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| AICP GUIDELINES
The most important component in production is clear and specific communication between the production company and contracting-client. The bid proposal is a creative road map, an outline of how the company plans to execute the job. The best bids provide the most production values and are developed with precise specifications supplied by the contracting-client that allows the production company to be equally specific regarding what will be supplied. They are more than simply an allocation of dollars.
The basic AICP bidform (long form) has become the standard in bidding jobs in commercial production. The basis of the bidform is that all live items grouped in A-to-K or A-to-H (whichever is applicable) are marked up by a single number. This number encompasses overhead costs as well as the production company fee. Because it is an average that provides for differentials of profit and overhead throughout the job, the bidform is designed for use with a constant number in marking up all line items of the bid. If any lines are pulled out to be marked up at different levels or not marked up at all, the logic of the bidform and its effectiveness as a business tool are compromised. In that case, other forms of bidding, such as single page estimates, are recommended. The AICP stresses that the number used, its components and its application to any terms are strictly a matter of independent determination by each Producer. Under this system, production companies submit a proposal including a summary of costs. Once details of the approach have been agreed upon and the proposal is accepted, it becomes the contract price for the job, barring a major change in specifications. There are no accounting obligations to contracting-client by the production company for actual costs after the production. It is standard industry practice that contracting-client producers have the authority to approve changes in specifications.
This buying method is more complex and can be used when there are a number of unknown factors and when there is a risk that the job may involve costs that cannot be anticipated. Under this system, production companies propose an estimate of the costs in detail based on the agreed upon specifications. Typically this estimate is submitted on a six-page cost summary (long form). To the total of these costs, a fixed fee (a specific dollar amount) is added. When agreed upon, the combination of costs and fee becomes the contract price. At the conclusion of the job, the production company does a cost-accounting, and the contracting-client is billed all actual direct costs plus the pre-determined fixed fee (specific dollar amount). The AICP recommends that all additional accounting expenses be included as a direct cost of the production. During the course of the bidding process, production companies through their producers and directors often provide approaches to a project that materially change its overall look or direction. Production companies may also provide new elements, designs or characters for the project. The exploitation of such creative contributions when the job is not awarded to that production company is the misappropriation of the property of that production company for which appropriate compensation is required. Sequential Liability means that the agency as agent for its principal, the advertiser, is liable for payment to the production company only if the advertiser has paid the agency; otherwise the advertiser is directly responsible for the payment. Certain agencies have inserted a Sequential Liability clause in their contracts. Others have added a side letter to be signed by the production company. Still other agency contracts do not overtly refer to Sequential Liability as being in effect, but do refer to the agency as "acting as agent for" (the advertiser), which suggests the same thing. If the agency is requesting the recognition of a "principal-agent" relationship, then the client (principal) should not be released from the obligation of payment until total payment is made to the production company. It should be clarified that even if the client pays the agency, the client remains liable if the agent defaults in fulfilling the payment obligation. If an agency's internal policy insists upon these payment terms (sequential liability), the production company should:
It is recognized that this is a labor intensive industry and accordingly prompt payment to the production company for services rendered is essential Each payment guideline is designed so that the first payment is made to the production company upon signing of the contract, but not later than 5 business days prior to the commencement of the first filming (shoot) day. It is recommended that if payment is not made as agreed, the production company reevaluate the ability of the contracting-client to meet its contractual obligations. Failure to make prompt payment, as set forth in the contract between the production company and the contracting-client, is a breach of contract giving the production company recourse to the cancellation provisions set forth herein. In the event the contracting-client is an agency and is in default of any payment, it is recommended that the production company notify and forward duplicate invoices to the advertiser. Title of ownership of a commercial does not transfer until full payment is made. Each production company should consider adoption of a payment policy requiring full payment for the commercial prior to its broadcast use. The Association believes that such a policy is consistent with good faith business practices and it is also consistent with provisions used in Great Britain by the Advertising Producers Association, the Institute of Practitioners in Advertising, and the Incorporated Society of British Advertisers.
1) The "75-25" plan is applicable in instances of firm bid contracts whose requirements are production through film or videotape dailies.
A)In productions expected to be completed within 120 days, 75% of the contract price is due and payable upon commencement of production or signing of contract. B)25% of the contract price is due and payable upon delivery but not later than 30 days from the date of the final invoice or not later than the airing of the commercial, whichever is sooner. When shooting outside the U.S., the production company is often obligated to pay the foreign vendors in full before leaving the country with the negative. Where foreign production is involved, the first payment due the production company will be no less than 75% of the contracted price. In recognition of the occasionally volatile nature of currency rates, the agency and the production company should agree in advance to contingency plans for rate fluctuations. Suggested options might include:
 Late Payments When payment by the agency under the terms of the production contract is late, there will be an interest charge at Prime + 2%* on all payments later than 30 days from the contract due date (using the prime rate as of the 30th day). *The production company determines the actual rate of interest. The rate inserted above is shown as an example. If the production company blocks out a specific period of time with the agreement that it represents a firm commitment from the contracting-client, then, obviously, no further efforts are made to sell that time. If the job is canceled or postponed within the Guideline time frame, it is unlikely that this time can be re-booked. It should be understood that this time represents a production company's only source of income. The AICP acknowledges, however, that it is the production company's obligation to make all reasonable efforts to re-book the canceled/postponed time with another comparable project. If the time is re-booked, then there is an obvious area for negotiation on the director's cost and/or the production fee.
