When writing a grant application, it can sometimes be useful to (partly) outsource the writing, for example due to a lack of time or experience. You can enlist the help of specialized subsidy consultancy firms for this. However, this help is usually not cheap. How do you make sure you won't pay too much?
The purpose of this information is to provide more information about how the prices used by subsidy consultancies are determined and to help you in the negotiation process in order to arrive at a price that is acceptable to you.
In any case, always consult with your faculty, or the relevant authority in your situation, both before and during the negotiation process, so that you do not make commitments that ultimately turn out to be unfeasible, often financially.
- Prices consultancy firms
The prices charged by subsidy consultancy firms are always exclusive VAT! Where companies only pay VAT on the difference between the purchase price and the sales price of products, and can therefore reclaim (part of) the VAT from the tax authorities, this does not apply to a university. So keep in mind that the actual total price is always 21% higher.
Subsidy consultancy firms generally use the following three revenue models for the services they provide:
- Hours x Rate
- No Cure - No Pay
- Combination of No Cure - No Pay and a fixed amount
Below is a more detailed explanation of the three revenue models:
Hours x Rate
The following rates generally apply (more or less) for Hours x Rate:
- Junior consultant: €110 per hour
- Medior consultant: €130 per hour
- Senior consultant: €150 per hour
You do not know in advance what “rank” the consultants will have, who will work on your proposal. That depends on who has the time or the right expertise at that moment. In addition, this fortunately says little about the writing skills of the consultant, but more about the fact that senior consultants are paid more and therefore have to bring in more revenue to justify their costs. Ultimately, you simply pay for the work delivered and it is in the interest of the continuity of the consultancy firm to deliver high-quality proposals.
No Cure - No Pay
In the case of No Cure - No Pay (NCNP), the subsidy consultancy firm uses a percentage of the requested subsidy as the price, if the application is successful. If you submit a subsidy application asking for a €2,000,000 subsidy and you have agreed an NCNP percentage of 7%, then you must pay 7% * €2,000,000 = €140,000 when the when the grant is awarded. Please note that:
- You cannot use the subsidy to be received to pay the bill of the consultancy firm;
- You usually have to pay the entire amount in one go, even if you only receive the grant in parts, and you may not use the entire €2,000,000 in the future to carry out your project. Sometimes it is possible to agree that, for example, after the grant has been awarded, you will first pay half of the NCNP amount and then the other half at a later time, for example after 6 months. Ultimately, of course, nothing changes in the total amount to be paid and this structure is at most interesting for managing your cash flow.
It is difficult to estimate in advance what percentage a consultancy firm will charge for NCNP. This depends entirely on the amount of subsidy you want to apply for, how much it will cost for the consultancy firm to write the grant application, and how high the consultancy firm estimates the chance that the grant will be awarded.
When it comes to a regularly recurring grant instrument, a high subsidy amount to be applied for, a reasonably long subsidy application (in any case at least 25 A4 pages) combined with a low success rate (<10%), the subsidy consultancy firm usually also charges a fixed amount in advance in combination with an NCNP amount. In this way, the consultancy firm can be sure that they have at least recouped part of their costs if the grant application is not granted in the end.
- Price negotiations
If you would like to engage a consultancy firm on the basis of an hourly rate or NCNP and find it difficult to negotiate the hourly rate, percentages or other constructions, please contact your contact person at the SBD-Grants Office or faculty. They can assist you in establishing an acceptable price.
With the above information in mind, it is important to get an answer to the following two questions:
- Should I opt for Hours x Rate or NCNP (plus possibly a fixed amount)?
- When is the price acceptable for the option I have chosen?
