Finder's Fee
Finder's Fee
(OP)
I am consulting on the side, and I have opportunities to engage other specialties for mutual benefit. The ideal situation is to charge a nominal 10% finder's fee for locating an opportunity for another specialty. It was recommended that disclosure of the opportunity should be accompanied by a simple written agreement between the other party and me. I don't want to act as a general contractor. Any comments?





RE: Finder's Fee
that is a difficult question...Many state PE boards have language that addresses this type of fee and it is generally frowned upon if not restricted for situation like taking a fee from a vendor for a certain type of equipment that went on a job.
A common element of the language among most state boards is that you have to provide engineering services to get a fee and conversely, a fee must be charged when engineering services are rendered....
I think it really depends on how you can justify the situation at hand. It is definately a slippery slope. I know several engineers that justify the practice and their names are tarnished among the construction community because they are perceived to be on the "take." Even though this is not the case, the preception is still out there and evolves into something very different than the innocent business prospect of collecting a finders fee.
When I find work that either I don't want to do, or do not have the expertise to do, I often inform other consultants to the opportunity and ask them to write me into the scope to perform some of the work if they get the project.
I think in our business, preception is everything....negative things make their way around work circles much faster than positive things...
just my thoughts...
BobPE
RE: Finder's Fee
Surely since you are self employed and presumably do nothing to bring the profession into disrepute then why not?
More than likely once you had established good connections in the specialities that you needed, they would reciprocate using the same method. What goes around comes around but as long as business is coming in the door I don't understand BoBPE's issue with this.
BoB, could you elaborate? I don't know how someone can be 'on the take' if they need to bring in special knowledge that they do not posess. I would have thought that it would be up to the 'sub-contracting' engineer whether he thought that it was worth it or not.
Regards, HM
No more things should be presumed to exist than are absolutely necessary - William of Occam
RE: Finder's Fee
my comments only pertain to a PE who wants to dispense engineering advice...it has nothing to do with anything non engineering related...if you are charging a finders fee to get a client engineering advice, then this is the concern that I have and is the focus of my original comment.
BobPE
RE: Finder's Fee
No more things should be presumed to exist than are absolutely necessary - William of Occam
RE: Finder's Fee
Could you advise which engineering jurisdiction limits or restricts what has been referred to here as "finders fees"? I must admit that I've never heard of this type of restriction here in N.America. Is it just one state or are there more than one?
Regards,
RE: Finder's Fee
I merely want to receive a small fee for finding work for other specialties that flow from my design work. As an alternative, I can leave the customer with the task of finding his own subcontractor contacts.
RE: Finder's Fee
To me it is a win win situation where the sub contractor has a more even (possibly) work flow and I can provide a wider range of services.
regards
sc
RE: Finder's Fee
Shouldn't a contractor not be held to a similar standard?
As a contractor you are somehow in a position to influence the client's choice. Maybe they are under the impression that you can help them make a better choice by virtue of the fact that you work on other projects with these folks. Isn't it a betrayal of their trust to pick someone who greases your palm? I know that's how I would feel if I were the client. Do you disclose this finder's fee to your client?
I'm not saying it's wrong but seems very grey to me.
RE: Finder's Fee
One way about the issue is to offer your client the opportunity to let you find them 3 reputable contractors for a small fee. This is then clearly a contract to find suitable engineering firms rather than an engineering firm paying you for giving them work.
sc
RE: Finder's Fee
You say "As a contractor you are somehow in a position to influence the client's choice. Maybe they are under the impression that you can help them make a better choice by virtue of the fact that you work on other projects with these folks"
Surely that is one of the reasons that someone would choose a professional engineer? You have the expertise, which includes being able to define when you need to bring in contractors AND to be able to judge whether they are competent.
Surely how you source the contractor is up to you? If you employ them because they are prepared to pay the finder's fee but they do a bad job then it reflects badly on you.
You raise an interesting point about disclosure... The original post seems to imply that the party paying the finder's fee would be the specialty contractor. If it was the other way and I was the client hiring a professional engineer I would not be happy about paying for the PE expertise and then having an estimate padded by the inclusion of finder's fees for specialty contractors.