2)If notice of cancellation/postponement is given ELEVEN TO FIFTEEN WORKING DAYS prior to the commencement of the shoot, the contracting-client will be liable to the production company for:
3) If notice of cancellation/postponement is given MORE THAN FIFTEEN WORKING DAYS prior to the commencement of the shoot, the contracting-client will be liable to the production company for:
As with live action production, if the production company blocks out a specific period of time to produce a job, no further efforts are made to sell that time. And, if a job is canceled or postponed, it is the obligation of the production company to make all reasonable efforts to re-book the time. If the time is re-booked, there is an obvious area for negotiation on creative fees and/or the production fee. a) If notice of cancellation/postponement is given more than half way through the production schedule of the job, that is between the award or start date and the final deliver date, the contracting client will be liable to the production company for the full cost of the job as a bid. b) If notice of cancellation/postponement is given in the second quarter of the production schedule of the job, that is between the award or start date and the final delivery date, the contracting client will be liable to the production company for:
1) All out of pocket costs, including the expense of all staff and free-lance labor attached to the project. This expense will include full payment through the original completion date if that labor is not re-booked by the company, or, in the case of the free-lance labor, not able to re-book itself on another project. c) If notice of cancellation/postponement is given in the first quarter of the production schedule of the job, that is between the award or start date and the final delivery date, the contracting client will be liable to the production company for: 1) All out of pocket costs, including the expense of all staff and free-lance labor attached to the project. This expense will include full payment through the original completion date if that labor is not re-booked by the company, or, in the case of the free-lance labor, not able to re-book itself on another project Upon first notice of possible cancellation/postponement of a production, it is the obligation of the production company to supply the contracting client with an estimate as accurate as possible of the potential out-of-pocket costs, including the estimated expense of staff and free-lance labor, that will be charged upon cancellation or postponement.
1) A contingency day is any day where a scheduled film or tape shooting has been prevented from occurring due to circumstances beyond the control of the production company. a) weather conditions (rain, fog, sleet, hail or any adverse condition that is not consistent with the prescribed shooting conditions desired by the contracting-client).3) The production company recognizes its obligation to minimize contingency day liabilities and will apply accepted industry cancellation practices. 4) The production company will quote the maximum exposure figure (a "not to exceed" figure) as a contingency day cost. This will be a cost per day figure. However, this figure does not include the cost of premiums for crew or suppliers (i.e., should the contingency day fall on weekends, holidays or premium days based on consecutive employment). 5) If a contingency day situation arises, the cost of the contingency day shall consist of: a)all out-of-pocket costs.6)If, in anticipation of bad weather, a contingency day situation arises before 12 noon the day before the shoot or sooner (even multiple days in advance of the shoot), the costs involved will be subject to no less than a 15% handling fee. 7)Based on a bad weather forecast, the potential exists for the contracting-client to incur costs with the intention of preventing a postponement of the scheduled shoot (e.g., additional electricians and grips, additional lighting, trucking and possibly location dressing and personnel). The producer will provide an explanation of these costs which will include not less than a 15% handling fee. This could also apply to overtime incurred due to a delayed start or downtime during the day for bad weather. When the production company is providing the production insurance for the job, the production company should indemnify, defend and hold harmless the advertising agency and the client. Likewise, when the advertising agency or client is providing the production insurance the advertising agency and/or client should indemnify, defend and hold harmless the production company from any and all claims arising from the production regardless of the limits set in their policy, and the production company should be added as a "named insured" on the policy for that job. The production company is the preferred procurer of insurance for the production since it is in the best position to understand the need for special risk insurance and since it is in a contractual relationship with equipment vendors and/or locations should there be a loss. Whether production insurance is provided by the production company or the advertising agency and/or client, the production company is actively involved in the insurance process and there are costs associated with this involvement. For wrap-up, the production company must identify special risks, have insurance certificates issued or directed to vendors and locations, and negotiate and process insurance claims should the need arise. In most cases, the production company is required by the advertiser or agency to maintain "usual and customary" insurance coverage in addition to that provided under the wrap-up insurance program. It is therefore appropriate that the production company include in its estimate a charge for wrap-up administration, purchased insurance (including coverage required by the wrap-up policy), and/or any coverage costs associated with uninsured risks.
The AICP has established a Grievance Committee for the use of its members. Composed of former AICP chairmen still with member companies, as well as the current chairman and vice chairman, the committee investigates complaints by members of violations of the National Guidelines, above, or other unfair or unethical business practices. Members may file a grievance by completing the official form and mailing it with back-up material to the Grievance Committee, c/o AICP, 3 West 18th Street, New York, NY 10011.
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