Are Typical Engineering Fees for 4 Story Building Too Low? 1

[mfstructural]

I was recently contacted by an architect in the area that designs a lot of buildings. Their current structural engineer is dealing with some health issues and he was referred to me. He sent me his CAD files for the building and asked that I submit a proposal for structural design/dwgs. During the conversation we talked about this being a longer term relationship, as he doesn't know what the status of the other engineer is (they had worked together for over 10 years). After reviewing the drawings I estimated that the structural scope would take 3 to 4 weeks. I based my fee on $150 and hour. I ended up calling him to further discuss expectations, timeline, etc. I implied that I was thinking 3 to 4 weeks at the $150/hr rate and he kind of hesitated and said that his engineer was under 10k. I should say that the arch indicated that the other engineer typically took about 3 weeks to get the design back. I should note that the dwgs he sent were for a CMU structure with interior steel beams/cols and wood trusses.

Many of the buildings they design are somewhat similar but each may have its own uniqueness. In the dwgs he sent me, much of the front is windows, particularly first story. So I was thinking a steel moment frame on the first story for lateral system. The arch said that the engineers dwgs were very concise and he had a good system down.

All this being said, I understand discounting fees for the purpose of "getting your foot in the door" or doing volume work, but I feel like under 10k is too low for this type of building and the liability we as engineers are taking on. This could be a good opportunity, but I'm wondering if it's worth it for the fees. The day we spoke it was in the afternoon, and he was already emailing the next morning asking if I had the proposal....which is also alerting since it gives me the impression they will be pressuring me to finish these jobs.

I just wanted to get opinions on this...I don't understand why the fees are so low and this is not the first time I'm coming across this. If all us engineers stuck together the price discrepancies would not be so large.

 

[JedClampett]

For structural, I'd start at the building's construction budget times 2%. So, unless the building is being built for less than $500,000, it's not enough. Check what the architect and MEP is getting too. I bet it's a lot more than 10 grand.
Too many engineers are underestimating prices to get their "foot in the door." All you're doing is setting a baseline that is expected to be beat the next time. "...you did this for $10,000 last time, why not $8000 this time?"
I wouldn't suggest collusion, but the amount of liability we (structural engineers) are taking on is worth more than the price you are getting.

 

[SWComposites]

What is a typical architect’s fee for this type of building?

 

[dik]

I'm working on a six storey addition, on a time basis, that has stalled a bit. I'm pretty much up to date... no specs but comprehensive drawing notes. Cost currently is approx $15,000, and that might be a tad low... since there is 'just me'.

-----*****-----
So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates

-Dik

 

[skeletron]

Your estimate to deliver the drawings (3-4 weeks) is good.
Your fee rate is +/- what I would expect with or without the currency conversion.
Your total fee seems reasonable, if not a bit low. Not sure if that includes field reviews or if they're billed separately.
$8k seems really low for design+field review. I've seen some people not be upfront of the expected field costs and then the client picks the "low bid" but actually ends up paying way more.

 

[271828]

...I implied that I was thinking 3 to 4 weeks at the $150/hr rate and he kind of hesitated and said that his engineer was under 10k. I should say that the arch indicated that the other engineer typically took about 3 weeks to get the design back.

$9k for 120 hours is $75/hour. If you're working in parallel with a CAD operator for some of that, then the rate is even lower. I bet they would like for you to work for that. LOL.

 

[geotechguy1]

Big engineering firms would probably charge $300/hr and double the hours. It's the world of sole practioners and small firms that this race to the bottom happens.

Sadly, engineering fees will probably never go up until the big companies successfully collapse the market for small firms and sole practioners somehow...and then the extra rate will all be going to shareholders, accountants and admin staff and not engineers.

 

[dik]

It's because of the engineering mentality that, "I can do something better and cheaper than you can." It's called 'foot shooting'. It happens in Canada, too.

-----*****-----
So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates

-Dik

 

[mfstructural]

I don't have that mentality that I could do it better and cheaper than someone. I have a good amount of forensic related work where the hourly rate is significantly higher than the norm. I personally would not lower my rate and flat fee because I believe that I could do it better than someone else. My time and expertise is worth more regardless of any of that.

My thought process was that I could get this work and potentially hire someone but at these rates I don't believe that is not profitable. That being said let's say you do do this job for a low fee which equates to 50 to 75 an hour, there is still liability to deal with regardless if you're working as a one man shop. There is opportunity cost with other potential work.

 

[dik]

I don't either, but it's pervasive in the profession... I charge what I think is appropriate... not reducing fees to get work. I'm generally not short of work.

