The Price of Treating Local Consultants as Interchangeable

They Are Niche. We Are on the Leash.

Photo by Pozva on Unsplash

There is a difference between negotiating the cost of engineering and negotiating engineering capability out of a project. Recently, while preparing a proposal for a major industrial revamp, I was reminded how easily that distinction can disappear.

The project involved an international technology licensor responsible for the basic engineering, while the detailed engineering was expected to be performed by a local consultant. This is a common arrangement in large process-industry projects. What is also common, however, is the difference in how the two parties are perceived and treated.

The international licensor enters the project as a specialist. Its knowledge is considered difficult to replace, and its technical authority is largely accepted from the beginning. Its methods may be reviewed and its commercial proposal may certainly be negotiated, but its expertise is rarely treated as an ordinary commodity. The local consultant enters the same project from a very different position. Every man-hour must be defended, every activity is subjected to reduction, and every revision is expected to produce another commercial concession. Flexibility is demanded until flexibility begins to resemble surrender.

The licensor is niche. The local consultant is on a leash. In our market, availability is too often mistaken for replaceability.

The initial scope of the project covered multiple stages. Before submitting our commercial proposal, we provided a detailed understanding of the scope, the proposed execution methodology, the required deliverables, the project schedule and the estimated man-hours. This was deliberate because engineering cost should not be discussed before the engineering obligation is properly understood.

An engineering proposal is not simply a number placed in a commercial table. It represents the size and composition of the engineering team, the experience level of the personnel involved, the number of review cycles, the extent of site verification, coordination with the licensor, calculations, drawings, document revisions and responsibility for identifying and closing technical gaps. These elements ultimately determine whether the work can be performed properly within the required schedule.

Our methodology and man-hour estimate were not significantly challenged during the initial review. The commercial proposal was requested afterward. Once the commercials were submitted, however, the scope began to move. Certain activities were removed, others were combined or deferred, and the proposal passed through several revisions without reaching final commercial alignment. Eventually, the discussion shifted towards a comparison with another consultant whose quoted price was said to be significantly lower.

There is nothing inherently wrong with receiving a lower quotation. Another consultant may have lower overheads, a different staffing model, better efficiency or a different interpretation of the required scope. Every company has its own commercial strategy and operating structure. The concern begins when the comparison is limited to the final price without examining the scope, assumptions, man-hours, staffing levels and responsibility included behind that price.

A commercial comparison without technical normalisation is not an engineering comparison. It is merely a comparison between numbers.

When one proposal is a fraction of another, the client should first determine whether both consultants are offering the same engineering obligation. The comparison should consider what is included and excluded, how many man-hours have been estimated, what level of engineering maturity is being committed, how much senior engineering input has been provided, how many review cycles are included and how the consultant intends to address gaps or changes in the licensor’s basic engineering package. It should also assess whether the work can realistically be completed within the required schedule.

A lower price does not make the required engineering effort disappear. If sufficient effort has not been included at the proposal stage, it normally returns later through delays, variation orders, incomplete deliverables, technical disputes, excessive reliance on client engineers or additional risk during construction and commissioning. The apparent saving is therefore not always a real saving. It may simply be a cost or risk that has been postponed.

The engineering consulting market in Pakistan is already operating under considerable pressure. The number of substantial projects is limited, payment cycles are uncertain, experienced engineers continue to leave the country, and the cost of software, training, salaries and operations continues to increase. At the same time, expectations regarding local engineering rates often remain based on commercial conditions that existed many years ago.

Under these circumstances, competition gradually changes its character. Consultants stop competing only through capability, quality, efficiency and technical strength. They begin competing through their ability to absorb financial pain. One company reduces its profit margin, another reduces its man-hours, another assigns junior resources to work requiring senior judgment, while another assumes that the additional effort will somehow be recovered later. Some firms accept projects merely to keep their teams occupied and maintain cash flow until the next opportunity appears.

At that stage, the market is no longer necessarily rewarding the best engineering solution. It may be rewarding the organisation most willing, or most desperate, to accept the commercial risk.

