- •In praise of the fourth edition
- •CONTENTS
- •FOREWORD
- •The concept of consulting
- •Purpose of the book
- •Terminology
- •Plan of the book
- •ABBREVIATIONS AND ACRONYMS
- •1.1 What is consulting?
- •Box 1.1 On giving and receiving advice
- •1.2 Why are consultants used? Five generic purposes
- •Figure 1.1 Generic consulting purposes
- •Box 1.2 Define the purpose, not the problem
- •1.3 How are consultants used? Ten principal ways
- •Box 1.3 Should consultants justify management decisions?
- •1.4 The consulting process
- •Figure 1.2 Phases of the consulting process
- •1.5 Evolving concepts and scope of management consulting
- •2 THE CONSULTING INDUSTRY
- •2.1 A historical perspective
- •2.2 The current consulting scene
- •2.3 Range of services provided
- •2.4 Generalist and specialist services
- •2.5 Main types of consulting organization
- •2.6 Internal consultants
- •2.7 Management consulting and other professions
- •Figure 2.1 Professional service infrastructure
- •2.8 Management consulting, training and research
- •Box 2.1 Factors differentiating research and consulting
- •3.1 Defining expectations and roles
- •Box 3.1 What it feels like to be a buyer
- •3.2 The client and the consultant systems
- •Box 3.2 Various categories of clients within a client system
- •Box 3.3 Attributes of trusted advisers
- •3.4 Behavioural roles of the consultant
- •Box 3.4 Why process consultation must be a part of every consultation
- •3.5 Further refinement of the role concept
- •3.6 Methods of influencing the client system
- •3.7 Counselling and coaching as tools of consulting
- •Box 3.5 The ICF on coaching and consulting
- •4 CONSULTING AND CHANGE
- •4.1 Understanding the nature of change
- •Figure 4.1 Time span and level of difficulty involved for various levels of change
- •Box 4.1 Which change comes first?
- •Box 4.2 Reasons for resistance to change
- •4.2 How organizations approach change
- •Box 4.3 What is addressed in planning change?
- •Box 4.4 Ten overlapping management styles, from no participation to complete participation
- •4.3 Gaining support for change
- •4.4 Managing conflict
- •Box 4.5 How to manage conflict
- •4.5 Structural arrangements and interventions for assisting change
- •5 CONSULTING AND CULTURE
- •5.1 Understanding and respecting culture
- •Box 5.1 What do we mean by culture?
- •5.2 Levels of culture
- •Box 5.2 Cultural factors affecting management
- •Box 5.3 Japanese culture and management consulting
- •Box 5.4 Cultural values and norms in organizations
- •5.3 Facing culture in consulting assignments
- •Box 5.5 Characteristics of “high-tech” company cultures
- •6.1 Is management consulting a profession?
- •6.2 The professional approach
- •Box 6.1 The power of the professional adviser
- •Box 6.2 Is there conflict of interest? Test your value system.
