Advice on renewal rate negotiation

**XperTest** · 12 May 2008, 09:36

Originally posted by apb View Post

Hi guys,

I am currently coming to the end of my first contract (3 mths) this month and have been offered an extension on the same terms for a further 4 mths. I am working on a project which is expected to run for 18 months and I am the Senior IT PM managing all IT workstreams and PMs.

When I first applied for the role, I was advised the rate was £450 - £500 and that there were two roles available - PM and Senior PM.

I was offered Senior PM at £450 - I stated I was expecting £500 and after a couple of minutes 'consulting with the Client' the agent came back with £475. As I had no role to go to after resigning from my permie job and working my notice I jumped at it.

The role is excellent, challenging and will take my career forward.

The project I am managing is more complex and larger than I initially envisaged plus the scope has increased. I thought these would be good reasons to justify a rate rise.

I have advised the agent that I would like a rate rise given the above and he has stated that he would have to consult with the client - and 'could I reply to the offer email outlining the reasons why.'

I believe that an increase could be taken from the Agency margin rather than trying to pass on to the Client - I have not taken any action so far as given the economic climate I do not want to lose this role.

Should I just accept current rate and renegotiate in 4 months time once I am further entrenched in the project?

Should I not reply to the agent for a couple of weeks and make them sweat?

Any other tactics I should employ or just shut up and be thankful I have a role and not on the bench.

Any help welcome, thanks.

I think a rate increase after just 3 months is a bit early, unless the role is dramatically different to how it was portrayed. You're a PM, so I presume you know how the client will react as it would be the same as your gut reaction would be if a contractor in your team asked for a rate increase after he'd essentially just come in..

**malvolio** · 12 May 2008, 10:36

Yes, you're a bit early, but...

You can only justify it on the grounds of either severe scope creep so you're doing significantly more work (or more responsible work) than you were before, or that you have brought significant value-add to the project over and above the client's expectaion of what they're paying you to do, which is probably quite high anyway. Also, you are paid by the agency, so negotiate with them. How they recover their costs is their problem, either by reducing margins or charging more. The agency are quite right to ask you to defend your request, but you have to make a financial case, not a market one (especially right now).

So no harm trying if you think it justified. But be aware the only weapon you have is the right to walk away. If you do that you have a three month, incomplete project on your CV, which would do more harm than good, and you won't be earning anything while you find a new job. You would be better IMHO sticking the with the rate you have and getting the job done.

**BA to the Stars** · 12 May 2008, 10:41

If you are after a £25 per day rise, over the 18 months you seem to imply that you will get on the project that equates to £9,000. If, however, the client thinks, no way, greedy so & so and withdraws renewal, then at your current rate it would take 19 days to recoup this. Ask yourself:

1. Am I happy with the rate I am getting?
2. Am I happy in this gig?
3. If I get the chop for asking for more, will I get another gig within 19 days or will I have no more than 19 days between gigs over the course of the next 18 months?
4. Will the agent actually reduce their margin to give you a rise?
5. Will you want another rise at the next renewal (or will that be the clients perception)?
6. If you leave this gig, will you need to spend more travelling / overnights stays, etc at a new gig.

In my opinion, I would get yourself a little bit more established within the project and at the clients, but it is your call

**Dow Jones** · 12 May 2008, 11:47

Must be justified...

I can't see any grounds to justify a rate increase.
Original rate was £ 450-500, offered £ 450, asked £ 500, settled for £ 475 (admittedly on the low side for the amount of work, but was accepted).
However, it looks like you got an extra £ 25 and now asking for another £ 25 (another in 3 m/6m/9m ???).
In principle, you get no increase after 1st extension. Min after a year, rarely after 6 m.

**apb** · 12 May 2008, 11:59

Originally posted by BA to the Stars View Post

If you are after a £25 per day rise, over the 18 months you seem to imply that you will get on the project that equates to £9,000. If, however, the client thinks, no way, greedy so & so and withdraws renewal, then at your current rate it would take 19 days to recoup this. Ask yourself:

1. Am I happy with the rate I am getting?
2. Am I happy in this gig?
3. If I get the chop for asking for more, will I get another gig within 19 days or will I have no more than 19 days between gigs over the course of the next 18 months?
4. Will the agent actually reduce their margin to give you a rise?
5. Will you want another rise at the next renewal (or will that be the clients perception)?
6. If you leave this gig, will you need to spend more travelling / overnights stays, etc at a new gig.

In my opinion, I would get yourself a little bit more established within the project and at the clients, but it is your call

I think you all have provided some very valid points and yes if I was in the Client's position I would think it is a little early and may indicate that at every renewal I will be asking for more.

Given the market, it's not the time to cry over £25/day - I think I will accept the renewal and assess the position at the next renewal.

Thanks for all your help - it's really useful to get other views rather than relying on my limited experience in this game.

**BrilloPad** · 12 May 2008, 13:31

Have you any idea what margin the agency is on?

**apb** · 12 May 2008, 18:12

Originally posted by BrilloPad View Post

Have you any idea what margin the agency is on?

Unfortunately not, don't think at this stage I'm in a position to ask the Client.

The complicating factor is that I am contracted to a consultancy and working on a Bank account. The agency is part of the overall consultancy group although I am sure they operate as a commercial entity and cross charge the cost - I presume their profit is derived from the margin.

Think I will have to accept at this stage!

Thanks.

**thunderlizard** · 12 May 2008, 18:46

I have advised the agent that I would like a rate rise given the above and he has stated that he would have to consult with the client - and 'could I reply to the offer email outlining the reasons why.'

You should think up some reasons, in order to play ball politely. It won't make any difference to the outcome, because the only real reason is "you can't get better cheaper elsewhere", but if they do sign you again it'll make them feel a bit happier about it.

Think about the last time your gas company put up the bills - they try and explain it away with reference to operating costs, but the real reason is "because out competitors are putting theirs up, so we think we can".

**swamp** · 12 May 2008, 21:02

Originally posted by apb View Post

I was offered Senior PM at £450 - I stated I was expecting £500 and after a couple of minutes 'consulting with the Client' the agent came back with £475. As I had no role to go to after resigning from my permie job and working my notice I jumped at it.

The agent has pocketed the extra £25.

When he was 'consulting with the Client' he was really bragging to his boss and high-fiving his colleagues. Probably rang the office bell too. I believe the phrase they use is "like taking candy from kids".

HTH

Advice on renewal rate negotiation