All the consulting firms (second tier) I've worked for have priced by the hour on a time and materials basis. I've always thought this was crazy, not least cos filing timesheets is so boring.It seems like many accountants and lawyers are moving away from this to the holy grail of value pricing. (See this debate: http://www.accountingweb.co.uk/cgi-bin/item.cgi?id=172674&d=1032&h=1022&f=1026) Why is that consultants who are meant to bring innovative insights to many industries still sticking with a backwards commercial model? I'd be interested to know if you have any experience of firms not pricing based on time and rates. How it is done. And whether it has been successful (profitable + satisfied clients). Cheers

I believe this is in effect a response to the fact that few people are willing to pay £2000 a day for consultants any longer. I see it as a response to downward pressure on daily rates.

Time and materials is the perfect commercial model as you are paid on a direct correlation to the application of resource. This may be an old model but it is in no way outdated.We also work on contingency fees but only when the odds are stacked towards us - the client believes they obtain more value from this but they pay for our risk in the size of the end fee.Tim and materials offers them absolute clarity.

The issues are whether the costs are predictable to the client and whether the consultant is delivering value by working by the billed hour - which gives him or her an obvious incentive to pad the hours out. The time and materials approach doesn't necessarily give transparency at all.

IBR baby. How else is there?

The firm I work for prices work by firstly estimating the amount of time that each team member will spend on the project, and then multiplying it by their hourly rate. We do this in fine detail, right down to the last 15 minutes per each activity. Then we pick an arbitrary figure that we think the client will accept, and put that in the proposal. As the assignment progresses, we record all of the hours we work and then we write off 80% of them so that we only invoice the client for the amount written in the proposal.

SophieYou have just described my world totally - and that of my last 3 companies!It often strikes me that most users of this forum consider themselves to be "consultants" - which I've no doubt they are - but this terms masks the fact that we all carry out so many different activites.D

Easy - we ask ourselves what the client is willing to pay. We then work on a project according to what they are paying - if it's 500k, it'll be an awful lot of detailed analysis. If the only have £10k they can't expect the same amount of time as the £500k project.This may upset the people who do outsourcing but call it consulting ;-)