- •Box 6.3 On audit and consulting
- •6.3 Professional associations and codes of conduct
- •6.4 Certification and licensing
- •Box 6.4 International model for consultant certification (CMC)
- •6.5 Legal liability and professional responsibility
- •7 ENTRY
- •7.1 Initial contacts
- •Box 7.1 What a buyer looks for
- •7.2 Preliminary problem diagnosis
- •Figure 7.1 The consultant’s approach to a management survey
- •Box 7.2 Information materials for preliminary surveys
- •7.3 Terms of reference
- •Box 7.3 Terms of reference – checklist
- •7.4 Assignment strategy and plan
- •Box 7.4 Concepts and terms used in international technical cooperation projects
- •7.5 Proposal to the client
- •7.6 The consulting contract
- •Box 7.5 Confidential information on the client organization
- •Box 7.6 What to cover in a contract – checklist
- •8 DIAGNOSIS
- •8.1 Conceptual framework of diagnosis
- •8.2 Diagnosing purposes and problems
- •Box 8.1 The focus purpose – an example
- •Box 8.2 Issues in problem identification
- •8.3 Defining necessary facts
- •8.4 Sources and ways of obtaining facts
- •Box 8.3 Principles of effective interviewing
- •8.5 Data analysis
- •Box 8.4 Cultural factors in data-gathering – some examples
- •Box 8.5 Difficulties and pitfalls of causal analysis
- •Figure 8.1 Force-field analysis
- •Figure 8.2 Various bases for comparison
- •8.6 Feedback to the client
- •9 ACTION PLANNING
- •9.1 Searching for possible solutions
- •Box 9.1 Checklist of preliminary considerations
- •Box 9.2 Variables for developing new forms of transport
- •9.2 Developing and evaluating alternatives
- •Box 9.3 Searching for an ideal solution – three checklists
- •9.3 Presenting action proposals to the client
- •10 IMPLEMENTATION
- •10.1 The consultant’s role in implementation
- •10.2 Planning and monitoring implementation
- •10.3 Training and developing client staff
- •10.4 Some tactical guidelines for introducing changes in work methods
- •Figure 10.1 Comparison of the effects on eventual performance when using individualized versus conformed initial approaches
- •Figure 10.2 Comparison of spaced practice with a continuous or massed practice approach in terms of performance
- •Figure 10.3 Generalized illustration of the high points in attention level of a captive audience
- •10.5 Maintenance and control of the new practice
- •11.1 Time for withdrawal
- •11.2 Evaluation
- •11.3 Follow-up
- •11.4 Final reporting
- •12.1 Nature and scope of consulting in corporate strategy and general management
- •12.2 Corporate strategy
- •12.3 Processes, systems and structures
- •12.4 Corporate culture and management style
- •12.5 Corporate governance
- •13.1 The developing role of information technology
- •13.2 Scope and special features of IT consulting
- •13.3 An overall model of information systems consulting
- •Figure 13.1 A model of IT consulting
- •Figure 13.2 An IT systems portfolio
- •13.4 Quality of information systems
- •13.5 The providers of IT consulting services
- •Box 13.1 Choosing an IT consultant
- •13.6 Managing an IT consulting project
- •13.7 IT consulting to small businesses
- •13.8 Future perspectives
- •14.1 Creating value
- •14.2 The basic tools
- •14.3 Working capital and liquidity management
- •14.4 Capital structure and the financial markets
- •14.5 Mergers and acquisitions
- •14.6 Finance and operations: capital investment analysis
- •14.7 Accounting systems and budgetary control
- •14.8 Financial management under inflation
- •15.1 The marketing strategy level
- •15.2 Marketing operations
- •15.3 Consulting in commercial enterprises
- •15.4 International marketing
- •15.5 Physical distribution
- •15.6 Public relations
- •16 CONSULTING IN E-BUSINESS
- •16.1 The scope of e-business consulting
- •Figure 16.1 Classification of the connected relationship
- •Box 16.1 British Telecom entering new markets
- •Box 16.2 Pricing models
- •Box 16.3 EasyRentaCar.com breaks the industry rules
- •Box 16.4 The ThomasCook.com story
- •16.4 Dot.com organizations
- •16.5 Internet research
- •17.1 Developing an operations strategy
- •Box 17.1 Performance criteria of operations
- •Box 17.2 Major types of manufacturing choice
- •17.2 The product perspective
- •Box 17.3 Central themes in ineffective and effective development projects
- •17.3 The process perspective
- •17.4 The human aspects of operations
- •18.1 The changing nature of the personnel function
- •18.2 Policies, practices and the human resource audit
- •Box 18.1 The human resource audit (data for the past 12 months)
- •18.3 Human resource planning
- •18.4 Recruitment and selection
- •18.5 Motivation and remuneration
- •18.6 Human resource development
- •18.7 Labour–management relations
- •18.8 New areas and issues
- •Box 18.2 Current issues in Japanese human resource management
- •Box 18.3 Current issues in European HR management
- •19.1 Managing in the knowledge economy
- •Figure 19.1 Knowledge: a key resource of the post-industrial area
- •19.2 Knowledge-based value creation
- •Figure 19.2 The competence ladder
- •Figure 19.3 Four modes of knowledge transformation
- •Figure 19.4 Components of intellectual capital
- •Figure 19.5 What is your strategy to manage knowledge?