This may reduce the initial engineering cost for the client, but over time it weakens the local consulting ecosystem. An engineering company cannot retain experienced specialists, develop intellectual property, invest in modern software, train younger engineers and build institutional knowledge if projects are awarded mainly on the basis of who can survive on the least revenue.

Major industrial clients therefore need to consider a broader question. Do they want local consultants merely to remain available, or do they want them to develop into strong engineering institutions capable of assuming greater technical responsibility? The answer cannot be separated from procurement and contracting practices. A local engineering industry cannot be expected to grow while every commercial negotiation pushes it closer to subsistence.

The deeper issue is not simply the difference between foreign and local pricing. It is the difference in perceived scarcity. International licensors often own proprietary technology, operating data, specialised process knowledge, design methods and experience accumulated across several plants. Their value is linked to the fact that their expertise is considered difficult to replace.

Local consultants, by comparison, are frequently treated as interchangeable, even when their technical depth, systems, project experience and execution capabilities vary considerably. This creates an uncomfortable hierarchy. The foreign specialist is valued for what makes it unique, while the local consultant is repeatedly pressured to demonstrate that it can be cheaper. One is rewarded for scarcity; the other is penalised for availability.

The result is that local firms are expected to accept increasing responsibility at decreasing commercial value. This is not how engineering capability is developed.

It is also important to recognise that the pressure does not originate from one person or even one organisation. Clients are under pressure from management, management is under pressure from boards, and boards are under pressure from project financiers and shareholders. Financiers seek cost certainty in an environment where complete technical certainty is rarely available, particularly during revamp projects involving existing facilities, incomplete records and interfaces with licensors.

Each layer therefore attempts to transfer risk to the next. The owner transfers risk to the contractor, the contractor transfers it to the consultant, and the consultant eventually transfers it to the engineering team through reduced man-hours, compressed schedules and increased workload. In the end, the individual engineer is expected to manage the consequences of incomplete information, unrealistic timelines and commercial decisions made well above the technical level.

This is what institutional fight-or-flight looks like. The anxiety of losing the project becomes almost as strong as the anxiety of winning it. Losing creates uncertainty regarding future workload and continuity of the team. Winning may create an obligation that cannot be executed responsibly within the agreed cost and schedule.

In such an environment, professional integrity becomes expensive. It requires discipline to submit realistic man-hours when optimistic numbers are commercially more attractive. It requires courage to challenge assumptions that cannot be technically defended. It also requires management judgment to explain that certain costs cannot be removed without also removing scope, quality, schedule certainty or engineering responsibility.

There are also situations where the consultant is effectively expected to invest in the project. The consultant finances repeated proposal revisions, provides extensive technical clarification without compensation, absorbs uncertainty in the scope, accepts delays in decision-making, carries payment risk and reduces its margin in the hope of securing the award. This is often described as competitiveness or relationship building. It is also frequently justified by the possibility of receiving future projects.

However, future projects are not compensation for present losses. They are possibilities, not contractual returns.

If a consultant is genuinely expected to carry a portion of the project risk or invest effort beyond the compensated scope, the commercial arrangement should recognise that contribution. Performance-linked fees, milestone incentives, shared savings or other value-based mechanisms may provide a more balanced relationship than simply asking the consultant to subsidise the engineering. If the consultant is expected to participate in the risk before the project succeeds, there should at least be a discussion about participation in the value created after it succeeds.

Otherwise, the term “investment” merely describes risk being transferred downward without any corresponding reward.

Not every project must be won, and not every price should be matched. There comes a point where reducing the price no longer reduces only the consultant’s profit. It begins to reduce the conditions necessary for responsible engineering.

A country does not develop engineering capability by repeatedly purchasing the cheapest engineering available. Capability develops when knowledge is allowed to accumulate through execution, experience, training, investment and institutional continuity. This requires fair competition, realistic schedules, proper technical comparison, mutual trust and sufficient commercial space for engineering organisations to retain people and grow.

International licensors became niche by developing proprietary knowledge, operating experience, specialised technology and institutional authority over decades. Local consultants cannot build comparable capability if they are continually treated as interchangeable resources whose primary value lies in being cheaper.

A local engineering industry cannot become niche while it remains permanently on a leash.