efficiently - then do it. Find a supplier to take on different tasks.
5) are you being overly optimistic as to your abilities?
6) maybe your supplier is assigning lower qualified personnel, ie., juniors verses seniors, then what you are.
7) develop a long term plan to replace, possibly internally.
Can you look at a win-win option here? If cost control is a concern, why not look at a cost plus incentive or similar type contract approach where there's a benefit to the consultant in coming at or below a target amount?

You definitely want to talk to the consultant about what goes into the hours. As we mature in our professions, we come to realize that there is much more that gets incorporated into what we do.

I, for one, make sure that each activity I have includes the relevant time for planning, researching, executing, reviewing, reworking, documenting, tracking and capturing metrics. I track my time at the sub-activity level even if I only report at the activity level.

Having said that, don't be surprised if the consultant adds some contingency. If that is the case, ask the consultant to not add any contingency to his time estimate. You should be managing the contingency outside of the individual activities.
Does your consultant provide timesheets for the work together with the invoices? If not, you can ask him to prepare such in advance when you can discuss the tasks and how much time he needs.

You can also share with him your project schedule, the part where he has tasks and agree on the time he needs, to get his commitment on the time of his work. This way you will reduce the risk of delays of the overall schedule.

In my experience it has been a common practice to ask for timesheets from consultants together with the invoices. However, it is better to ask and agree in advance, before invoicing, so you have the chance to discuss the scope of his work and timeline. If you have doubts that he is overestimating the time, you get the chance to discuss your concerns with him and eventually adjust the time.
SAP is a "must" in this sense. My actual work place depends on SAP. What I did and what I am doing is simple for me, perhaps because my basement of knowledge is software engineering: I met the consultant in order they explain to me the rationale behind the estimation. Sometimes you stated the requirement. Sometimes the consultant stated the requirement. But in always there is "the ancient trap" of misunderstanding that will impact on estimation. Barry Bohem has wrote a lot on the matter mainly with the "Cone of Uncertainty". And it does not matter the method/framework you use to create solutions.

the consultant may not be unreasonable in charging his hours.
Try to understand his situation.

If I understand you correctly, you are comparing the charged hours with your own estimates, not his commitments.
You are owning contingencies officially and he is eating them practically.
If your procurement department negotiated his fees they might have pressed him to lower rates and he feels now it is fair to charge more units (hours).

In the end, you cannot let the situation go unhandled (not only because of the steering committee but because of your own reputation). But do not start with a confrontation but with understanding the others and make sure they understand your situation. Maybe then you can jointly come up with a solution.

If you let it slip, someone on the SC might call for an audit and they might conclude this to be fraud - then the fun starts. Stay in control.

Happy learning how to handle conflict.

Thanks for your replies!! That was very helpful!

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