To answer these questions, it is recommended to take the following steps during the negotiation process:
1. Request an hour specification
To decide whether you want to engage a subsidy consultancy on the basis of an hourly rate or NCNP, it is best to ask for an hour specification in advance. When you submit your plans for a large subsidy application and the subsidy consultancy considers this a promising application, it is often the case that they immediately make you an offer based on NCNP. This sounds tempting, because you pay relatively little to nothing if the grant is not awarded. Do not just go along with this, because the costs can be unnecessarily high later on. So first ask for an hour specification in which the subsidy consultancy specifies per phase in the application process how many hours they think they will need to fully work out the subsidy application and to carry out all relevant activities. Such an hour specification, for example, can look like this:
- Initiation phase: 50 hours at €150 per hour excluding VAT
- Application phase: 150 hours at €150 per hour excluding VAT
- Interview phase: 20 hours at €150 per hour excluding VAT
- Implementation phase (optional): €150 per hour, to be discussed after the grant has been awarded
>> Total costs in the initiation phase up to and including the interview phase: €33,000 excluding VAT.
After receiving the time specification, try to estimate whether it is a realistic plan. If in doubt, ask whether the consultancy firm can substantiate this (verbally) and if necessary, reach out to your contact person at the SBD-Grants Office or faculty for help.
2. Determine the fee: hourly rate or NCNP
After receiving the hour specification, you can decide whether you want to engage the consultancy firm on the basis of an hourly rate or NCNP. Below is a description of what you should take into account for each choice:
A. Hours x Rate
When you opt for Hours x Rate:
- Negotiate the hourly rate. Depending on the complexity of the grant application, the amount of work this will cost the consultancy firm and how much work you do yourself, you can propose a lower hourly rate. Generally, subsidy consultants often try to charge around €150 per hour. This is therefore the highest rate and given the different rates, it is clear that the price can still be lowered. If you want to have a grant application written on the basis of €150 per hour, do not accept this blindly and negotiate a lower rate. For example, think of €110 or €125 per hour. In the end, you often end up with a lower hourly rate, for example somewhere between €125 and €140 per hour.
- Ask the consultancy firm to keep a timesheet on the basis of which they will send an invoice every month for the hours worked, which the University of Twente must pay within 30 days. This avoids having to transfer a large sum of money before the consultancy firm has started working for you, so that you only pay for the hours that the consultancy firm actually spends working on your subsidy application.
- Make an agreement with the consultancy firm that they will inform you when they have spent 80% of the agreed hours. The moment they inform you about this, you can discuss whether the consultancy firm is able to fully work out your application with the remaining number of hours or whether a number of extra hours may be needed. That way you won't be faced with surprises later.
For Hours x Rate, €150 per hour is usually justifiable. However, there are many consultancy firms that all compete with each other. In addition, the University of Twente is considered financially reliable by subsidy consultancy firms as a large semi-government institution with a lot of potential for future assignments, so it is quite possible to negotiate a lower hourly rate.
When you opt for NCNP, compare the offer you receive with the number of hours that the consultancy firm expects to spend on elaborating the subsidy application in accordance with the requested hours specification.
From this example you can conclude that Hours x Rate in advance is more than twice as expensive compared to a fixed amount + NCNP. Of course, a full NCNP scheme will cost you nothing if the application is unsuccessful. However, when the grant is awarded, NCNP is suddenly 7.5 to 8.5 times more expensive than the Hours x Rate alternative.
If NCNP is your preference, please consider the following:
- Suggest a lower risk premium ratio.
In the example, the risk premium is approximately 8, compared to the hours x rate fee. To start with, you can imagine that the NCNP fee should not cost more than 2.5 times the Hours x Rate fee. In this example, this means that the NCNP may not cost more than €24,000 * 2.5 = €60,000 (excl. VAT). You could again divide this amount into a fixed contribution in advance, for example 50% of the total Hours x Rate amount = €12,000, and the other parts (4 * €12,000 = €48,000) in an NCNP scheme.
You can argue as follows why an offer with a lower risk premium is attractive: The consultancy firm is already paid in advance half of the amount they would normally earn by working on the basis of Hours x Rate. In addition, they will again be paid 4 times this amount when the subsidy is awarded. That is a gain of 250% on top of the amount that the consultancy firm would have earned if they had started working at Hours x Rate.
- Include a limit on the NCNP amount to be received. Because NCNP works with percentages of the total budget to be requested, the consultancy's fee automatically changes when the budget changes. Where you may have wanted to apply for a lower subsidy than the maximum allowed subsidy at an earlier stage, this may be increased at a later stage. As a result, the work and hours of the consultancy firm will invest do not increase, but their remuneration will increase significantly.