- •19.3 Developing a knowledge organization
- •Figure 19.6 Implementation paths for knowledge management
- •Box 19.1 The Siemens Business Services knowledge management framework
- •20.1 Shifts in productivity concepts, factors and conditions
- •Figure 20.1 An integrated model of productivity factors
- •Figure 20.2 A results-oriented human resource development cycle
- •20.2 Productivity and performance measurement
- •Figure 20.3 The contribution of productivity to profits
- •20.3 Approaches and strategies to improve productivity
- •Figure 20.4 Kaizen building-blocks
- •Box 20.1 Green productivity practices
- •Figure 20.5 Nokia’s corporate fitness rating
- •Box 20.2 Benchmarking process
- •20.4 Designing and implementing productivity and performance improvement programmes
- •Figure 20.6 The performance improvement planning process
- •Figure 20.7 The “royal road” of productivity improvement
- •20.5 Tools and techniques for productivity improvement
- •Box 20.3 Some simple productivity tools
- •Box 20.4 Multipurpose productivity techniques
- •Box 20.5 Tools used by most successful companies
- •21.1 Understanding TQM
- •21.2 Cost of quality – quality is free
- •Figure 21.1 Typical quality cost reduction
- •Box 21.1 Cost items of non-conformance associated with internal and external failures
- •Box 21.2 The cost items of conformance
- •21.3 Principles and building-blocks of TQM
- •Figure 21.2 TQM business structures
- •21.4 Implementing TQM
- •Box 21.3 The road to TQM
- •Figure 21.3 TQM process blocks
- •21.5 Principal TQM tools
- •Box 21.4 Tools for simple tasks in quality improvement
- •Figure 21.4 Quality tools according to quality improvement steps
- •Box 21.5 Powerful tools for company-wide TQM
- •21.6 ISO 9000 as a vehicle to TQM
- •21.7 Pitfalls and problems of TQM
- •21.8 Impact on management
- •21.9 Consulting competencies for TQM
- •22.1 What is organizational transformation?
- •22.2 Preparing for transformation
- •Figure 22.1 The change-resistant organization
- •22.3 Strategies and processes of transformation
- •Figure 22.2 Linkage between transformation types and organizational conditions
- •Figure 22.3 Relationships between business performance and types of transformation
- •Box 22.1 Eight stages for transforming an organization
- •22.4 Company turnarounds
- •Box 22.2 Implementing a turnaround plan
- •22.5 Downsizing
- •22.6 Business process re-engineering (BPR)
- •22.7 Outsourcing and insourcing
- •22.8 Joint ventures for transformation
- •22.9 Mergers and acquisitions
- •Box 22.3 Restructuring through acquisitions: the case of Cisco Systems
- •22.10 Networking arrangements
- •22.11 Transforming organizational structures
- •22.12 Ownership restructuring
- •22.13 Privatization
- •22.14 Pitfalls and errors to avoid in transformation
- •23.1 The social dimension of business
- •23.2 Current concepts and trends
- •Box 23.1 International guidelines on socially responsible business
- •23.3 Consulting services
- •Box 23.2 Typology of corporate citizenship consulting
- •23.4 A strategic approach to corporate responsibility
- •Figure 23.1 The total responsibility management system
- •23.5 Consulting in specific functions and areas of business
- •23.6 Future perspectives
- •24.1 Characteristics of small enterprises
- •24.2 The role and profile of the consultant
- •24.4 Areas of special concern
- •24.5 An enabling environment
- •24.6 Innovations in small-business consulting
- •25.1 What is different about micro-enterprises?
