RoC & Ethics Scenario Discussion: Fee Bidding

Scenario 1: Fee Bidding

APCeye+RoCEthicsA client is engaging with 4 Surveyors to tender / bid for some work.  All parties have exactly the same brief.

The tender / bids are received and the client decides to discuss the opportunity to reduce the tender / bid with one Surveyor.  The client informs the Surveyor that they are their preferred Surveyor and if they could reduce their bid by £5,000 they would undercut the lowest tender / bid which is £12,000.  The client also reliably informs the Surveyor that they have another two projects lined up if they do this deal now.

Discuss the Ethical Issues?

See ALL of the Discussions HERE:  https://apceye.wordpress.com/roc-ethical-scenario-discussions/

Have you got a Rules of Conduct / Ethical Scenario that you would like to suggest for future discussion?   Email the details to me at:  jon@delever.com 

15 thoughts on “RoC & Ethics Scenario Discussion: Fee Bidding

  1. As the Surveyor, I would have to stand by my original tender/bid. Whilst it may have been higher than the other Surveyors, I was acting with integrity providing a bid which adequately encompassed the scope of works in the first place, thus by reducing it I am undermining the fact that I am acting within my limitations. I would stand my ground and allow the client the opportunity to make an informed decision.

    The issue with the client informing the Surveyor of additional work at a later date if a deal is done now is clearly a bribe and is therefore illegal under the Bribery Act.

    • I concur with Stuart’s points. I just have a few to add ;

      If the surveyor is willing to drop their price so significantly, will they be allowing sufficient time and resources required to complete the works adequately?

      Is there likely to be variations/claims for additional works that may not have come to fruition if the works were completed at full price?

      From the surveyors point of veiw – will the client expect reductions in price on future projects? Is this a sustainable way to run a practice?

  2. My view is that it would be unprofessional and unethical to accpet the proposal to reduce the fee and I would advise the client of this. Also, by accepting, it would not promote trust in the profession and go against RICS ethics.

    The original fee was priced against the same information as your competitors and therefore, you would have to stand by the sumbmission. As a result, the business would need to take a view on their pricing rates as obviously, they were not competitive for this scheme.

  3. There are two issues at play here. The first issue relates to fee undercutting. The RICS discourages agressive fee cutting but encourages healthy competition; after all, this is what contributes to set the market level for competitivley priced fees. It is still possible to enter into further fee negotiations with a prospective client following an initial fee proposal so long as you maintain a professional stance and demonstrate respect for others. Therefore, you should not undercut another firm but should you wish to renegotiate your original fee quote, consider varying the level of service to reflect the revised fee. Also consider whether it is still possible to offer the service at such a substantial discount; it may be better to stand by your original quote, after all it was set at this level for a reason.

    The second issue, where the potential client offers the forthcoming projects to secure the lower fee, is bribery and is therefore illegal under the Bribery Act 2010.

  4. Looking at each of the Ethical Standards separately

    1. Integrity – Reducing your bid is certainly not acting in an honest and straightforward manner. I definitely wouldn’t like to read about my actions in the press putting myself in the position of co-bidders for the contract – I would not like to be treated this way.

    2. High Standard of Service – can I realistically provide the level of service required if I knock £5,000 off my bid or will I have to cut corners and offer a lower standard of service?

    3. Promote Trust in the Profession – Acting on the information of my client to reduce my bid and undercut the others does not promote any trust in myself or the profession

    4. Treat others with respect – I would not be treating my co-bidders with respect. I wouldn’t like it if this happened to me

    5. Take responsibility – just to passively turn a blind eye and accept the advice from your client is wrong. You need to be accountable and act if something doesn’t feel right.

  5. The only way one should reduce ones fees is if there is a reduction in the service level ie a change of scope of works.
    Cutting ones fee is not the right thing to do even if it was ethical it undermines ones worth. If you needed surgery would you want the cheapest surgeon to do the job? Why therefore would you want to be the cheapest surveyor.?
    If the tender was not what the client could have afforded in the first place then he will need to think about his selection process. He may need advice on what he requires and how that can be correctly tendered. I would suggest that if he is tendering on price alone then he is not looking for best value.
    To go to one of the suppliers/surveyors to negotiate is not unheard of but will fly in the face of corporate governance and public procurement rules. If the decision to go to tender was correct in the first place then one has to question why the change.
    I suggest that you should talk to your potential client and understand what he needs. It would be ethical to then advise on the best procurement route. Hopefully the honest approach will be appreciated but if not would you really want to work for that client?

