Contingency fee
A contingency fee is a fee that is owed only if a stated result is achieved. In cost review work, the result is usually money recovered, and the fee is usually a share of that amount.
If nothing is recovered, nothing is owed under that arrangement. Terms differ from one provider to the next, so the contract matters more than the label.
Why contingency fees matter in a cost review
Most businesses want to know what a review will cost before it starts. A contingency arrangement changes the question. You may pay nothing up front, and the fee depends on the outcome. That can lower the barrier to starting a review.
It can also raise questions you should ask early. What counts as a recovery? Does a credit on a future bill count? Are savings that continue over time counted, and for how long? Who decides? The answers sit in the engagement terms, which are agreed between you and the partner firm. Fairview does not set them. Some partner firms work on a contingency basis.
A plain-words illustration
Say a business suspects it overpaid several suppliers over a few years. It engages a firm on a contingency basis. The firm reviews payment records and finds that some invoices were paid twice, and that some supplier credits were never applied.
The suppliers agree to refund part of the money and issue credits for the rest. The agreement says the fee is a share of recovered cash and does not mention credits. The business and the firm now have to read the contract closely to decide how the credits are treated. This is why the definition of a recovery belongs in writing before work begins.
How it shows up in a review
When you talk with a partner firm, fee terms are one of the first topics. Contingency is one model among several, and others include flat fees and hourly rates. Compare them in the article on contingency fee versus flat fee. The model a firm uses may depend on the category of work. [CONFIRM: a partner firm supplies and approves its fee model]
Terms worth reading closely include:
- How the fee is calculated and what it is applied to.
- How credits, refunds and future savings are treated.
- The period the fee covers.
- Who pays any third-party costs.
- What happens if you end the engagement early.
- Whether you keep your existing vendors, and who contacts them.
- Your rights to see the supporting records.
Contingency work is common in a recovery audit, where the task is to find past overpayments. It is also seen in categories such as accounts payable audit. Some professions have rules that limit or forbid fees of this kind. [VERIFY: rules that apply to the type of firm and the type of work]
Common mistakes
- Assuming it is free. Under a contingency model you still pay if there is a result, and the share may be large.
- Leaving the term vague. Define a recovery in the contract, including credits and future savings.
- Not asking about costs. Some arrangements treat expenses separately.
- Ignoring the length of the commitment. Check how long the agreement runs and how it ends.
- Focusing on the rate only. A lower share on a narrow definition may cost more than a higher share on a clear one.
- Skipping your own review. You remain involved. Confirm findings against your records before agreeing to a claim.
- Comparing unlike offers. Ask each firm to state its terms in the same way.
Tip: Ask each partner firm for its engagement terms in writing, then compare how each one defines a recovery.
Related terms and pages
- Recovery audit explains the review where contingency fees are common.
- Duplicate payment describes a typical finding.
- Contingency fee versus flat fee compares fee models.
- The glossary lists more terms.
To begin, use "Request a professional" and choose the form that fits your business. Fees and terms are agreed between you and the partner.
Sources
Tell us what you need reviewed. We match you by hand with an independent partner firm. You keep your existing vendors.Find out what you are overpaying.