The no-win-no-fee model is used by big and small companies alike because it is seen as an easy way to sign up a client. This model may seem attractive at first but it has hidden dangers you’ll need to consider.
It is no accident that no-win-no-fee fee-based business models for legal services had to be legislated against in the UK. It seemed a good idea at first, but quickly it encouraged bad practices in and around the industry. Any claim no matter how unreasonable was taken on in the hope a settlement will be made.
In the Horizon 2020 proposal writing industry, there are similar effects when this model is used.
Win fee-based models aren’t all bad and not all grant writers or Horizon 2020 consultancies offering them are engaging in bad practices. But if used incorrectly the downside can be one or all of the following,
- a higher than expected real cost,
- a lower quality proposal,
- unethical business practices.
Let me explain how this can occur, sometimes without any malice or intention.
A higher than expected real cost
People outsource Horizon 2020 proposal writing because it is an expert and time-consuming task. Many times the company can’t afford in-house expertise, or there isn’t enough demand to justify a full-time bid writer, or the proposal is a one-off exercise.
Companies or even individuals that offer proposal writing will need to cover the cost of the proposal development. But quite often the client won’t want to pay these costs right away, because if the proposal loses then the perspective is that the money is wasted (this isn’t true but more on that in another post).
But we seem to forget that the proposal could actually win, and in fact,that is the desired outcome. And if the proposal does win, you’ll need to pay the success fee. And I know of companies charging an amount equal to 30% of any grant awarded.
If you have a project that costs €100,000 and your grant covers 70% of the cost, you can expect to receive €70,000 in funding. A 30% win fee would mean a €21,000 bill to the grant writer suddenly your project costs €121,000, many times this extra cost wasn’t considered in cash flow projections.
A lower quality proposal
As a company or a horizon 2020 consultant offering this service, you want to make money, which is a reasonable expectation.
How do you make money with no-win-no-fee business models?
Every time a proposal wins you get money in the bank. But since even very well prepared proposals will lose, a couple of unlucky evaluations could mean you are suddenly faced with no income. Thus if you offer this model you must have a pipeline of proposals to cover your costs and risk of a proposal losing.
Seems obvious, a larger pipeline will offer more protection against losing proposals. But the problem is that proposal writing doesn’t scale well.
As a company you’ll want to keep your staff costs per proposal low, so you’ll employ less experienced staff, or give more than one proposal to each writer. And it would seem a really good idea to give more proposals to less experienced lower paid staff.
If we are trying to write two proposals at the same time, obviously the amount of time we spend on each is reduced and so is the quality. This is counter productive because a lower quality proposal always has a lower chance of winning.
People also tend to get focussed on having a large win pipeline with this model, so they will accept lower quality proposals in the hope that at least one will win.
Much similar to the legal industry when any claim is accepted no matter what the actual credibility of the claim. Sometimes any proposal idea will be accepted, even when the proposal has no chance of winning.
Unethical business practices
Unfortunately, there is a practice of hiding the win fee as a cost the total project to be claimed back from the grant authorities. It will be hidden as an extra margin on project management or admin services. In some cases, these services are never delivered based on unwritten agreements between the grant writer and winner.
This has the effect of reducing the amount of grant that can be spent on actually developing innovative technology. But almost all grants are paid once you’ve spent the money and have provided invoices as proof. Thus win fee is paid by the grant provider. Since grants are funded through tax this is a clear example of waste, and the taxpayer shouldn’t be picking up the bill to develop the proposal in the first place.
What you need to consider when selecting a Horizon 2020 grant consultant
Paying nothing upfront means that your cost will be hidden elsewhere. You should try to access the best expertise that you can afford if it is truly zero then find a company that gives a good explanation on why they offer the model, who will be doing the writing work and their level of expertise. My experience with good companies or people that offer this model, is that they will have a good enrollment process and select only high-quality proposals.
Paying for the best expertise doesn’t have to be expensive you can access expertise through coaching rather than an external consultancy. But no matter how you access your external expertise make sure you take ownership of the process, don’t just leave it to the external expert to manage.
Taking ownership doesn’t mean you are responsible for completing the work, but it does mean that you are responsible for the quality of the proposal. Make sure you involve the right people in the proposal generation, and if you are using external expertise make sure you remain in control of the process and understand how the proposal will be developed.
Writing grants is an expert task, and it should be, good grant writers can return their investment quickly. But like any good investment you may need to commit for a time before you see a return.