Consultant Exclusivity Agreements - Unfair Practice

I’m busy – actually swamped – so there have been no posts this week and won't be until the weekend.

Except this one.

Consultants are getting a raw deal when they are forced to sign exclusivity agreements with firms bidding on tenders issued by the EU, USAID or World Bank. These agreements tie consultants to one bid with no guarantee that the proposal will win. Aside from being a questionable market practice in general, there is no consideration for these one-side contracts and they are unenforceable. Except, of course, the donor agencies will enforce these types of agreements either through official or unofficial blacklisting of consultants, consulting firms or both. In most jurisdictions, courts would throw out this practice and, as far as blacklisting occurs, provide for punitive damages.

It is really time for both the donors and the consulting firm to face the problem and the only way for the issue to be resolved fairly is for consultants to demand consideration for signing exclusivity letters.

These agreements, as currently structured, deprive the consultant of work opportunities at no cost to consulting firms. They are options. Options carry a cost in the market. If consultants do not work as a group to force this issue, they will remain at the mercy of consulting firms and the donors.

Consultants should demand that payments for the option be made at the time of signing – just like any other similar option contract. That sum can then be applied to the remuneration package if the firm wins the tender. If the firm does not – well – too bad. That is a cost of doing business in a market economy.

Individual consultants will never risk demanding this obvious reform but can do so collectively.

Which organization will step up and take down this unfair practice?

Unfair Trade Practice for Consultants: Exclusivity Letters

This has always been an annoyance for me and other consultants: Letter of Exclusivity.

Frankly, consultants should begin to demand that if a letter of exclusivity for a proposal is demanded (more often than not a requirement by donors such as USAID and the EU and the like) then that constitutes an opportunity cost which must be covered by a payment. It is an option. Companies pay for options. This should be palatable for the consulting firm if it is coupled with a deal that if the project is awarded, then the payment can be deducted from the consultant's remuneration. If the consulting firm loses the the bid, then, well, that's how options work. If the consultant withdraws after the payment is made and before any decision, then the money must be returned. It may even be structured so as to place the funds in a trust with the consultants bank.

This strikes me as completely fair. That's why it won't happen. Consultants are also terrified that they will be blackballed for being the first or even part of a small group demanding this change.