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Eta Energy Solutions is an innovative oil and gas engineering consultancy. It is one of the very few or perhaps the only oil and gas consultant that offers the option of value-based fees as its preferred approach. Although we can offer clients who prefer, more traditional methods of billing such as fees based on hourly/daily rates or based on deliverables, our preferred approach is to be remunerated based on the value or benefits we deliver to our clients. We don’t expect to be remunerated if we don’t provide any value or benefits to our clients.
Not based on time
Eta Energy Solutions believe that a value-based approach to billing for consultancy services is more beneficial to our clients. We pursue a value-based approach that is not based on the time taken to complete a particular piece of work. While we would spend as much time required to deliver on our clients objectives, we don’t believe that time taken to complete a study or project is a very good indicator of its value. This is because one consultant can spend a month to provide solutions that will save a client millions of pounds while another may spend three months and may not be able to provide the same client with any significant benefits. In this example, it is not the consultant who has spent more time that has offered more value but the one who has spent less time but has saved the client millions of pound in the little time spent. This is why we don’t prefer to measure the value that our clients derive based on time spent. Also, when time is the measure of value for a study or project, some consultants or contractors will tend to focus on how to use more time and seek variations to increase the time spent on the work. This is not very beneficial to the client company as consultants will tend to do a lot of insignificant and unnecessary work just to justify the time bill. If time spent is the measure of value, consultants will tend to be focused on delivering more time (which may not necessarily equate to benefits) to the client.
Not based on deliverables
Another approach that is traditionally used is for consultants to bill clients based on deliverables submitted to clients. In the case of consultancy studies, what is normally referred to as deliverables may include final reports, presentations, software or meetings. Again we would use deliverables as a vehicle to communicate the value we have provided to our clients, however we do not believe that deliverables in themselves are the best indicator of the value or the benefit of the work that consultants provide to clients. This is because deliverables like reports and presentations are only as good as what they contain. There is no guarantee that because a deliverable has been submitted, the objectives for hiring the consultant were fulfilled. At Eta, we believe that clients hire consultants for specific objectives that they want to fulfil or problems they want to solve. The main aim of clients for hiring the consultant therefore is not to get some deliverables such as reports or presentations but to solve some important problems. Deliverables may be the way that the consultant may communicate the solution or benefit to the client but they are not the benefits that the client is looking for in themselves. This is why our preference is not to go with the approach of billing based on the submission of deliverables alone. We don’t think this is beneficial to clients in the long run. When deliverables like reports or presentations are used as the main way of measuring value, the tendency for consultants is to focus on delivering the reports or presentations quickly irrespective of whether they have proffered the client a sensible, practical and cost-effective solution to their problem. In many cases, the consultants just need to provide a chunky report or presentation with sufficient colourful and glossy figures and charts that justifies that “work” has been done but this is usually very weak on solving the client’s problems or meeting their objectives. We don’t prefer this approach because we don’t believe our clients get the best value this way.
How does our value-based approach work?
Eta Energy Solutions prefer a value-based approach where clients are billed based on the value and benefits received from our services and the significant strides being made towards fulfilling their objectives. With this approach, we are not focused on time spent or deliverables submitted but our eyes are firmly on what matters to our clients – the fulfilment of their objectives (the reasons why they came to us in the first place).
So how does it work? Prior to contractual engagement, we will initially begin to discuss with our clients about potentially conducting a study for them, we will aim to understand and agree with them what key objectives they want to achieve from the work. We will also seek to comprehend and reach consensus with them on what value and benefits they would derive from the study if the objectives were met. In addition, we will discuss and agree on some measures we can use to indicate when success is being achieved with regards to progress towards meeting their objectives. Based on these discussions and agreements with the client, we will in our proposal set out a plan for the work that will include all these elements. The commercial proposal will be set out in such a way that we will not expect to receive any fees if we don’t deliver any value or benefits to our clients. We believe this is the best approach for the benefit of our clients and ensures that when they pay fees, the receive benefits in return rather than just time spent or deliverables.
Benefits to our clients
Our unique value-based approach to billing means that our clients pay for the benefits they get rather than just paying for activity without any obvious benefits. It also means that in a cyclical industry like the oil and gas sector, our fees automatically and naturally adjust to the commodity prices because these are an important factor in determining the value our clients derive from our services.
We believe that our clients will benefit from pursuing this value-based approach with consultants in general because it prevents consultants from gaining undue advantage by “stretching” the hours worked in order to boost their invoice amounts. This value-based approach ensures that there are more incentives for consultants to deliver value in actual improvements to clients’ operations. It shields clients from receiving just time-consuming activities or box-standard deliverables of negligible value and which most importantly does little or nothing to solve the problems for which they approached the consultant in the first place.