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Last edited 14 Sep 2020

Fee proposal

A fee proposal is a proposal prepared by a consultant for a prospective client describing the services that the consultant proposes to undertake and the fee that will be charged. This may be in the form of a letter, or may be a more detailed document accompanied by a cover letter.

It is very important that the nature of an appointment is set out in detail before work commences to avoid potential confusion or misunderstanding of what is expected, how much it will cost, and what is not included, and to prevent scope creep. Institutes such as the Royal Institute of British Architects (RIBA) include a requirement for a written agreement of appointment in their code of conduct.

A fee proposal may be prepared in response to a formal ‘request for proposals’ prepared by the client, which sets out the nature of the project, the client’s requirements and the information that they expect the consultant to include in their proposals, (generally described as the ‘consultant’s proposals’), or it may be prepared following more informal communications with the client.

If the client is seeking proposals from more than one consultant, it is advisable to take the time to prepare a formal request for proposals, otherwise they run the risk that consultants will submit proposals in a range of different formats, and including a variety of information which makes it is difficult to compare one with another and select the most suitable offer.

A well-prepared request for proposals should mean that proposals received are prepared in a consistent way and can be compared on a like-for-like basis. Inexperienced clients may benefit from the assistance of an external adviser to help them describe their requirements, decide on the form of appointment, identify a short-list of potential consultants, prepare a request for proposals, assess submissions and negotiate fees.

Depending on the complexity of the project and whether the client has already provided a written description of the project and the services required, a fee proposal might include:

Details of the legal entity that is making the proposal. This is not always as clear-cut as it may seem.
A description of the project, including the project programme, anticipated cost and anticipated procurement route.
A schedule of services to be provided. This may include a description of services that are not included within the proposal (for example, making an outline planning application), and limits to certain activities (for example the number of meetings or site visits).
Details of key personnel to be allocated to the project and their roles.
Identification of any sub-consultants the consultant intends to use.
The form of agreement and conditions of engagement that will be used.
The level of professional indemnity insurance that will be provided.
The hardware and software that will be used.
The fee chargeable (and whether VAT is charged), broken down against stages of the project.
Chargeable expenses.
Hourly rates to be applied to any work outside the proposed scope of services.

Submission of a fee proposal might be followed by a period of negotiation and clarification, and then the signing of a formal agreement that sets out the exact terms of the appointment.

Letters of appointment (or letters of acceptance) are sometimes used to appoint consultants in cases where the client wants the consultant to start work quickly, while a full contract is being prepared. They may also be appropriate if a consultant is required for a very insubstantial or minor commission where a full-blown contract could be seen as heavy handed and off-putting. However, the same basic issues should be agreed and set out in writing. See letter of appointment.

In some appointment processes, a fee proposal might be used to describe just the fee element of consultant’s proposals, which also include technical proposals and perhaps design proposals. The fee proposal may be submitted in a separate sealed envelope that is not opened until after assessment of technical and design proposals so that the selection is not unduly influenced by price – which may be negotiable anyway.