>A close friend of mine is VP of a light manufacturing company and asked me to come in and look at a software requirement they had - basically a networked UI and reporting system for some custom firmware they had been developing.
>As i understood it he had cleared with the CEO that i would go in and produce a spec and estimates for them to take to their board of directors for budget approval (but that was a no brainer because customers were clamouring for it). So i went in, had a meeting with the engineer who developed the firmware, told them my rates and that i would itemise the requirements, and come up with a system concept with recommendations and estimates.
>I delivered a 15 page document a few days later and went in for another meeting to present the ideas etc. A week later my pal mentioned the document had been useful in a presentation he had given to a major client who was anxious for this software. They took it to the board who deferred a decision pending better financial statements from the CEO.
>At the end of the month i invoiced for my time so far (2 days) and sent it to my pal the VP.
>
>The board eventually approved the project but it was to go out for a competitive bid. They also said they needed the s/w but were worried about their cashflow so could i give them 60 day terms. I declined but said i could cap my monthly billings and spread the invoices out for them. Soon after i was told that i couldn't invoice them for preparing a proposal bidding for the contract.
>
>Oh well i thought, that will teach me.. friends and business. I should add that my pal the VP has been pretty much emasculated since the arrival of a new CEO earlier this year.
>
>My pal then sent me the competitive bid for comment. It was a 1½ page document that hadn't really understood the requirements (as i had understood them at least) with estimates to produce a prototype and do further analysis - what you would expect for your first free hour's consultation. I heard no more and soon decided i didn't want the job anyway - they were going to be too much trouble. And started scrambling for other work to fill the gap (offers please).
>
>2 days ago the engineer who wrote the firmware went to my wife's office (she also works there - i know, i know) and said he was dismayed i wasn't being awarded the contract and how sh*tty it was that they used my design to spec the project for the other firm.
>
>So i asked my pal to resubmit the invoice. I got a phone call from the CEO saying they wouldn't be paying as they don't pay for proposals. I pointed out much of the above and that as they had now benefited from my work they should pay me for it. He declined.
>
>I'm ticked. I should've known better i know, but i'm ticked anyway.
>
>What's the concensus? Am i being a male appendage and just chalk it up to experience or, when i my wife finds a new job, take them to small claims court. Candian law has the concept of "unjust enrichment" for cases where a firm can be shown to have benefited from someone's work unjustly.

Hard to say. A lot of companies don't pay for proposals - fact of life. What you might be able to argue is that what you did is more than just a proposal, it was a project specification/needs analysis as well. That is to say, it included legwork that's needed prior to being able to create a meaningful proposal. Maybe you could point out the work you did was

X% specification/analysis
Y% proposal

and suggest they pay you X% of your invoice. Effectively, you'd be offering them a discount. That might be a way for both sides to "save face" as it were. They might be receptive to this, as you have some "ins" at the company and there is some recognition that you provided value to them for which you were not paid. Hopefully you and the CEO didn't get too hostile about this and are still on speaking terms.

Your legal options probably depend partly on whether you have done work for them before informally. If you can prove a history of work for them without prior approval and which they've happily paid you might be able to argue that this case is the same thing.

Otherwise, from a hard legal standpoint, without a written contract or witnessed verbal agreement you probably don't have much recourse (warning: IANAL). For a lawyer to look at this would be hundreds of dollars just to start - given the value of your invoice, would it be worth it?

With new clients I generally give away a little time at the beginning to build the relationship and get the broad strokes, but if they need significant work in specs or analysis I tell them up front they'll need to pay for that. As you've painfully found, you generally need to keep things professional/arm's length no matter how many "ins" you have with the client.

I'd try the "discount" approach first. If they bite, you can chalk up the discount amount as a learning experience ;)

My C$0.02.