- •Box 25.1 Consulting in the informal sector – a mini case study
- •25.3 The special skills of micro-enterprise consultants
- •Box 25.2 Private consulting services for micro-enterprises
- •26.1 The evolving role of government
- •Box 26.1 Reinventing government
- •26.2 Understanding the public sector environment
- •Figure 26.1 The public sector decision-making process
- •Box 26.2 The consultant–client relationship in support of decision-making
- •Box 26.3 “Shoulds” and “should nots” in consulting to government
- •26.3 Working with public sector clients throughout the consulting cycle
- •26.4 The service providers
- •26.5 Some current challenges
- •27.1 The management challenge of the professions
- •27.2 Managing a professional service
- •Box 27.1 Challenges in people management
- •27.3 Managing a professional business
- •Box 27.2 Leverage and profitability
- •Box 27.3 Hunters and farmers
- •27.4 Achieving excellence professionally and in business
- •28.1 The strategic approach
- •28.2 The scope of client services
- •Box 28.1 Could consultants live without fads?
- •28.3 The client base
- •28.4 Growth and expansion
- •28.5 Going international
- •28.6 Profile and image of the firm
- •Box 28.2 Five prototypes of consulting firms
- •28.7 Strategic management in practice
- •Box 28.3 Strategic audit of a consulting firm: checklist of questions
- •Box 28.4 What do we want to know about competitors?
- •Box 28.5 Environmental factors affecting strategy
- •29.1 The marketing approach in consulting
- •Box 29.1 Marketing of consulting: seven fundamental principles
- •29.2 A client’s perspective
- •29.3 Techniques for marketing the consulting firm
- •Box 29.2 Criteria for selecting consultants
- •Box 29.3 Branding – the new myth of marketing?
- •29.4 Techniques for marketing consulting assignments
- •29.5 Marketing to existing clients
- •Box 29.4 The cost of marketing efforts: an example
- •29.6 Managing the marketing process
- •Box 29.5 Information about clients
- •30 COSTS AND FEES
- •30.1 Income-generating activities
- •Table 30.1 Chargeable time
- •30.2 Costing chargeable services
- •30.3 Marketing-policy considerations
- •30.4 Principal fee-setting methods
- •30.5 Fair play in fee-setting and billing
- •30.6 Towards value billing
- •30.7 Costing and pricing an assignment
- •30.8 Billing clients and collecting fees
- •Box 30.1 Information to be provided in a bill
- •31 ASSIGNMENT MANAGEMENT
- •31.1 Structuring and scheduling an assignment
- •31.2 Preparing for an assignment
- •Box 31.1 Checklist of points for briefing
- •31.3 Managing assignment execution
- •31.4 Controlling costs and budgets
- •31.5 Assignment records and reports
- •Figure 31.1 Notification of assignment
- •Box 31.2 Assignment reference report – a checklist
- •31.6 Closing an assignment
- •32.1 What is quality management in consulting?
- •Box 32.1 Primary stakeholders’ needs
- •Box 32.2 Responsibility for quality
- •32.2 Key elements of a quality assurance programme
- •Box 32.3 Introducing a quality assurance programme
- •Box 32.4 Assuring quality during assignments
- •32.3 Quality certification
- •32.4 Sustaining quality
- •33.1 Operating workplan and budget
- •Box 33.1 Ways of improving efficiency and raising profits
- •Table 33.2 Typical structure of expenses and income
- •33.2 Performance monitoring
- •Box 33.2 Monthly controls: a checklist
- •Figure 33.1 Expanded profit model for consulting firms
- •33.3 Bookkeeping and accounting
- •34.1 Drivers for knowledge management in consulting
- •34.2 Factors inherent in the consulting process
- •34.3 A knowledge management programme
- •34.4 Sharing knowledge with clients
- •Box 34.1 Checklist for applying knowledge management in a small or medium-sized consulting firm
- •35.1 Legal forms of business
- •35.2 Management and operations structure
- •Figure 35.1 Possible organizational structure of a consulting company
- •Figure 35.2 Professional core of a consulting unit
- •35.3 IT support and outsourcing
- •35.4 Office facilities
- •36.1 Personal characteristics of consultants
- •36.2 Recruitment and selection
- •Box 36.1 Qualities of a consultant
- •36.3 Career development
- •Box 36.2 Career structure in a consulting firm
- •36.4 Compensation policies and practices
- •Box 36.3 Criteria for partners’ compensation
- •Box 36.4 Ideas for improving compensation policies
- •37.1 What should consultants learn?