Regards, HM
No more things should be presumed to exist than are absolutely necessary - William of Occam
RE: Finder's Fee
RE: Finder's Fee
If yes, then why should a contractor be held to a lesser standard for exerting influence regarding selection of a third party? Isn't that contractor acting as an agent of the customer... part of the team?
Once again I think the real test is: are you going to tell the customer about this finder's fee? If you really think there is no betrayal of the customer's trust going on, then there is no reason for you to be reluctant to tell the customer all about the finder's fee.
RE: Finder's Fee
If you were completely unrelated to the procurement, and you act on otherwise publicly gather information, then there's no issue.
Also, having a relationship with the customer can potentially create problems for you if the person you steered to the job later defaults or otherwise fails to perform.
TTFN
RE: Finder's Fee
Scenario:
I design a series of widgets for a customer but I don't know anything about controls. So I says to the buyer, I know an excellent controls designer, do you want me to see if he's interested in quoting. The customer says yes. So I go to the controls designer and hand him the specs. He says he's interested in quoting. I say I want a commission if his quote is succesful.
How is that unethical?
RE: Finder's Fee
Your candidate potentially receives from you otherwise non-public information and therefore has an unfair advantage over any other person bidding on the job. Maybe this is not a big deal in commercial procurements, but in government procurements, this is a definite problem.
If your candidate does not take a reduction in profit or overall fee, then your finder's fee will be added to the cost of the new supplier and your customer is potentially paying more for services than otherwise necessary if it had been a fair and open competition.
Overall, it would seem to be something of a breech of trust, since you are technically working for your client, but potentially influencing a procurement of theirs where you have a financial interest.
The simplest solution to the dilemma is, of course, full and open disclosure to your client about your potential conflict of interest and your financial stake in the decision process. If your client is OK with this type of arrangement, then so be it. If you choose not to disclose, then when the client finds out, he may wonder about the fairness of the decision and whether you were looking out for his interests or yours, while being in his employ.
TTFN
RE: Finder's Fee
Let’s say you go to your family doctor for a checkup. He tells you that you need to see a ear/nose/throat specialist to analyse a symtpom outside of his area of expertise.. He offers to put you in contact with a good e/n/t.. Later on you find out that he received 10% of the fee. You’re telling me you wouldn’t be mad at the doctor?
RE: Finder's Fee
RE: Finder's Fee
It is not at all obvious to me that full disclosure was the intent of other finder's fee proponents in this thread.
RE: Finder's Fee
TTFN
RE: Finder's Fee
A government contract, at least where I live, has procurement requirements which make it not applicable to this scenario. I.E. you're arguing about something that doesn't even apply to the initial question. In other words ludicrous.
RE: Finder's Fee
RE: Finder's Fee
RE: Finder's Fee
The real question here is about perception. It does not matter whether it is ethical/unethical, legal/illegal, moral/immoral, it is how your actions are percived by the public that is important. The ethics courses that I have taken, required by Govenment and Company, stress that regardless of whether it is ok... how is it percived by the public. If the general public, i.e. not the engineering community, believes there to be some back room going on's, then it should not be done. Even with full disclosure to the client. Just ask a few of your non-technical friends for their opinion on the proposal.
The best option is this: get the referal fee from the client, not the subcontractor. Offer to line the client up with a sub for a small fee, or several subs from which the client can pick from. This removes any perception of colusion, and/or impropriety on the Engineers part.
It is better to err on the safe side and loose a job or two, then to lose your license and hence livelihood.
Best regards.
RE: Finder's Fee
Given the facts presented in plasgears's message, there is neither anything unethical or unlawful related to charging a fee for professional services. Yes Virginia, it's true that professionals gain experience that not only allows them to perform services more efficiently in subsequent assignments, but also allows them to routinely charge fees for such advice. One example of such advice is the recommendation, to their clients, of firms or individuals expert in desired fields. Not only is this got nothing to do with kickback or conflict of interest, it also carries with it a significant amount of liability (risk).
Regards,
RE: Finder's Fee
Given the facts presented in plasgears's message (did you happen to read it?), fees paid by the client are completely irrelevant.
