2010 US Public Sector Business Consulting Services Rates Increase by 3.5 Percent
Monadnock Research (VIII N10) - 12 March 2010
Executive Summary Rates for business consulting services provided to US public service organizations in 2010 increased by 3.5 percent over 2009 levels. The mean hourly rate for services across all categories was just under $200. Less than one-fifth of business consulting services firms, however, included executive-level positions in negotiated rate schedules.
This Research Note summarizes our analysis of rates for the business consulting services category under the US GSA's Schedule 874, Mission Oriented Business Integrated Services (MOBIS). It also analyzes the consolidated hourly rates of each firm within MR's 8 labor rate categories, including details on the categories themselves, for the top 5 percent of the 2,000 firms providing related services. Over the next eight weeks we will publish our analysis of rates for financial and business advisory services, human resources and administrative services, advertising and integrated marketing services, and information technology professional services. Focus on Hourly Rates Hourly rates are a key focus for buyers and providers of consulting services. Perhaps too much of an emphasis is placed on fees and not enough on alternative forms of value. But with independent objective advice and expertise as the procurement category, the disaggregated cost of services is key. The client and firm assess numerous other variables for projects that impact deliverables, milestones and overall cost. Clients may emphasize return on investment and other forms of value in the deliverables. The firm may focus on project margin, professional development opportunities and relationship capital associated with the engagement. But even though there has been significant movement toward fixed cost projects, value-based pricing, and alternative fee arrangements, hourly rates are where it begins and ends when it comes to understanding value for client and firm.
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Detailed hourly rates by staff level combine with the unique complement of specific resources in successful consulting projects to ensure that they're delivered on-time and on-budget. Understanding the formula for success is key to ensuring that sufficient value is created for all stakeholders to make the investment. Armed with the right fees data by level of professional, procurement organizations can better compare firms' bids on projects. But this can only be achieved through a clear understanding of typical hourly rates by labor category, practice area, region, and industry. Monadnock Research (MR) continuously conducts research in the area of consulting fees and recently concluded a comprehensive analysis of hourly rates for nearly 150 large consultancies with current negotiated rate schedules for a number of consulting and advisory services categories. This research note summarizes our analysis of rates for the business consulting services category under the U.S. GSA's Schedule 874, Mission Oriented Business Integrated Services (MOBIS) rate schedule. Here we take a more in-depth look at the negotiated rates within this category for the world's largest consulting firms that provide services to agencies within U.S. public sector, the world's largest consulting client. This is the first in a series of five MR Research Notes, which beyond the MOBIS category, will include analysis of rates for financial and business advisory services, human resources and administrative services, advertising and integrated marketing services, and information technology professional services. In our study, we rationalized and consolidated firm rate categories into our 8 professional fee categories, based on professional role, expertise, education, and job responsibilities. We then analyzed the consolidated hourly rates within each firm using our labor categories for the largest of the 2,000 firms providing business consulting services within the MOBIS category to create a comprehensive listing of summary rate statistics for close to 100 large and very large firms. Professional Fee Categories Monadnock Research uses eight categories to represent the consolidated categories for consulting rates. Some firms break down their rate structures into as many as 100 categories or more, and others offer as few as four or five. The challenge in establishing rate categories from a research perspective is to have a sufficiently small number of to ensure that the volume of responses (the proverbial "n") yields the highest statistically valid result within a population of respondents performing similar work with comparable levels of expertise and education.