- •Box 37.1 Areas of consultant knowledge and skills
- •37.2 Training of new consultants
- •Figure 37.1 Consultant development matrix
- •37.3 Training methods
- •Box 37.2 Training in process consulting
- •37.4 Further training and development of consultants
- •37.5 Motivation for consultant development
- •37.6 Learning options available to sole practitioners
- •38 PREPARING FOR THE FUTURE
- •38.1 Your market
- •Box 38.1 Change in the consulting business
- •38.2 Your profession
- •38.3 Your self-development
- •38.4 Conclusion
- •APPENDICES
- •4 TERMS OF A CONSULTING CONTRACT
- •5 CONSULTING AND INTELLECTUAL PROPERTY
- •7 WRITING REPORTS
- •SUBJECT INDEX
APPENDIX 4
TERMS OF A CONSULTING CONTRACT
This appendix supplements section 7.6 on consulting contracts. These contracts come in many different forms and degrees of detail. It is useful to be aware of differences in national legislation and practice concerning contracting in general, and contracts for the provision of professional services in particular. In international contracts, the client and the consultant should agree on the applicable law, which is usually the law of the client organization’s home country. In exceptional and justified cases the consultant and the client may agree to apply the law of the consultant’s country or the law of another jurisdiction that is considered neutral by both parties.
The consultant may be requested to accept the client’s standard form and conditions of contract. This is normally the case if the assignment is part of a programme financed by a technical assistance agency or a development bank, and if the work is for public sector clients.
In other cases, the consultant will be able to use his or her own form of contract, or develop a contract in agreement with the client. To support their members, some consultants’ associations have prepared standard contract clauses, or guidelines for contract terms and conditions, reflecting the profession’s experience.
In any event, it is strongly recommended to consult a lawyer on the contract form to be used and on unusual contract clauses suggested either by the client or the consultant. Certain provisions that may look familiar and are sometimes referred to as “boilerplate” (e.g. indemnification and dispute resolution clauses) may prove particularly onerous for one of the parties if they are not properly drafted.
The comments that follow are structured in accordance with the checklist in box 7.6, “What to cover in a contract – checklist” (section 7.6).
1.Contracting parties
It should be made clear not only who signs the contract (and its cancellation, amendments, etc.), but also who will make operational decisions on work progress, changes in the workplan and staffing, and results. In reality, there are several
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categories of “client” in most organizations, as pointed out in section 3.2. Technical assistance contracts are often signed by the funding agency, but the real client is the organization receiving assistance. What will be its roles and rights in preparing and implementing the contract?
2.Scope of the assignment
This section describes the work to be performed, the objectives to be achieved, the timetable and the volume of work. Although it is the core section of the contract, its importance is often underestimated. Many consultants feel that their objective should be to sign the contract even if the scope of work has not been fully clarified and could be viewed differently by the consultant or the client. Their credo is: Why bother with detailed work descriptions and plans when we know well that eventually the client will want something else? While flexibility is the consultant’s major virtue, a lack of detail and precision in outlining what should be done and achieved has made the life of many consultants and clients difficult.
3.Work products and reports
This section describes the so-called “deliverables”, i.e. specific documents and reports that the consultant will be transmitting to the client during and at the end of the assignment. Here, too, a great deal of misunderstanding can be avoided by being as specific as possible in describing what the client will receive. What is “a report”? What do we mean by “complete documentation on a training programme for sales managers”?
Unnecessary written reports should not be requested. They take up both the consultant’s and the client’s time without changing anything in the course of the assignment. Conversely, the need for frequent and short progress review meetings is not fully appreciated in many contracts.
4.Consultant and client inputs
Consultant inputs to the assignment are those that have to be provided within the given contract framework. This may include names (and curricula vitae) of operating consultants, names of partners and other seniors responsible for managing and backstopping the assignment, management systems and other proprietary know-how to be provided, and other inputs. It should be clearly stated which inputs will be provided within the agreed fee and which will only be available against additional payment. Any such additional inputs will require the client’s prior approval.
Furthermore, there should be no ambiguity as regards changes in the agreed inputs – when and under what conditions would the consulting firm be authorized to assign different staff, and when and how would the client be able to ask the consultant to replace the staff assigned to the project. If the client has selected not only a consulting firm, but also particular people within the firm, the client’s view should prevail in any such changes.