3. The Negotiations
When you propose alterations to the payment scheme, it does not mean that a subsidy consultancy firm will immediately agree to your changes. See these suggestions as the start of the negotiations and make it clear that you are also in talks with other subsidy consultancies. Also indicate that a payment based on hourly rate is also an option for you if you cannot agree on the NCNP amount. This will give you more weight during negotiations.
A sensible subsidy consultancy firm will not want to work out a less promising application on the basis of NCNP, but they might want to try it on the basis of Hours x Rate. They will of course not share their assessment of the success of the application with you. In any case, a subsidy consultancy will always want to present you with a hefty bill the moment they start working for you on the basis of NCNP. They justify this because they also bear the risk that the subsidy application cannot succeed. They also run that risk, of course, but you should also be aware that a subsidy consultancy will only agree to carry out work based on NCNP if they believe that the subsidy application has a significant chance of success. Therefore, do not feel hesitant to negotiate a lower NCNP amount.
With all the above information in mind, we can now formulate some advice and considerations.
Involve the SBD-Grants Office and your faculty
To start with, always discuss your plans for a grant application with the help of an external consultancy with your contact person from the SBD Grants Office and faculty, before you start a discussion with a grant consultancy. This prevents you from aiming in advance for a type of compensation that turns out to be unfeasible at a later time. You can prevent this by discussing your plans for a grant application with your contact person at the SBD Grants Office or faculty in advance.
Most favorable payment arrangement
In general, having work performed by a subsidy consultancy firm on the basis of Hours x Rate is usually the most favorable. You should only engage a consultancy firm if you think you have a good chance of being awarded the subsidy for your project idea, otherwise you will be wasting a lot of (tax) money. If you think you have a good chance of success, it will be much cheaper to have the subsidy application worked out on the basis of Hours x Rate. You don't have to worry about potentially having to pay a huge bill.
If you nevertheless want to have the subsidy application written on the basis of NCNP, take into account the risk premium ratio between the requested NCNP amount and what it would cost if the subsidy application is worked out on the basis of Hours x Rate. Make sure you don't pay too much by only focusing on the NCNP percentage and forgetting to consider this in relation to the alternative based on Hours x Rate.
Ownership of the application
Grant consultancy firms often set the condition that when they work on the basis of NCNP, they retain the intellectual property of the grant application. This entails restrictions for resubmission or (partial) use of the written text for another grant application. A possible resubmission therefore forces you to have it carried out again by the same subsidy consultancy firm. They do this to prevent that they do not receive their NCNP compensation in the event that the customer decides, after being rejecting in the initial submission, to resubmit the subsidy application and then still receive the subsidy. When an application is worked out on the basis of Hours x Rate, then the subsidy application is actually yours, because you have paid for every hour worked on it. You can then reuse the content of the subsidy application without hesitation or legal consequences.
Contribution from consortium partners
When you have a consortium grant application written by a subsidy consultancy firm, make sure to agree with the consortium partners who will pay which part of the final bill. It is fairest to divide the bill in proportion to the subsidy to be received by each partner. The consultancy firm will usually only want to work with one client, so that will make the University of Twente jointly and severally liable if it acts as a client. Be aware of this and make clear contractual agreements with the other parties within the consortium regarding the account to be paid, before entering into an agreement with the subsidy consultancy firm.
Project management by consultancy firm
Please be aware that subsidy consultancy firms usually only take care of the preparation and submission of the subsidy application. Possible project management and helping with the drafting of a consortium agreement with the European Commission or NWO after the grant has been awarded, are not covered by this. You can receive help from Novel-T and/or Strategic Business Development for drawing up a consortium agreement. You do have to pay for help with project management, but in many grant applications you can also reserve a budget for project management in your grant application. It is usually cheaper to have a project manager appointed within the UT to assist in the execution of the project, rather than hiring a consultant from the grant consultancy to do this. However, this must be agreed in advance within the UT from which the intended project manager must be appointed. One of the options for this is the Project Management Office within Strategic Business Development (SBD).