How to work with a consulting firm? A 3-step guide

A Drummondville manufacturer hired an integrator to assess its needs, only for the integrator to recommend its own solution and offer to implement it. Twelve months later, the budget had doubled, the deliverables were never defined, and no one internally knew how to operate the system without the consultants. The problem wasn't the firm. It was the lack of a plan before hiring them.

The market figures cited are from public sources and serve as benchmarks: fees, timelines, and contract models vary depending on the size of the mandate and the sector.

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

How can you work with a consulting firm without losing control of the mandate?

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

The first step in planning is to produce a general project plan and summary estimates. This plan will tell you which components to outsource. We recommend having this prepared by a firm other than the one that will carry out the work: it is the only way to verify later that the work complies with the plan.

Next, communicate the project parameters precisely: participating business units, target processes, data to be converted, interfaces to be built, deployment approach, chosen methodology, and software versions. Firms want the broadest possible mandate. It is up to you to break down the project according to their actual field of expertise.

The clearer the mandate, the better your chances of negotiating a fixed price, which reduces your financial risk. Hybrid models also exist, as we explain in IT Contracts: The Risk-Sharing Model, a Catalyst for Success.

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

Target firms that have demonstrated expertise in your type of project, invite at least three, and dedicate the necessary time to a comprehensive request for proposals so that submissions are based on facts rather than assumptions.

Fees must correspond to the value added by the deliverables. The firm that is worth the most is the one that puts its experience and intellectual capital to work for your project's velocity. A firm that learns your industry at your expense is not worth its hourly rate, even at a discount.

The lowest price does not always represent the greatest value. As with recruitment, prepare an evaluation grid before opening the proposals. Also, involve your organization's procurement department: their expertise improves terms and maximizes your purchasing power.

A few benchmarks to guide your 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 carrying out the work (PlanAxion).
• 7 minimum criteria in the evaluation 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 firm clients in Canada are private companies, and Quebec generates 14.5% of the sector's revenue (Statistics Canada, 2023).
• According to a McKinsey and University of Oxford study of over 5,400 IT projects, large projects go over budget by an average of 45% and deliver 56% less value than expected (2012).

The same McKinsey study reports the case of a bank that negotiated unit prices hard with its supplier, only to end up with an inexperienced team. Another obtained 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 firm that is worth the most is not the cheapest by the hour: it is the one whose experience shortens your project.

How do you choose the right firm and retain expertise after they leave?

Choose a firm only after interviewing the actual resources proposed and checking references with their clients, then contractually require a knowledge transfer to your permanent employees before the mandate ends.

A proposal often features the firm’s best resumes. Interviews confirm that these specific individuals will be assigned to your project and that they possess the required experience. Ask for references from clients who have undergone a similar mandate, ideally in Quebec, and call them.

Also, be wary of consultants who sell what they implement. An integrator certified by a software vendor has a direct interest in the solution they recommend, as we detail in A vendor-certified ERP integrator cannot provide neutral advice.

Before the mandate ends, ensure that knowledge transfer takes place. This phase, known as post-implementation support, aims to anchor skills within your team while maximizing your investment. We describe the conditions for this in Three key factors for successful post-implementation support.

What should you keep in mind before signing with a consulting firm?

Remember three key habits: define a plan and deliverables before soliciting bids, compare at least three proposals using a scoring grid, and include knowledge transfer in the contract. These habits require a few weeks of preparation, but they prevent months of dependency on consultants who were never chosen based on explicit criteria.

The PMI’s 2018 Pulse of the Profession estimated that 9.9% of every dollar invested in projects was wasted due to poor performance. Part of this waste stems from poorly scoped 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. This number maintains healthy competition, allows for a real comparison of approaches and prices, and reduces the risk of depending on a single supplier. Allow enough time to write a comprehensive request for proposals: the more precise the document, the less firms rely on assumptions and the more comparable the submissions will be.

Should you entrust planning and execution to the same firm?

No, preferably not. PlanAxion recommends assigning the general project plan and summary estimates to a different firm than the one that will carry out the work. This separation makes it possible to verify that the execution respects the established plan, prevents a supplier from defining the scope they will later bill for, and maintains an independent perspective throughout the project.

How do you compare proposals from consulting firms?

Prepare an evaluation grid before opening the proposals, just as you would for recruitment. Evaluate their understanding of the mandate, scope coverage, experience in the field, knowledge of your industry, the quality of the proposed team, their approach, and the price. Follow up with interviews with 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 its experience. A 2012 McKinsey and Oxford University study cites a bank that negotiated unit prices aggressively and ended up with an inexperienced team, and another that paid dearly for changes and support after a low initial price.