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21 Stating your price > Separate financial proposals - Pg. 195

Stating Your Price 195 start of a contract, and the contractor may still need either to commit the firm's own resources or to increase its borrowings. These practical difficulties are often compounded by delays in the reduction or release of guarantees by clients. Late payers and non-payers Public sector clients and large business organizations may have unwieldy accounting systems and arthritic payment procedures that mean you will be kept waiting to receive the money you are due, even when appropriate payment terms are defined in the contract. Though these clients may pay late, their corporate standing does offer some assurance that your invoices will eventually be paid, but if your client is, say, a small business or a private individual, you have no such assurance. It is not uncommon for businesses on the verge of collapse to take on consultants in a last-ditch survival strategy: if that fails, your chances of getting paid for your work go up in smoke. The way to minimize your exposure to this risk is first, to include the possibility of non-payment among the factors you consider when deciding whether or not to pursue a bid opportunity (Chapter 7), and second, to require, as a condition of starting work, that the client signs and returns a letter of engagement which defines your understanding of the assignment and its contractual basis and terms of payment. As a further measure you may wish to ask for an advance payment, say 50 per cent of the quoted fee as discussed above. Don't feel inhibited from doing that: clients who value your quality and professionalism will accept the request as a term of engaging your services and will pay you promptly, while those who object are likely to be the ones who will keep you waiting for your fees or perhaps never pay at all. Some clients, though, may imagine that having made an advance payment they are entitled to delay paying the balance of your fee; a clearly defined letter of engagement is the way to disabuse them of that notion. Separate financial proposals In certain sectors of procurement such as contracts for EU-funded work and projects financed by international or regional development institutions, it is standard practice for clients to require bids to be submitted in two parts: 1) a technical proposal, which has to contain no financial information; and 2) a separate financial proposal, which is opened only after the technical proposal has been evaluated. This is the `double envelope', `staged tender' or `two-stage' procedure, which considers technical quality first and then cost (Chapters 22 and 23). The reason for separating financial information is to try to ensure that the client's technical evaluation of the bid is not influenced by considerations of