Finder's Fee 1

[zdas04]

[I've already dealt with this, but I thought it would be an interesting case study for discussion]

I recently prepared a cost estimate for a pipeline job including a length of pipe that had a published price of $8.45/ft. In this market, discounts off published prices are very rare and premiums abouve published price are pretty common.

When my client placed the order, the manufacturer called me and said that "since I had sent so much business their way, they would sell my client the pipe for $7.50/ft and pay me a 2% "finder's fee". The options that I saw were:
1. Accept the finder's fee and my client's appreciation for saving them 11% on a big-ticket item, but don't disclose the fee.
2. Accept the finder's fee, but tell the client about it.
3. Ask the manufacturer to subtract the finder's fee from the invoice to my client.

If the discussion gets interesting on this, I'll post the way I resolved it.

David

 

[Ashereng]

There are private sector employers who do not allow their employees to accept anything either.

I was in a project golf tournament, sponsored and paid for by the project, and employees of the client were not allow to accept any of the "fun prizes" typical of golf tournaments. They couldn't even accept a sleeve of balls.

"Do not worry about your problems with mathematics, I assure you mine are far greater."
Albert Einstein
Have you read FAQ731-376 to make the best use of Eng-Tips Forums?

 

[LHA]

I agree with Ashereng (Petroleum) 23 Mar 06 10:08 post.

Your original post did not state that you had exclusively (or even preferentially) spec'd the $7.50 pipe; indeed, you say you didn't have a business relationship with the supplier. You based your initial cost estimate honestly on the best data available. Now you have better data, so the next time you should estimate pipe @ $7.50 - and here's what I think the crux of our disagreement is - TIMES 1.02%. Why? Because it will cost the next client $7.65 to get the item in question. Why will it be so cheap? Only because you buy a lot of pipe. They can't buy pipe for $7.50, because the market will not allow someone to give a small buyer pipe at a loss.

Do with the 2% "commission"/"finder's fee"/"whatever you want to call your profit" as you see fit, you've earned it. Your client got a better deal than they could have elsewhere, and it was due to your expertise. They will be back if they are smart, you will keep making money if you are smart, and the capitalist machine keeps feeding itself and my son for another day...sleep well


Remember, amateurs built the ark...professionals built the Titanic. -Steve

 

[stevenal]

Zdas04 is not a reseller of pipe. If he were, he would add a competitive profit on top of his cost without any ethical dilemma. He is not even a buyer of pipe. All he did was estimate the cost of the pipe. He is acting as an engineer working for and being compensated directly by a client. Congrats to Zdas04 for the right choice.

Since this is now in the realm of the hypothetical, I'd like to add a fourth option: The whole subject of ethics (especially their lack) tends to put people into defense mode. Just look at some of the threads here. Consider the mindset of the pipe seller when asked to reduce the clients invoice. Put on the spot, he is now in defense mode. He'll reduce the invoice, but future discounts may be less forthcoming. Option 4 is to gracefully accept the kickback, disclose same to client, and adjust the engineers bill to client by the same amount. No conflict of interest and no hurt feelings.

 

[zdas04]

Stevenal,
In a perfect world, Option 4 would be a great answer. The problem with ever getting a penny in your hand for even a moment is that there is a real risk of a disconnect.

For example, a guy that doesn't see my invoice providing the finders fee back to the client has a conversation with the manufacturer and the manufacturer mentions that since I hooked the company up with the manufacturer they would pay MuleShoe Engineering a finders fee like they did the last time. Word quickly spreads around the engineers in my client's company that I'm taking kickbacks (everyone gossips) and I am eased off the approved vendor list and the engineer that saw my invoice is just confused that he can't use me any more.

No amount of goodwill with one individual could ever be worth the risk appearing unethical to a large company.

David

 

[sundale]

Per Colorado Professional Engineering Law:

3.4 Licensees shall act in a professional manner for each employer or client and shall avoid conflicts of interest.

3.4.5 More than one source of compensation. Licensees shall not accept compensation, financial or otherwise, from more than one party for services on the same project, or for services pertaining to the same project, unless the circumstances are fully disclosed to, and agreed to, by all interested parties.

3.4.6 Solicitation or Acceptance of Compensation. Licensees shall not solicit or accept financial or other valuable consideration, directly or indirectly, from contractors, their agents, or other parties in connection with the work for employers or clients for which the licensee is responsible.

This law is more or less in most all states for registered engineers and architects. You made the proper ethical, and most likely legal, decision. Your client should bring you some good beer at the very least...