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How much pay is too much for a consultant?

When a consultant gets a public contract with a high hourly rate, the public may not understand why that rate may actually be quite reasonable.

On September 16, a front-page headline in the Chicago Tribune read “Metra’s big ticket.” The big ticket referred to the fees charged by consultant George Avery Grimes to improve service and otherwise clean up Chicago’s troubled commuter railway service.

How much do you think the consultant is paid? Well, I was curious at the outrageous fee he charged so I looked for the details . . . which were easy to find because the absurd hourly rate featured prominently in the story’s subhead, copy and photo caption.

Now get ready to be shocked.

The scandal is that Grimes is paid $275 per hour.

To some people that sounds like a lot of money . . . and it is a substantial amount . . . but I was expecting a rate of $1,000 per hour or even more based on the tone of the story.

Doing the math, $275 per hour may appear to equal $550,000 per year, but actually, it doesn’t. There are several reasons for this. First, he’s only charging for hours worked, not necessarily for each full week, and he estimates he has been billing substantially below the actual number of hours worked.

Second, he doesn’t have a full-year contract—renewal of his first six-month contract is now being considered.

Third, he has been totally ethical in the ways he has coordinated, managed and billed for his engagements. He is not reimbursed for lodging or expenses, and he even pays his own ticket to return home to Denver every two weeks.

And finally, his work is exemplary. When taking the train on his own, unpaid time, he investigated why fares weren’t being collected as they should be. He discovered the conductor reading a newspaper and reported him, resulting in disciplinary action.

Chicago has lots of governmental scandals. Nothing new there.

But the entire article gave no indication that George Avery Grimes profited from political connections, bribes or anything else inappropriate.

Furthermore, his qualifications are impressive: a recent, successful consulting project recommending administrative and safety improvements in the Los Angeles-area train network, three decades of relevant experience and a Ph.D. in railroad economics.

The article details the controversy, now under way, over renewing the Grimes contract. Some argue that it’s ridiculous to hire a consultant when the goal is to cut costs.

But actually, the agency’s management and budgetary problems erupted during the reign of the previous CEO who committed suicide while under investigation. Now the organization lacks the expertise to move forward without a consultant.

And the newspaper story totally skips over how much time and money Grimes invested in winning the contract, such as how many presentations he prepared and the number of trips he made to Chicago.

This incident is a great example of how consulting can appear to be an expensive boondoggle to a critical outsider but a reasonable, fair expenditure to someone who understands the consulting profession.

Yes, $275 per hour can induce sticker shock to the casual observer, but considering the individual’s unique standing in his narrow specialty, I believe it is quite reasonable.

Originally posted 9-19-11

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