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Client inputs, such as time spent on the assignment by managerial and technical personnel, or administrative support, are often taken for granted and vaguely defined. In implementing assignments, many consultants do not insist on timely and full provision of inputs promised by clients. This practice increases the duration and costs of many assignments, and can cause a great deal of disenchantment. The consultant proceeds alone with the work, only to find that the client is not happy with the results and will not accept them.
5.Fees and expenses
Chapter 30 provides comments on desirable and undesirable fee-setting and billing practices. In drafting a contract, the fee formula applied, the estimated or agreed total fee, the conditions under which fees may be adjusted, and any expenses that will be charged separately should be clearly set out.
6.Billing and payment procedure
This procedure is also described in Chapter 30. The contract should set out the conditions to be met in requesting advance, interim and final payments, such as the reports that have to be submitted and accepted, the time records to be provided, and the way of presenting bills.
7.Professional responsibilities and standard of care
As a rule, the consultant will refer to the consulting association’s or his or her firm’s code of ethics and professional conduct (and attach such a code to the contract text). If necessary, the contract may also include special clauses on questions such as conflicts of interest to be avoided or activities from which the consultant agrees to refrain.
8.Representations
Consultants should avoid making false or inaccurate statements during the negotiations or in the contract in describing the firm’s or individual consultants’ capabilities and achievements. By misrepresenting or overstating their education, experience, work methods and results achieved, the consultants who fail to meet their clients’ expectations may, in addition to tarnishing their reputation, expose themselves to liability for breach of contract or fraud.
Before stating, for example, that you employ only “highly qualified and proficient staff” or that your problem-solving or change-management methodology has “saved clients millions of dollars”, you should consider whether you would be in a position to substantiate such statements were you required to do so in judicial proceedings brought by an unhappy client. Obviously, a distinction should be made between such self-laudatory statements which, if not a sign of good taste, are usually not susceptible of attracting liability. For example, a consultant may state that he or she is an “excellent professional”, or “leading authority in his or her
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field”. This may be untrue, but it is not a misrepresentation within the meaning defined above.
9.Confidentiality
During the assignment, the consultant may have access to confidential information of the client. Conversely, the consultant may, in certain cases, disclose confidential information to the client in performing the assignment. Each party agrees to keep confidential the information disclosed by the other party. Confidential information should be clearly identified. The parties will wish to exclude certain categories of information. Information that is publicly available is a common exclusion. Other exclusions may include information that a party is required to disclose by virtue of applicable law, court decision or government action. It is advisable to consider whether the confidentiality obligation should last indefinitely or end after a few years.
10. Protection of intellectual property
Increasingly, consultants use methodologies and training materials covered by copyright, patents or trademarks (see also Appendix 5). The contract will set the conditions under which these materials are available to the client (limited use within the client firm, no reproduction, fee to be paid for use, and similar).
Copyright in the materials produced as part of the assignment can be handled in various ways and is a matter of negotiation. Some clients insist that any copyright to works produced for their money belongs to them. Other clients want to be able to use the materials at their own discretion within the limits of their organizations, but agree that copyright should stay with the consultant (especially if the material is not a joint product of the consultant’s and the client’s work).
In many civil law countries, copyright is not transferable. However, the consultant may grant the client an exclusive or non-exclusive licence to use the work, namely to carry out certain acts that would otherwise infringe the copyright in the work (for example, the consultant may agree that the client will have the exclusive or non-exclusive right to publish, edit and broadcast the work).
11. Liability
As pointed out in section 6.5, legal liability is a relatively new phenomenon in consulting contracts and in many contract texts there is no reference to any liability. Yet liability questions should be given due consideration and the consultant may wish, or be obliged to, take out a liability insurance. This is especially the case if the advice to be provided will have a major impact on the client’s business decisions, or if the consultant is designing and delivering systems that will strongly influence the client’s operations (typically in information technology consulting).
