We recently discussed the Royal Commission and a recent example of an Events company benefiting from undisclosed commissions, rebates and mark-ups. In case you missed it, you can read it here.
This article will highlight a few points to consider when assessing the fees charged by potential event managers and protect yourself as a consumer from undisclosed fees and commissions.
1. Ask them
When conducting interviews with prospective event managers ask them whether their proposal clearly identifies all income streams the organiser will earn as a result of doing business on your behalf. You should ask for this confirmation in writing, ideally signed by the company director.
This should include:
If the company is a member of Meetings and Events Australia (MEA), then under the code of ethics they have agreed to ‘Declare any commissions, remuneration or additional benefits received from a third-party that directly arises out of work performed for the client’.
2. See a contract
Ensure that at the stage you are considering selecting the organiser, you see a copy of the draft contract based upon your event and tender requirements. It is quite possible that many of the terms you agree to once obtaining a contract may not have been fully disclosed in the initial tender proposals. By selecting the organiser before viewing a contract, you are, with all due respects, already bound to them and your negotiation powers are severely weakened.
3. Compare Rates
As with any form of purchase, the general rule is:
“If it’s too good to be true, it’s too good to be true!”
Whilst there are no clear guidelines as to what constitutes a ‘fair fee’, it should not be too hard for you to estimate what a fair fee with a fair profit margin should look like. By asking the event manager for an estimate of the time they will spend on the event, you should be able to assess what a fair market price should be. Any significant quote below this estimate should encourage closer scrutiny.
So, what should you be looking for as a client to ensure your organisation receives a fair deal?
1. Budget based contract
Many organisers request their client sign off on a budget at the commencement of the event. Once this is done, the organiser is then given the rights to control expenses within this budget. If expenses have been inflated from ‘fair market value’ within this budget, then you the client will be paying for this. If you do not know what ‘fair market values’ are, you are potentially opening yourself up to paying significantly inflated costs for third-party services.
2. Direct Invoicing
Often you will find that organisers simply invoice all event expenses (including third-party costs) to the client on one invoice without supporting documentation. You should request that all expenses charged are supported by an invoice from the supplier. In that way, any mark-ups on supplier invoices will be clearly identified.
3. Preferred Suppliers
All event managers by nature have ‘preferred suppliers’, who as a general rule are ‘preferred’ because they are tried, tested, proven and trusted in the supply of services. However, you should always ask the organiser what their views are with regard to the use of alternative suppliers. Are there restrictions / terms in their contract which may prevent this? If so, why?
4. ‘Other costs’
As margins have been squeezed in the industry, many event managers have been forced to recover lost income through the leveraging of ‘other costs’. These may not be included in an original proposal and will only become apparent during contact discussions. These may include such things as:
Credit Card Handling
Some event managers charge excessive percentages of processing fees for credit card transactions. The charge for most merchant payment options is typically in the region of 1%, so any rate above that is income to the event manager.
You may well see a charge for handling the quarterly BAS return on behalf of your event. Typically, you will have already paid for the accounting for your event in the management fee, so paying additional for the lodgment of the BAS return should be minimal at most. If the accounting has been prepared correctly, the completion and lodgment of a BAS return would be a one-hour job per quarter at the most.
Whilst a monthly email charge or rate for bulk emails is not unreasonable, you should ensure the ‘actual charge’ is.
Within the small print of the contract, there may well be additional undeclared charges that you or your delegates may be subject to that were not flagged in the original proposal. By requesting the sighting of a standard contract at the tender stage, you should be able to identify such charges before it is too late.
As a leading supplier of conference management services and a part of an industry that I am immensely proud of to be a participator, it is important that we as an industry do not denigrate our markets through corrupt or dishonest practices.
To receive the high-quality service you seek, it is important to ensure that we as service providers are receiving our income in a fair and transparent manner.
By continually forcing down price at the expense of quality, clients are by default forcing event managers to seek other, less ethical means of earning income. This has the potential to compromise their duty of care to their own organisation.
Francis Child – Managing Director, The Association Specialists