consultancies, how do they bill?

[darrenb]

My client is a small software consultancy (a real one with its own PMs) and I am trying to figure out how they bill their clients (insurance companies/banks/etc).

I know they bill hours worked by the contractors, but how do they figure the margin? Would they have a fixed rate per contractor, or would the large institutions (who have a lot of sway) insist on knowing the rate of the contractor, and then applying a percentage, as with some recruiters?

If it's a percentage thing, then obviously I'm not doing the consultancy a favour by giving them a low rate.

[Gonzo]

In my experience the consultancy will have a standard rate card with different rates for different skills and experience levels. Something like:

Junior Dev - £500 per day
Dev - £600 per day
Senior Dev - £700 per day

Project Manager - £1,000 per day.
Senior Programme Manager - £2,000 per day.

Those aren't real figures I just made them up because I am getting a little out of touch now but you get the idea.

Your job is to find the rate card and get as much of what you are being charged out at as you can. Bear in mind though that the consultancy may have offered a "discount"* to get the business.

The best ways to get the real numbers once you are in is to find the Project Manager's cost projections or get friendly with the accounts payable people and then use the information from the consultancy's invoices when you negotiate your renewal.



*By "discount" take that as a "small reduction in the over-inflated rate". Same as hotels really. Everyone loves a discount so rack rates are high for show purposes only and noone pays them.

[darrenb]

Thanks, good information. Actually the PM casually mentioned a figure of 600 but I assumed he was lying.

But the main thing then is that the end-end client won't know my rate. On the whole that's good, because if they do that's just more opportunities for phbs to object and jinx the contract.

[downsouth]

the end client aint interested in 'your specific rate' just the 'overall rate' for all services that they are being charged for.

As its been agreed and your working then nowt to worry about.