Two proposals, one claim

An industrial design firm with about 25 staff was making its first claim, and was not sure how much of its work would qualify. Its best estimate was a claim of about $120,000, and it knew the figure could be lower. Two advisers proposed. One quoted 20% of the benefit received, no cap, review support priced by the hour. The other quoted a fixed fee of $35,000 with review support included. Illustrative figures.

Nothing, until the firm had put both proposals on the same basis. It asked each adviser for a worked example on $120,000 and on $250,000, in case the work qualified more widely than the founders expected. It also asked for the fee base in writing and for the engagement letter with its standard terms. It read both letters with the contracts section beside them and compared the non-fee terms: full claim before filing, records returned without charge, notice period, exit fee. Illustrative figures.

On the expected claim of $120,000 the percentage fee was $24,000 and the fixed fee $35,000. The crossover was $175,000: below it the percentage fee cost less, above it the fixed fee did, and on a $250,000 claim the percentage fee would have been $50,000 against the same $35,000. If the claim failed altogether, the percentage fee was nothing and the fixed fee was still $35,000. In a bad year, a claim reduced after filing, the percentage fee on the amount received fell with the claim while the fixed fee stayed where it was. The firm chose the percentage fee, because its claim was uncertain and below the crossover, and because it wanted to pay nothing if the claim did not succeed. It asked for the fee to be on the amount received, which the letter already said. It also asked for a cap of $60,000 in case the claim turned out much larger than expected. The adviser agreed. It noted in writing that if it had expected a claim above the crossover, with well documented projects, the fixed fee with review support included would have been the sensible choice. The claim was filed at $120,000, and three years passed without a review. Illustrative figures.

$24,000, as the worked example said, with the cap never reached and the hourly review support never needed. Had the firm chosen on the headline numbers alone it would have been comparing a rate with a sum, and had it expected a larger, surer claim the answer would have gone the other way. Illustrative figures.

What helped here was the method, and it would help any first claim. The how to compare proposals guide, the fee comparison calculator and the script for asking how the fee is calculated were sent to both advisers with the same figures. Neither proposal was wrong. The contingent versus fixed fees page shows why each suits some businesses. The script for asking for a fee cap is the one the firm used. The firm's written note of its reasons is what made the decision a good one rather than a lucky one.