Tesco’s move to make professionals cut their fees appears to be blatant profiteering, argues Don McLean
I read with interest your news article ‘Tesco slashes fees by 40 per cent’. Such a ‘challenge’ was made to we here at McLean Architects in Glasgow, by the chief architect and a senior buying manager at Tesco. All the architects who faced this cutback had the option to refuse. We did.
McLean Architects started working on the Tesco Express development programme in Scotland last summer, following an approach from Tesco. Having completed 27 feasibility studies across Scotland, and anticipating the majority of these studies moving into the implementation stage – a not insignificant workload – I was summoned to Tesco’s headquarters.
Having been told we were doing good work, and that Tesco intended to expand by 25 per cent over the next five years, I was advised that Tesco ‘required’ us to rise to the challenge of reducing our fee for professional services by 40 per cent. It took a few heartbeats to realise it was not 1 April, and that they were serious.
I immediately stated that, since our margin was generally in the region of 12-15 per cent, I could not see how this would work. I was then advised that those who ‘rose to the challenge’ would attract a considerably higher workload. Strangely, I still could not see how this would work, given that we would then have a higher workload on a significant loss-per-job basis.
Ultimately, following discussion with my colleagues, we proposed a 20 per cent reduction in fee for a trial period, on the understanding that this would be based on a restricted service. This proved unsuccessful and we were put under pressure to accept the full 40 per cent cut for no reduction in service. We refused, saying it was simply not in our business plan that we work at a loss.
Advantage is being taken of exposure to current workload
I have come across a variety of Tesco’s professional consultants since then, including structural engineers, services consultants, solicitors and planning consultants, all of whom appear to have reluctantly accepted these terms.
Tesco appears to be taking advantage of the extent to which these consultants are exposed to current Tesco workload. This appears to be blatant profiteering on the supermarket giant’s part, particularly when its record profit levels are considered. My main frustration is that professionals should think this way of working is acceptable and sustainable. How long will it be before every other large retail client follows suit? It would be interesting to know how many consultants refused to compromise the quality of their service, rather than work at a loss.
Interestingly, when I advised colleagues in the construction industry last summer that we had won the contract for Tesco Express across Scotland, several of them used exactly the same expression to describe our good fortune: ‘You have sold your soul to the devil.’
Don McLean is managing director of McLean Architects