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Q: As a client I'm amazed that the people in agencies who have no vested interest in keeping costs down (creatives) are allowed free reign (perhaps you mean rein?) with the most expensive purchase an agency will ever make (commercials production). Am I missing something?
A: What you seem to be missing is any understanding of the real-life client/agency relationship. Nobody in your agency has vested interest in keeping costs down. However much you might long to sub-contract cost control, you can't. You and your company bear the costs; only you can determine their magnitude. That's one of the things you're paid to do - and one of the reasons you deserve to be paid well.
Creatives don't see themselves as having free rein. They see every creative assignment as a battle in the war between Beauty and the Beancounter.
They cannot understand why you should balk at spending an extra few hundred thousand pounds on production when it will give you a work of transcendent wonder. Sometimes they're right and sometimes they're wrong; and you'll only know which after the money's been spent. Unless you forbid them from spending it, of course, in which case you'll never know.
Your agency has everything to gain from generous production budgets.
Do not think them villainous for recommending them. Only you can weigh the cost against the likely return. It's extremely difficult and it won't make you loved but I'm afraid it's your call.
PS. None of the above excuses mindless and unprofessional extravagance.