Having previously discussed working with an aviation consultant on well-defined tasks, this month David Wyndham considers questions of working with consultants on open-ended questions and tasks in Business Aviation...
Open-ended questions and tasks in Business Aviation often involve increased complexity, which can lead to difficulty in establishing a firm price when engaging the services of an aviation consultant. Take the example of contracting a chosen consultant to assist you through the aircraft selection and negotiations process, or to monitor the aircraft through outfitting and delivery. In each case, the consultant can act in an advisory role, or as an agent of the buyer with limited responsibilities.
Furthermore, these tasks, no matter how well defined, are dependent on outside variables beyond the consultant’s ability to control. It is in the management of these outside variables that the time required can be hard to limit.
Let’s assume the buyer consultant will advise and recommend pricing and develop negotiation strategies with you, the buyer. If the aircraft selected is a popular model that’s in high demand there will be limits to what can be negotiated – less so if the aircraft model is less popular on today’s market. Regardless, a good buyer-broker should be up front with what can and cannot be expected.
While there are few sole buyer-brokers in aviation, other options exist. Some pre-owned aircraft brokers, for example, will advertise buyer-brokering services or aircraft needs planning.
They should know the market well as they broker aircraft for other owners; however they need to be clear as to how they handle potential conflicts of interest between representing you as the potential buyer, and their seller-clients.
One industry leading buyer-broker I know sets firm prices for their services, dependent on how far into the process they go (from identifying the aircraft options right through to final delivery). Others may bill as you go. If the best value aircraft is found early, the cost will be less than if the search becomes lengthy and difficult.
There are also agents who will represent you though the outfitting of your aircraft. This is commonly done with new aircraft, mostly of the large cabin variety. In this arrangement, the agent will monitor your aircraft through the final stages of construction including painting and the outfitting of the aircraft. They do this by being present, on site.
These people are paid to live with your aircraft, verifying that any equipment and options you specified are exactly what is being provided. The OEMs tend to do a very good job, but the time to discover that the color of the seating and carpet is not correct is during installation, not on the day of delivery!
Your agent will manage and direct the acceptance flight, too, and will have a checklist to follow and verify that every single system, accessory, switch and light is working correctly. Any discrepancies will be noted and fixed as necessary.
Understandably, doing this monitoring and possible intervention for a $50m aircraft is not inexpensive (although the ultimate cost will depend on their length of stay at the factory). As they say, the squeaky wheel gets the grease – and your outfitting agent will make sure that your aircraft is always getting the attention and care it needs to be delivered on time, and as expected.
Legal & Tax Consultants
Legal and tax consulting tend to be focused on a set of desirable outcomes that require varying amounts of time to accomplish. In this area, I recommend aviation-skilled experts to work with your in-house counsel or CPA. What may make sense from a business or IRS perspective may not work from a regulatory perspective.
Just because an aircraft is based in one state or province does not mean it is no longer subject to taxes and fees in other locations.
Different authorities, for example, have varying definitions for what constitutes commercial operations.
Your Legal and Tax Consultants will manage risk while retaining ability for you to use your aircraft in a productive manner. These arrangements tend to favor open-ended discussions and billing.
Summary on Open-Ended Contracts
The biggest caveat in open-ended contracts is the management of expectations within the confines of a budget. When Conklin & de Decker does open-ended consultancy, we try to set up boundaries as to what will and will not be done, and establish a reasonable not-to-exceed amount for the expected work.
You will need to work with your chosen consultant to define a successful outcome at the start of the project along with the expected deliverables and billing schedule. Be as specific as possible with areas of authority and responsibility.
Open-ended arrangements are often necessary and appropriate in the arena of Business Aviation. By defining desired outcomes and setting ground rules, you reduce the likelihood of surprises or bills that far-exceed what was expected at the outset.