Finder's Fee 2

[plasgears]

I am consulting on the side, and I have opportunities to engage other specialties for mutual benefit. The ideal situation is to charge a nominal 10% finder's fee for locating an opportunity for another specialty. It was recommended that disclosure of the opportunity should be accompanied by a simple written agreement between the other party and me. I don't want to act as a general contractor. Any comments?

 

[BobPE]

plasgears:

that is a difficult question...Many state PE boards have language that addresses this type of fee and it is generally frowned upon if not restricted for situation like taking a fee from a vendor for a certain type of equipment that went on a job.

A common element of the language among most state boards is that you have to provide engineering services to get a fee and conversely, a fee must be charged when engineering services are rendered....

I think it really depends on how you can justify the situation at hand. It is definately a slippery slope. I know several engineers that justify the practice and their names are tarnished among the construction community because they are perceived to be on the "take." Even though this is not the case, the preception is still out there and evolves into something very different than the innocent business prospect of collecting a finders fee.

When I find work that either I don't want to do, or do not have the expertise to do, I often inform other consultants to the opportunity and ask them to write me into the scope to perform some of the work if they get the project.

I think in our business, preception is everything....negative things make their way around work circles much faster than positive things...

just my thoughts...

BobPE

 

[HamishMcTavish]

Does that mean that a PE can only ever work in engineering and never do any general business consulting etc?

Surely since you are self employed and presumably do nothing to bring the profession into disrepute then why not?

More than likely once you had established good connections in the specialities that you needed, they would reciprocate using the same method. What goes around comes around but as long as business is coming in the door I don't understand BoBPE's issue with this.

BoB, could you elaborate? I don't know how someone can be 'on the take' if they need to bring in special knowledge that they do not posess. I would have thought that it would be up to the 'sub-contracting' engineer whether he thought that it was worth it or not.

Regards, HM

No more things should be presumed to exist than are absolutely necessary - William of Occam

 

[BobPE]

sorry hamish, I didn't realize this was a business forum, I thought it was an engineering forum....

my comments only pertain to a PE who wants to dispense engineering advice...it has nothing to do with anything non engineering related...if you are charging a finders fee to get a client engineering advice, then this is the concern that I have and is the focus of my original comment.

BobPE

 

[HamishMcTavish]

Sorry Bob, I thought engineering was a business...

No more things should be presumed to exist than are absolutely necessary - William of Occam

 

[PM]

BobPE:

Could you advise which engineering jurisdiction limits or restricts what has been referred to here as "finders fees"? I must admit that I've never heard of this type of restriction here in N.America. Is it just one state or are there more than one?
Regards,

 

[plasgears]

Thanks for the postings,
I merely want to receive a small fee for finding work for other specialties that flow from my design work. As an alternative, I can leave the customer with the task of finding his own subcontractor contacts.

 

[sc]

I don't actually get a finders fee for getting work for what is essentially sub-contract work.What I do get is a better rate per hour than clients can from the sub-contract engineer. The difference between their rate and mine is the cost of bringing them to the table and supervising them to ensure the work is what is required. I also still make some profit from their work. In turn I sub-contract to the same people that sub-contract to me.

To me it is a win win situation where the sub contractor has a more even (possibly) work flow and I can provide a wider range of services.


regards
sc

 

[electricpete]

If you were inside the company and got any kickback for influencing a contract to go a certain direction, that would clearly be over the line. There is no question about it. The company person would lose their job.

Shouldn't a contractor not be held to a similar standard?

As a contractor you are somehow in a position to influence the client's choice. Maybe they are under the impression that you can help them make a better choice by virtue of the fact that you work on other projects with these folks. Isn't it a betrayal of their trust to pick someone who greases your palm? I know that's how I would feel if I were the client. Do you disclose this finder's fee to your client?

I'm not saying it's wrong but seems very grey to me.

