Contingency-based fee structures are often promoted as zero risk programs, as customers only pay a percentage of savings generated by the outsource partner. Financial liability is increased in this model as the final cost is not known until the deliverable – savings – has been identified. In addition, contingency audits do not identify or resolve the root cause of what creates billing errors and inefficiencies in telecom environments; the audit objective is purely error identification and financial recovery, not sustainable financial efficiency. Contingency-based audits serve to meet immediate savings needs, but the value they generate is temporary.
Flat fee engagements outperform contingency engagements in terms of cost, relationship preservation, long-term results and business objective alignment. Fee-based projects allow for a broader scope of work than contingency-based projects, as activities companion to savings identification, such as inventory, service, and cost management, can be compensated. In addition, the financial liability for the project is more defined prior to engagement than contingency-based projects.