RE: Finder's Fee
http://www.nspe.org/ethics/eh1-code.asp
"4. Engineers shall act for each employer or client as faithful agents or trustees.
a. Engineers shall disclose all known or potential conflicts of interest that could influence or appear to influence their judgment or the quality of their services.
b. Engineers shall not accept compensation, financial or otherwise, from more than one party for services on the same project, or for services pertaining to the same project, unless the circumstances are fully disclosed and agreed to by all interested parties.
c. Engineers shall not solicit or accept financial or other valuable consideration, directly or indirectly, from outside agents in connection with the work for which they are responsible."
Items 4a and 4b make it clear that any finder's fee would have to be disclosed to all parties. If it is, it sounds reasonable to me.
I'm not sure what to make of item 4c.
RE: Finder's Fee
Personal financial interest in a decision making process poses a conflict of interest.
Your financial stake in a decision no longer makes it clear that you are a fair and impartial arbiter.
Your financial stake may preclude you from recommending a better or more experienced source.
We've recently gone through this exact situation; a consultant for one problem recommended someone for a different problem. We had to assume that the first consultant was providing the best available resource, but we didn't have enough time to fully explore the possibilities. The second consultant was very good, but we'll never know if there was someone even better.
TTFN
RE: Finder's Fee
Thinking about my original comments again I think that disclosure is possibly the only way to go.
If anyone was contacted by plasgears regarding subcontract work and agreed to pay the finders fee it would most likely be incorporated into the estimate for the cost of the work.
Who would end up paying it? Most likely the original client. This means that they will have paid plasgears for his expertise twice (although maybe not by the same amounts)
No more things should be presumed to exist than are absolutely necessary - William of Occam
RE: Finder's Fee
Thank you for your coments.
RE: Finder's Fee
In this type of business, your reputation is extremely important and even an appearance of impropriety can have long lasting effects.
TTFN
RE: Finder's Fee
The argument about liability is a red herring. There is liability in recommending any contractor, supplier, specifying material without regard for any finder fee or commission.
However if I were the client, I would object to any finder fee. I would expect you to recommend the best source for my needs with no influences on this recommendation other than what is best for my project and me.
I would not even be pleased to be asked permission to accept a finder fee. If I could cancel your contract at that point I would and rest assured I would never give you another contract. If you are working for me, then work for me. If you also want to be paid by someone else that’s your business, I would take steps to ensure that I was not also paying you. I would gladly pay for your time in putting together the team and bringing under one roof all the suppliers necessary for the project, that is part of why consultants are hired in the first place.
If you do not have a contractual arrangement with the buyer of services but say in the course of looking for work they say that they do not need your services but need the services of a different specialty, then there would be no problem in charging that specialty a finder fee. Personally is all that is involved is a phone call, I would most likely do it for the good will that I can generate with both parties.
Rick Kitson MBA P.Eng
Construction Project Management
From conception to completion
www.kitsonengineering.com
RE: Finder's Fee
electricpete wrote on Sept 1:
"Items 4a and 4b make it clear that any finder's fee would have to be disclosed to all parties."
Actually, the PE is required to divulge potential conflicts of interest only to his client, and not to "all interested parties". It is the prerogative of the client to determine if a conflict exists assumming the professional has fully informed his client of the particulars. There is no expectation for a PE to divuldge his fees to anyone, but his shareholders and the IRS.
I stand by my contention that many of the assertions and declarations posted here as fact are merely opinion and unsubstantiated conjecture. It matters not whether erroneous posts are first or fortieth in the order, . . .there are many readers who rely on the responses here as authoritative, and therefore it is important for the older professionals among us to provide reliable and accurate information whenever possible.
Regards,
RE: Finder's Fee
A pet peeve of mine - I don't like it when someone throws out a sweeping criticism towards all the posts that came before. From my perspective, you would do better to identify which poster, post, thought process or comment you disagree with. Just my two cents.
RE: Finder's Fee
Which post would you be referring to? Or are you making a general sweep?
(Just kidding)
My pet peeve is poeple that make long sentences and include redundancy; perhaps to appear wise.
(Just kidding again)
Sorry, was this a pet peeve thread?
RE: Finder's Fee
In my defense, there were one or two sublte context cues which could have tipped off an attentive reader. Take a close look at the first sentence of my September 15 message. It may not be obvious at first, but if you read it two or three times I think you will see what I mean. Let me know if you want a clue.
RE: Finder's Fee
Oh, I got it... and if you read my pet peeve carefully... you might find me right beside you.
RE: Finder's Fee