The eight Monadnock Research professional fee categories are: Executive Level - Senior-level corporate officers and executives with titles that might include CEO, President, Chief Operating Officer, or Senior Partner. Professionals in this category typically have a Ph.D., M.B.A. or another advanced degree. Relevant work experience is generally from 20 to 25 years or more. Professionals in this category typically interface with senior client executives and are involved with strategic issues and on business development, but do not have regular client interaction. Principal Level - Senior-level management or technical experts who are responsible for overall direction and management oversight of project operations and client relationships, and whose final approval is required on all commitments of a firm's corporate resources. Titles might include Partner, Principal, Vice President, Associate Partner, or Associate Principal, or in some cases a senior expert in a specific dicipline. Professionals in this category typically have a Ph.D., M.B.A. or another advanced degree. Relevant work experience is generally from 15 to 20 years. Professionals in this category typically interface with client executives on specific business issues and on business development, and often have overall engagement responsibility, but not on a daily basis. Director/Manager Level - Senior staff members who are responsible for all phases, activities, staffing, and outcomes of a project, including budget management and staffing for the entire project. Professionals at this level are being groomed to become a principal, or are senior level career technical or management professionals. Titles might include Director, Senior Manager, Executive Consultant, and other high-level subject matter experts. Professionals in this category usually have a Ph.D. or another advanced degree. Relevant work experience is from 10 to 15 years. These professionals interact with client staff on a daily basis, manage overall client interactions, and are the project leader. Senior Consultant Level - Mid-level staff whose technical skills and expertise in both general and specialized topics provide expertise that is critical to project success. Titles might include Senior Consultant, Manager, Project Leader, Program Manager, Task or Team Leader, Senior Programmer, or Senior Technical Expert. Professionals in this category usually have a graduate degree, or a B.S. with significant work experience. Relevant work experience is from 7 to 10 years. These professionals interact with client staff on a daily basis, provide some project leadership and may manage a small team. Consultant Level - Entry-level staff professional whose technical skills and expertise in both general and specialized topics are being developed, or a professional without an advanced degree with strong work experience. Titles might include Consultant, Associate, Programmer, or Technical Expert. Professionals in this category may have a graduate degree, or a B.S. with significant work experience. Relevant work experience is from 4 to 7 or more years. Requires limited supervision and frequently interacts with clients. Senior Analyst Level - Experienced professional with technical skills and expertise in both general and specialized topics is developed. Titles might include Senior Analyst, Senior Researcher, Subject Matter Expert, Senior Knowledge Manager, Senior Copywriter, or Senior Graphic Artist. Professionals in this category usually have a B.S. degree or may have an Associates degree with significant specialized work experience. Relevant work experience is from 2 to 5 or more years. Requires moderate supervision and periodically interacts with clients. Analyst Level - Entry-level staff position whose technical skills and expertise in both general and specialized topics is developing. Titles might include Analyst, Researcher, Specialist, Knowledge Manager, Copywriter, or Graphic Artist. Professionals in this category usually have a B.S. degree or may have an Associates degree with specialized work experience. Relevant work experience is 1 to 3 years. Requires heavy supervision and client interaction is limited. Support Level - Support staff whose skills and expertise in both general and specialized topics is moderately developed. Titles might include Secretary, Administrative Assistant, Research Assistant, or Designer. Professionals in this category usually have a high school degree and may have a B.S. or Associates degree, or equivalent experience. Requires heavy supervision and client interaction is extremely limited.
Consulting Fees by Labor Category Analysis of the rate information by labor category shows that in 2009 business consulting services firms charged a median rate of $175.41 per hour with a mean of $192.86. This indicates a concentration of rates at the lower levels. Rates for 2010 had a median of $181.52 and a mean of $197.88, with a similar concentration of rates at the lower levels. There was a 3.52 percent increase in the median rate and a 2.52 percent increase in the mean rate. While median 2010 rate increases across all labor categories averaged 3.5 percent, the increase ranged from a high of 5.4 percent for support positions, to a low of 1.7 percent at the Senior Analyst level. Executive Level Fees The median rate for 2010 Executive Level fees increased by 3.6 percent to $327.66, with a mean of $357.12. Rates ranged among firms in the sample from a high of $718.52 to a low of $199.50. It's worth noting that less than one-fifth of business consulting services firms include executive-level positions in their rate schedules. That's not to say that they won't be able to quote rates for Executive-Level professionals on specific projects. But there were no negotiated rates for that category of professional at most firms. Principal-Level Fees The median rate for 2010 Principal-Level fees increased by 4.31 percent to $302.20, with a mean of $327.43. Rates ranged among firms in the sample from a high of $626.00 to a low of $179.56. Director/Manager-Level Fees The median rate for 2010 Director/Manager-Level fees increased by 2.6 percent to $223.28, with a mean of $247.69. Rates ranged among firms in the sample from a high of $586.00 to a low of $128.20. Senior Consultant-Level Fees The median rate for 2010 Senior Consultant-Level fees increased by 3.25 percent to $177.94, with a mean of $202.76. Rates ranged among firms in the sample from a high of $509.85 to a low of $107.25. Consultant-Level Fees The median rate for 2010 Consultant-Level fees increased by 3.76 percent to $154.51, with a mean of $169.73. Rates ranged among firms in the sample from a high of $394.59 to a low of $88.89. Senior Analyst-Level Fees The median rate for 2010 Senior Analyst-Level fees increased by 1.72 percent to $113.44, with a mean of $121.67. Rates ranged among firms in the sample from a high of $266.50 to a low of $60.73. Analyst-Level Fees The median rate for 2010 Analyst-Level fees increased by 3.48 percent to $85.99, with a mean of $90.05. Rates ranged among firms in the sample from a high of $224.94 to a low of $40.31. Support-Level Fees The median rate for 2010 Analyst-Level fees increased by 5.36 percent to $55.44, with a mean of $58.82. Rates ranged among firms in the sample from a high of $165.60 to a low of $25.90. (Latest Update: 12 March 2010 at 3pm)
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