 

[sc]

Plasgears

One way about the issue is to offer your client the opportunity to let you find them 3 reputable contractors for a small fee. This is then clearly a contract to find suitable engineering firms rather than an engineering firm paying you for giving them work.

sc

 

[HamishMcTavish]

Hi electricpete,

You say "As a contractor you are somehow in a position to influence the client's choice. Maybe they are under the impression that you can help them make a better choice by virtue of the fact that you work on other projects with these folks"

Surely that is one of the reasons that someone would choose a professional engineer? You have the expertise, which includes being able to define when you need to bring in contractors AND to be able to judge whether they are competent.

Surely how you source the contractor is up to you? If you employ them because they are prepared to pay the finder's fee but they do a bad job then it reflects badly on you.

You raise an interesting point about disclosure... The original post seems to imply that the party paying the finder's fee would be the specialty contractor. If it was the other way and I was the client hiring a professional engineer I would not be happy about paying for the PE expertise and then having an estimate padded by the inclusion of finder's fees for specialty contractors.

Regards, HM

No more things should be presumed to exist than are absolutely necessary - William of Occam

 

[Hush]

If your sourcing for your client then you're acting in the capacity of a purchasing consultant. If your finding work for another firm then you're acting in the capacity of a sales agent. I see no conflict, why shouldn't you expect some renumeration?

 

[electricpete]

It is unquestionably unethical for anyone within the customer organization to receive any personal gain from exerting influence over a contract selection process. Do you agree?

If yes, then why should a contractor be held to a lesser standard for exerting influence regarding selection of a third party? Isn't that contractor acting as an agent of the customer... part of the team?

Once again I think the real test is: are you going to tell the customer about this finder's fee? If you really think there is no betrayal of the customer's trust going on, then there is no reason for you to be reluctant to tell the customer all about the finder's fee.

 

[IRstuff]

If nothing else, it's very similar to insider trading. If nor for your inside information, you would not be able to benefit from this transaction.

If you were completely unrelated to the procurement, and you act on otherwise publicly gather information, then there's no issue.

Also, having a relationship with the customer can potentially create problems for you if the person you steered to the job later defaults or otherwise fails to perform.

TTFN

 

[Hush]

I'm starting to wonder if I'm dense.

Scenario:
I design a series of widgets for a customer but I don't know anything about controls. So I says to the buyer, I know an excellent controls designer, do you want me to see if he's interested in quoting. The customer says yes. So I go to the controls designer and hand him the specs. He says he's interested in quoting. I say I want a commission if his quote is succesful.

How is that unethical?

 

[IRstuff]

There are issues that I see:

Your candidate potentially receives from you otherwise non-public information and therefore has an unfair advantage over any other person bidding on the job. Maybe this is not a big deal in commercial procurements, but in government procurements, this is a definite problem.

If your candidate does not take a reduction in profit or overall fee, then your finder's fee will be added to the cost of the new supplier and your customer is potentially paying more for services than otherwise necessary if it had been a fair and open competition.

Overall, it would seem to be something of a breech of trust, since you are technically working for your client, but potentially influencing a procurement of theirs where you have a financial interest.

The simplest solution to the dilemma is, of course, full and open disclosure to your client about your potential conflict of interest and your financial stake in the decision process. If your client is OK with this type of arrangement, then so be it. If you choose not to disclose, then when the client finds out, he may wonder about the fairness of the decision and whether you were looking out for his interests or yours, while being in his employ.

TTFN

 

[electricpete]

I agree 200%. If the client has no idea there is a finder’s fee, then he thinks you are providing him objective advice/assistance in selecting a designer free from any personal interest/bias in the selection. That is clearly not the case. Not sure whether it’s illegal but it sure could make the client mad.

Let’s say you go to your family doctor for a checkup. He tells you that you need to see a ear/nose/throat specialist to analyse a symtpom outside of his area of expertise.. He offers to put you in contact with a good e/n/t.. Later on you find out that he received 10% of the fee. You’re telling me you wouldn’t be mad at the doctor?

 

[Hush]

Sorry, I thought disclosure was obvious. The other arguments against however, strike me as somewhat ludicrous.

 

[electricpete]

With full disclosure to the customer it seems to me there is nothing unethical.

It is not at all obvious to me that full disclosure was the intent of other finder's fee proponents in this thread.

 

[IRstuff]

Maybe ludicrous for you, but grounds for dismissal and possibly jail in government contracts.

TTFN