  6. I would not accept the offer from the client because the tender would have been based upon a proper assessment of the work. Ethically it would be wrong to accept because it is not a ‘honest and transparent’ transaction, the offer of incentives to drop the price is tantamount to bribery as other contributors have advised.
    RICS is committed to setting and upholding the highest standards of excellence and integrity, we aspire to be a part of the organisation and to agree to the client’s deal or recommend it to the firm would be going against the ethics and code of conduct.
    I wouldn’t even consider revising the tender to cut out items to make it cost neutral as it would be dishonest, knowing that others have put in lower bids. Just knowing, it would feel wrong to act upon it.

  7. Final Commentary from Jon Lever FRICS

    Thank you to everyone who has contributed to this discussion. Ethics is often a very hard subject to fathom and the range of inputs has been great.

    So, to summarise this scenario and the key issues:

    1. Unfair Competition: I feel this is the most important issue and the fact the client has given you inside information regarding your competitors. As Chartered Surveyors we should have utmost respect for our fellow Chartered Surveyor and not enter into any unfair negotiations. This situation may have arisen due to an unaware / innocent client thinking that they could negotiate a lower figure. However, for whatever the reason I would ensure I explain to the client (in a very professional, tactful and gentle manner) that professionally I do not do business in this fashion. Remember Professional Ethics is primarily based upon the issue of RESPECT for one another.

    2. ‘Dutch Auction’: This is often a term used to describe a bidding war where the client is purposely and unprofessionally trying to play one party off against another until a price is reached that the client feels is the lowest they can achieve but often potentially leaving all other parties at risk and in a position where they potentially got carried away with the bidding and cost reduction that they inevitably cannot provide the level of service required for the fee (don’t confuse this with other types of professional and acceptable fee negotiation) . Again, I would not get involved in anything like this for the reason stated in item 1 above. Also if I am willing to reduce my fee maybe I should have quoted a more competitive one in the first place! There is also the potential issue of fee reductions suppressing the market and if you are willing to deliver a service at a low price then that may be conceived as the price it should be for the foreseeable future!

    3. What are you worth?: I think this is a hugely important issue and that we should always professionally quote fee levels which are reasonable for the level of work being provided, not forgetting the quality and professionalism that we bring to the market place. If you are over pricing your services for the quick win or so you can offer the client big discounts in order to win favour, then these are marketing techniques that I believe we should not really be involved in. Also as noted in item 2 above suppressing fee levels in the market place does not do you or your other Chartered Surveyor competitors any favours and has the potential to lead to future problems.

    4. Quality of work: This scenario often nurtures discussion around reduction of service and scope of work to reduce the fee. But, again, we must ask ourselves the question… “If we reduce our scope are we still providing a full professional service?” If not then we should STOP and question our actions / motive.

    5. Scope of Work: I think and have always maintained an attitude of openness and transparency with the work I provide. So a robust proposal / fee bid, clearly (and simply) outlining the content and a price breakdown has always been of highest importance for me. This has the added benefit that any client can see the full detail of the service provided and price it is being delivered for. This has a range of benefits but primarily if the client wants more or less you can easily identify what is or is not included in your service and what the likely cost would be should they require additional service. Don’t forget, one of our global ethical standards discusses the issue of simple, well explained information to allow our clients to make informed decisions.

    6. Fee Negotiation: Now if the client approached me and stated I was not the lowest (without giving any further information or figures) but could I review my fee as I was the preferred supplier, then this may afford me the opportunity to review and may be, just may be, offer a reduction (i.e. make a commercial decision). However, I would still very much have all of the above items in mind. I think, personally, I am very reticent in offering any reduction as whatever service I provide I would hope would be seen as being at a fair fee and adding value to the client.

    7 Bribery: Yes, clearly, a number of you picked up the ‘incentive’ mentioned by the client, which could be seen to be or lead to an issue of Bribery. This is clearly not a good situation to find yourself in and the Bribery Act 2010 is clearly explained by the UK Justice Ministry in their guidance notes. See http://www.apccentre.com for the quick links to this information.

    Kind regards
    Jon

  8. I am about to sit my APC (in 8 days time) and this discussion has been very helpful for my revision. Thank you!

  9. Thanks for this valuable feedback. I will be sitting for APC in this month end.

    One of my case study presented is on negotiation to finalize vendor and feel this will really help me for any queries raised by the panel

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