LIVE ISSUE/PRODUCTION COSTS: Will BBH’s new plans for greater openness work? - Application of the scheme is likely to pose problems Caroline Marshall reports.

It could be dismissed as a stunt - an agency gunning for transparency in its financial arrangements with production companies (Campaign, last week) - if it did not concern Bartle Bogle Hegarty, a leopard not known for changing its spots without serious consideration.

It could be dismissed as a stunt - an agency gunning for

transparency in its financial arrangements with production companies

(Campaign, last week) - if it did not concern Bartle Bogle Hegarty, a

leopard not known for changing its spots without serious

consideration.



BBH’s proposal is attracting attention from rival shops which sniff a

competitive advantage, from the production trade body which scents the

possibility of more disputes and from production companies which fear a

continuing erosion of their profits in a fierce climate. As Lisa Bryer,

the managing director of Cowboy Films, says: ’I’ve never seen the market

as competitive, tough and cost effective.’



So, how does BBH’s proposal, known as ’fixed bid - shared risk’, differ

from the existing fixed-price estimate system? Now production companies

benefit if the final production costs go under the net estimate - but

they bear the total financial risk if the costs go over the net

estimate. Actual costs are not disclosed.



The BBH proposal is also based on a fixed estimate plus a mark-up or

production fee, but if the actual production costs go over or under the

estimate, the client will be responsible for an agreed percentage of the

so-called ’overage’. And if there is ’underage’, the client will receive

a percentage of the savings.



All actual production company costs (including invoices) will be

available to the client, and a production accountant will be hired to

audit costs.



Does it make sense? On paper, yes, but production company heads query

BBH’s starting point. They argue that there is already transparency in

the system which the ten-page standard budget breaks down into minute

detail, like how much a walkie-talkie should cost for a day or how much

a VHS video cassette should cost (both, incidentally, cost around pounds

15).



The Advertising Film and Videotape Producers Association thinks its

members have addressed past extravagances, and questions exactly how

BBH’s initiative will improve transparency. And Cecilia Garnett, the

AFVPA’s chairman, is concerned that the existing contract will not work

for a shared-risk system. ’Production companies may need new

documentation and it may add to costs,’ she says. ’Don’t forget that

production accountants come with a fee.’



The architect of the proposal, BBH’s head of agency production, Mark

Collier, concedes that there is already a detailed breakdown of costs

but argues that clients are not party to it. ’We don’t think we are

being ripped off, and this isn’t a knee-jerk reaction to the recent

statements from the Creative Directors Forum, but the fact is that

actual costs are not made available to clients at the end of a

production. We want complete financial openness and this is a logical

extension of our policy of transparent billing,’ he says.



However, production company heads argue further that in the real world

inhabited by ferociously well-trained BBH producers, the concept of

’underages’ is a fantasy. One says: ’The fact that this has come from

BBH is remarkable. They are bastards to negotiate with and they have the

powerful currency of good scripts. BBH is already exploiting the system

well by never having the right money.’ Another adds: ’Mark (Collier) is

not foisting this on anyone, but we’re all a bit bemused. BBH already

has the most stringent budgets in town.’



The proposal puts more onus on the BBH in-house producer, who Collier

describes as the ’custodian of the production’. But what of the

all-important relationship with the director? Could this too be affected

with clients assuming a more nannyish role? In theory, a commercials

producer could now go to an agency producer and say, ’look, the director

wants a new set-up, it’ll take four hours and cost pounds 5,000. Is that

OK?’ and be met with an on-the-spot answer. Now there is a worry that

clients will be in the background saying, ’Hold on, I’m responsible for

20 per cent of these overages, I want 20 per cent of the voting rights

and no, you can’t spend the pounds 5,000.’



BBH’s chairman and creative director, John Hegarty, dismisses the

theory: ’Clients will not have to be on shoots. This is not about

getting things done for less, but I hope it will help production

companies focus on how they can buy better.’



Which leads us to the thorny issue of bulk discounts and BBH’s implicit

message to the production industry - if we have a bulk discount on

print, we keep some and hand some back to the client. Production

companies should do the same on the discounts they negotiate on things

like camera equipment and lighting.



Fine, say the production companies, if you give us a guaranteed volume

of work.



It’s a seemingly impossible impasse. Three industry trade bodies have

barely finished dedicating a great amount of time, money and effort to a

new production contract when along comes an agency wanting to rock the

boat. BBH, making 140-odd commercials a year, has powerful clout and

buying power and wants to innovate. Production companies, in thrall to

BBH’s juicy scripts, are already breaking their necks to make the films

and are suspicious about whether a notion of complete financial openness

can be applied fairly. Could the three points of view bear testament to

the fact that commercials production will always be fraught with

conflict?



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