Many clients will expect the contract to contain a clause whereby the consultant agrees to indemnify the client (and possibly the client’s employees, directors and officers) with respect to any and all damages, claims, costs, expenses and losses that
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may be suffered or incurred by the client in connection with a breach of contract by the consultant and/or wilful misconduct or negligent acts of the consultant. Such an undertaking may cover a number of situations, including personal injuries suffered by the client’s employees during a training session organized by the consultant, as well as losses caused to the client by the consultant’s failure to deliver on time. The consultant should have his or her lawyer review the indemnification clause to ensure that it is fair and that it does not require the consultant to indemnify the client beyond what is usual. The consultant may sometimes also obtain a reciprocal indemnification undertaking from the client, though its scope will usually be more limited. Before agreeing to provide indemnification, the consultant should confirm that this will not negatively affect the coverage of his or her liability insurance.
The contract may attempt to limit liability and provide, for example, that the total amount of indemnification that may be owed by the consultant shall in no event exceed the total amount of fees paid by the client. However, in certain jurisdictions, a limitation of liability may not be validly agreed, or may be agreed only under certain conditions; you should therefore check whether the proposed limitation is valid under the contract’s governing law.
12. Use of subcontractors
The use of subcontractors by the consulting firm may be authorized in some contracts and the client may choose to set the conditions for such use. As a rule, reliance on a subcontractor does not excuse a breach of contract since it is the consultant rather than the subcontractor who is party to the consulting contract.
13. Termination or revision
The contract should describe the steps to be taken upon completion of the assignment, including the settlement of all commitments by both parties and the submission and acceptance of all reports and documentation.
In addition, the contract may provide for the right of the client to terminate the contract without any reason or if specified external conditions occur. Such external conditions may include, for example, a change in business environment rendering the advice useless for the client. There may, however, be a mandatory notice period (say, one week in a simple management advisory assignment, or 30–60 days in a major engineering consultancy), and/or the client may have to pay the consultant an indemnity (e.g. fees for one month of work or 20 per cent of the remaining fees). If the client wishes to terminate the contract owing to poor performance of the consultant, a precise procedure should be followed (giving the reasons in writing, asking for a reply and immediate action, etc.) and the notice period may be shorter.
The consultant must also have the possibility to withdraw from the contract in certain circumstances, e.g. if the client is not paying or has suspended operations for a defined period of time. The contract would stipulate the procedure to be observed by the consultant. If the client has been declared bankrupt, the consultant can normally terminate the contract without notice.
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Turning to revisions, the contract may determine the dates and conditions for periodic revisions to reflect changed circumstances and client needs, and the procedure for unplanned revisions suggested by either party.
14. Arbitration
The contract may provide for the resolution of disputes in court or through an alternative dispute resolution (ADR) mechanism, such as mediation or arbitration (a single arbitrator or board of arbitrators). As a rule, consulting contracts use arbitration for settling disputes that cannot be handled amicably. The contracting parties agree on the rules of arbitration and the body to which the case would be referred. The laws of the country in which the arbitration takes places will generally govern the possible means and grounds of appeal against the arbitration award. Therefore, the arbitration forum should be selected carefully.
15. Signatures and dates
It should be made clear which representatives of the client and consultant are authorized to sign the contract and its amendments, bills, formal correspondence, and legally binding commitments related to the approval and execution of the contract.
* * *
Further guidelines on contracting are available in:
●World Bank: Guidelines: Selection and employment of consultants by World Bank borrowers
( www.worldbank.org/html/opr/guidetxt/, visited on 4 Apr. 2002).
●European Union: DIS Manual (Brussels, 1999).
See europa.eu.int/comm/enlargement/pas/phare/index.html.
●International Federation of Consulting Engineers (FIDIC): Client–consultant agreement
(White Book) (Lausanne, 3rd ed., 1998). See www.fidic.org./bookshop, visited on 4 Apr. 2002.
●E. Bleach and L. Byars Swindling: The consultant’s legal guide (San Francisco, CA, JosseyBass/Pfeiffer, 1999).
●Institute of Management Consultancy (United Kingdom): Standard terms and conditions of engagement (www.imc.co.uk/index3.html, visited on 3 Apr. 2002).
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