Working with a Consulting Firm: A 3-Step Guide to Getting Real Value

A Drummondville manufacturer hands its needs assessment to an integrator, who recommends its own solution and offers to implement it. Twelve months later, the budget has doubled, the deliverables were never defined and nobody in-house can run the system without the consultants. The problem is not the firm. It is the absence of a plan before hiring it.

The market figures cited come from public sources and serve as benchmarks: fees, timelines and contract models vary with the size of the mandate and the industry.

According to Statistics Canada, management, scientific and technical consulting services generated $37.8 billion in operating revenue in Canada in 2023, an 11.5% increase over 2022.

How do you start working with a consulting firm without losing control of the mandate?

To start working with a consulting firm without losing control, first define the target solution and the project scope, then set the expected deliverables and the mandate parameters before soliciting a single proposal.

The first planning step is to produce a high-level project plan and summary estimates. That plan tells you which components to outsource. We recommend having it prepared by a firm other than the one that will do the work: it is the only way to later verify that delivery follows the plan.

Then communicate the project parameters precisely: participating business units, target processes, data to convert, interfaces to build, deployment approach, chosen methodology and software versions. Firms want the broadest mandate possible. It is up to you to split the project according to their actual field of expertise.

The clearer the mandate, the better your odds of negotiating a fixed price, which lowers your financial risk. Hybrid models exist too, as we explain in IT Contracts: the risk-sharing model, a catalyst for success.

How do you target the firms to invite and write a useful request for proposals?

Target firms with a demonstrated track record in your type of project, invite at least three of them, and spend the time needed on a complete request for proposals so that bids rest on facts rather than assumptions.

Fees must match the added value of the deliverables. The most valuable firm is the one that puts its experience and intellectual capital to work on the velocity of your project. A firm learning your industry at your expense is not worth its hourly rate, even a discounted one.

The lowest price is not always the greatest value. As in recruiting, build a scoring grid before opening the proposals. Involve your organization's procurement department as well: its expertise improves the terms and maximizes your buying power.

A few benchmarks to frame the selection:

• At least 3 firms invited to the request for proposals to maintain healthy competition (PlanAxion).
• 1 separate firm for planning and estimates, different from the one delivering the work (PlanAxion).
• At least 7 criteria in the scoring grid: understanding of the mandate, scope coverage, domain experience, knowledge of your industry, quality of the proposed team, approach and price (PlanAxion).
• 65.5% of consulting firms' clients in Canada are private businesses, and Quebec generates 14.5% of the industry's revenue (Statistics Canada, 2023).
• According to the McKinsey and University of Oxford study of more than 5,400 IT projects, large projects run 45% over budget on average and deliver 56% less value than predicted (2012).

The same McKinsey study reports the case of a bank that negotiated hard on unit price with its vendor, then ended up with an inexperienced team. Another got a good price for the project phase, then paid dearly for every change and for support once locked into the technology. The entry price is only part of the bill.

The most valuable firm is not the cheapest by the hour: it is the one whose experience shortens your project.

How do you choose the winning firm and keep the expertise after it leaves?

Choose the firm after interviewing the people actually being proposed and checking references with its clients, then require by contract a knowledge transfer to your permanent employees before the mandate ends.

A proposal often showcases the firm's best résumés. Interviews confirm that those people will really be assigned to your project and that they have the required experience. Ask for references from clients who went through a comparable mandate, ideally in Quebec, and call them.

Be wary too of the advisor who sells what it implements. A vendor-certified integrator has a direct stake in the solution it recommends, as we detail in ERP Integrator Conflict of Interest: The Hidden Risk in Your ERP Selection.

Before the mandate ends, make sure knowledge transfer takes place. This phase, called post-implementation support, aims to anchor the skills in your team while maximizing your investment. We describe its conditions in Three key factors for successful post-implantation support.

What should you remember before signing with a consulting firm?

Remember three reflexes: a plan and defined deliverables before any solicitation, at least three proposals compared with a grid, and a knowledge transfer written into the contract. These reflexes cost a few weeks of preparation. They prevent months of dependence on consultants nobody chose against explicit criteria.

PMI's Pulse of the Profession 2018 still estimated that 9.9% of every dollar invested in projects was wasted through poor performance. Part of that waste comes from poorly framed external mandates. That part is within your control.

Frequently asked questions

How many consulting firms should you invite to a request for proposals?

Invite at least three different firms. That number maintains healthy competition, allows a real comparison of approaches and prices, and reduces the risk of depending on a single vendor. Allow enough time to write a complete request for proposals: the more precise the document, the fewer assumptions firms rely on and the more comparable the bids become.

Should the same firm handle both planning and delivery?

Preferably not. PlanAxion recommends assigning the high-level project plan and summary estimates to a firm other than the one that will deliver the work. This separation lets you verify that delivery follows the established plan, prevents a vendor from defining the very scope it will then bill for, and keeps an independent eye on the project throughout.

How do you compare proposals from consulting firms?

Build a scoring grid before opening the proposals, as you would in recruiting. Assess understanding of the mandate, scope coverage, experience in the field of intervention, knowledge of your industry, quality of the proposed team, approach and price. Complete the picture with interviews of the named resources and reference checks with comparable clients.

Why is the lowest price not always the best value?

Because a firm's value lies in its ability to accelerate your project through experience. The 2012 McKinsey and University of Oxford study cites a bank that negotiated hard on unit price and ended up with an inexperienced team, and another that paid dearly for changes and support after securing a good entry price on the project phase.