Consulting Fees

[Bob George]

"Derek Neighbors" <derek@gnue.org> wrote:

> > 1. Administration - Execs, secretaries, and accounting do not come for
free
>
> So all these one person shops have full time secrectaries?  Give me a
> break.

No, but you have to figure admin and managment costs in when you're
comparing the costs of staff headcount against a consultant. FTEs require
administration and management as an employee. The indpendent consultant does
not. That's part of the value proposition.

> [...]
> Thats right I dont count this, why should a company pay for you not
> working?  If you dont have work to keep you busy get out of the consulting
> business.

You need to add those costs to the FTE column when comparing. FTEs require
vacation and sick time, the independent consultant does not. That's part of
the value proposition.

> [...]
> Why should they pay for YOUR training, you arent THEIR employee.

The staff headcount requires training costs to be figured in the comparison.
The independent consultant does not. That's part of the value proposition.

> [...]
> Um 60,000 a year for an independent consultant seems ok to me, especially
> when this list is constantly complaining there is NO WORK IN PHOENIX and
> they are resorting to flipping burgers.

How good of you. Only hire the ones you think "worth it" then. I think most
FTEs aren't worth more than about $40K. What the hell does that have to do
with anything?

Companies I work for don't only do consulting locally. That helps smooth the
rough times over considerably, and a lot of markets bear far higher rates
than Phoenix. The costs of travel go into the calculation of course.

> [...]
> I call it scalping because people are wanting 100% pay for 60% work.
> Thats wrong.  Im not saying my math was perfect but even if you DOUBLED my
> 40/hr thats 80/hr so how is $125 anything other than gouging?

It's just as wrong for you to be paid while sick, just as wrong for you to
charge your company for vacation, just as wrong for you to be paid while
attending trade shows and training. You're not WORKING, why should you be
PAID? And hell, you probalby aren't working as hard as the soldiers,
firefighters and policmen out there who are doing REAL work. Why should you
get more? You don't put your life on the line! Why should you get more than
a schoolteacher? What a RACKET!

A consultant comes in a charges a higher rate for a shorter period. Consider
some of the factors above, and you'll see that a full time employee costs a
hell of a lot more than just salary + $10K + 10% bennies. The value of a
consultant is that they do NOT require as much overhead, and can be called
upon as needed. If you need specialized skills, then expect to pay
specialist rates.

> That said companies are paying that and as long as they do people will
> gouge.

If you use your apple-to-oranges comparison, sure it look like gouging. Keep
in mind that a project usually has a limited life time, and a consultant
will only be involved with part of that. Consultants charge based on the
VALUE they provide, not a flat fixed hourly rate. If your managmenet has any
sense, they bring in consultants when the VALUE they provide offsets
(hopefully many times) the costs of the engagement.

I don't know about where you work, but most people I know in IT do NOT have
extra hours to handle more projects. Consultants come in and help out where
needed, either doing basic work (staff aug) or specialized work that the
client company can't justify bringing on an FTE for. To be fair in your
comparison, and all of the costs you overlooked (training, management,
administration) need to be compared. Consider that an FTE specialist will
probably ask more than $60K, and the rates consultant charge aren't all that
unreasonable. Add to that that FTEs do NOT "work" for all the hours they're
paid (vacation, sick and smoke break/crappper time) and consultants start to
look like a bargain.

It's the same reason it'll cost me $300 to have a bumper touched up at my
car dealership. They don't pay the guy doing the work anywhere near that,
and the equipment and paint doesn't cost that much. But I don't have the
skills, equipment or TIME to do it out myself. 'Course I won't be getting it
touched up either, but apparently enough folks do to keep the guy busy
painting bumpers. Maybe with shopping around, I can find someone to do it
for less (maybe). I probably won't have the same confidence in them (fairly
or not), and they'll still charge what you would say are unreasonable rates,
FAR in excess of an hourly salary of $60K if extended out to a 40 hour
workweek 52 weeks per year. SO WHAT? They have the skills and the abilities.
I may get the same quality of work from the small guy, or I can "play it
safe" with the known quantity at the dealership. But I'm not going to be
paying the guy $25-40 an hour plus expenses unless he's not in it for the
money.

- Bob