For a Successful Client – Lobbyist Relationship – Have a Clear Fee Structure

The fourth reason clients give for firing their contractors is they don’t understand the fees they are paying. Lobby School students at times say to me, “We pay our #$%! lobbyist too much #$%! money for what we are getting!” Yet, I suspect they, like most consumers of lobbying services, really don’t know what they should be paying, how to structure mutually beneficial fee arrangements, or how to control incremental charges. Insiders Talk: Professional edition goes into considerable detail guiding readers in negotiating and managing lobbyists’ fees. However, for purposes of this article, I’ll provide a few suggestions.

Clients should benchmark fees before interviewing candidate contractors. Visit the state’s lobbyist registry to see candidates’ clients and expect that you will most likely engage a lobbying firm serving clients similar to yourself. If you are of modest means, firms with blue-chip clients may not be right for you. In 31 states lobbyists report their fees. Sometimes this is down to the penny and in other states by broad ranges.

15 elements are involved in determining the fees a lobbyist charges. These range from your ability to afford the lobbyist to the amount of lobbyist-attention for which you are willing to pay. Because clients make the lobbyist, an attractive client can negotiate fees down by 25 percent. That is, a lobbyist will “pay” a discount to the client which brings prestige to the client roster.

Never pay dollar-per-hour which rewards expenditure of time rather than accomplishment. As a naïve brand new in-house lobbyist, a dollar-per-hour lobbying firm told me that the project would be “light lifting.” At the end of a 60-day session, they presented me with a $60,000 bill, which in today’s dollars would be $110,000. Dollar-per-hour is an invitation for unaccountable and uncontrollable costs.

Pay a fixed-fee. A fixed-fee motivates the lobbyist to solve your problem as quickly as possible in order to maximize the contractor’s return on time invested. And well-structured fixed-fee helps to control costs.

A lobbyist’s proposed fee is just that, a proposal. You can accept the proposal, reject the proposal, or offer a counter-proposal. In the end, a skillfully negotiated fee reflects how much you want the lobbyist and how much the lobbyist wants you. To illustrate, I approached a contractor for representation. He quoted a fee. However, I earlier researched the state to predict the executive agency’s likely stance to our desired bill, assessed my principal’s political strength in the state, and estimated the overall difficulty in moving our issue. I countered the proposed fee stating the bill would not be a difficult sell and offered half the initially quoted amount, to which he agreed. In the end, we had a successful, mutually respectful client-contractor relationship.

Your engagement documents should require that the engagement amount include all charges that could reasonably be anticipated in a normal lobbying effort, that is, office expenses, registration fees, and the like. Make clear you will not be going over expense statements itemizing otherwise predictable charges.

However, sometimes work associated with a legislative campaign can expand beyond that which an expert acting in good faith could have predicted. The legislative environment is highly volatile and unpredictable; and sometimes it simply “blows up.” That which prior to the session looked easy unexpectedly became a battle. Do not expect your contractor to absorb all those additional costs. You must compensate for the services received. I’m not saying reimburse top-dollar, but I am saying compensate fairly.

I recommend biennial engagements with contractors. That is, every two years you auto-rebid for lobbying services and everybody in the capitol knows you auto-rebid. Bidders for your next Request for Proposals will include your current contractor who has an inside edge, that is, if you are happy with the firm. And if you are not happy with the firm then it’s an unembarrassing clean way to terminate an unsatisfactory contractor.

Further, biennial auto-rebidding lets you know what current fees are going for, who the new lobbying firms in town are, gives other firms who might be more suitable at this time a shot at your business, and discourages fee-padding. “Fee-padding” is when a contractor, knowing that increasing fees is difficult once a client has been engaged, builds future fees increases into the initial bid. Biennial engagements make fee-padding unnecessary, which should reduce fees.

Finally, do not offer your lobbyist more than 80 percent of the total amount you have for lobbying services. Always keep some money in reserve to accommodate the unexpected, such as needing another firm to supplement your contractor. And allow for a bonus. You may pay a bonus to reward a good lobbyist or send an unsatisfactory lobbyist away smiling.

Clients can negotiate engagement fees more equitable to both lobbyist and consumer. Well-written engagement documents narrow opportunities for unexpected additional charges. Except for the session blowing up unexpectedly, a sophisticated consumer of lobbying services, that is, a good client, can manage and control additional costs. Well-negotiated initial fees and limiting the opportunity for unexpected additional fees, reduce the likelihood clients will feel exploited, grow resentful, and ultimately fire their contractors.

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