-----*****-----
So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates

-Dik

 

[mfstructural]

Agreed. Thanks for everyone's input

 

[JStructsteel]

I wonder if the 'engineer' they used to use was older retired, and didnt mind doing at a lower cost.

I would stick to your quote and time frame. Next job add 10% just for the 'pain in the ass' clause the architect is. The more and more I work with Architects, the more and more I dont want to work with them.

Let them beat up someone else, so they are busy, and you can get the next job at the price it deserves. The low ballers cant take them all.

 

[SteelPE]

Hard to assess how much something would cost to design based upon the description of it being 4 stories.

I am not sure what I would charge my client, but $10k does seem very low. The architect is probably tied to that engineers proposal, and when he was unable to deliver he has to find someone else to do it. If that person (you) comes in higher he probably has to cover your fees with the fees he was going to receive.... which is not really your problem.

 

[gte447f]

Yawn... I have heard this same exact sales pitch from so many architects over the years. I no longer give them more than a few minutes of my time.

They have an engineer that they have worked with forever but... health problems... too busy all of a sudden... etc. excuses... so they are looking for a new engineer and looking to establish a long term working relationship with lots of repeat work. It never happens, because what they don't say is... only if you are the cheapest option out there, beacuse they are continuously price shopping. Also, the story of why they are shopping for a new engineer is probably often BS. They may just be price shopping their previous engineer or pissed at him for some reason.

If you are unfortunate enough to work with these types on multiple projects, you will start to see another pattern emerge. They tend to always minimize your expectations of the project scope, no matter what the actual scope may be. For example, I cannot tell you how many times I have gotten the call that starts with the exact phrase, "I have small project... that involves blah blah blah...". They make sure to tell you before anything else that it is a small project, regardless of what the actual scope or size of the project really is, to immediately set your expectation that the fee is tight.

I could go on, but. Where do they all learn these tactics? It's as if it's part of the curriculum.

 

[CWB1]

Liability/risk and labor rates are two separate matters only related if you're unethically cutting corners for profit. If you're following standard QA/QC process to ensure you're outputting high quality work then the frequency of your legal issues should be near-zero even if the severity is potentially career-ending. IOW, liability/risk should be a non-issue. Labor rates are obviously a function of the market, competition, etc. Where any business falls on the curve of cost vs incoming volume of work is up to the owner but ultimately it needs to be on the curve to be realistic. I've had several conversations with younger folks on the premise of "<career-field> needs to pay more/"living wage"/etc, my standard advice is that they need to find either the unicorn employer surviving at the top of the curve or another career field.

 

[phamENG]

CWB1 - I agree that they are separate, but they do both relate to the cost of services from a design firm. Liability plays (at least) two important roles here:

1) In building design, a problem for one consultant is a problem for all. My former employer was named in a lawsuit for HVAC issues. We don't design HVAC. We're structural engineers. But in many cases, the building owner's lawyer will name every consultant. Many times you can petition to have your name/firm taken off the suit, but even if its granted there will be lost time and legal fees associated with it. One of the other structural engineers on this forum has a great story about how he did a small job that got him sued by a third party. In the end the case was dismissed as he had done nothing wrong...after he'd racked up $10k in legal fees. So even if my QA/QC process is the best in my field, simply being there exposes me to risk. Such is life in building design/construction.

2) My E&O policy rates are based on risk exposure. They look at the markets in which I work, the value of construction that has been built using my designs, my claims history, and come up with a price. (Yes, I know - insurance pricing isn't that simple.) So a good chunk of my annual, non-wage overhead is tied directly to my risk and liability.

So it's a balancing act: how much do my employees need to be paid to retain them and keep them at least content? What is my non-wage overhead associated with/allocated to this project? How much will the market bear for this service? What's the difference/profit? As a business owner, I have to compare that number to the return I expect for the risks I'm taking - be it direct capital investment risks or potential liability risks. If it's not enough, I try to push the market higher or leave the project for somebody with a different risk profile/tolerance.

 

[kissymoose]

IOW, liability/risk should be a non-issue. Labor rates are obviously a function of the market, competition, etc

Two projects, based on the same house plans. One project is the structural design of a single house, the other is the structural design for a development masterplan to be used for dozens of houses. The amount of labor is the same, but the fee certainly shouldn't be. I'm going to want compensation proportional to the the increased liability of having my seal on every additional house.

Here's another example, two identical apartment buildings undergoing the same remodel. However, one building is owned by a single entity, the other is condos. Same amount of work for each job, but I'm charging more to do the condo job due to their love of litigation. I'd think most other engineers would do the same, meaning the market is dictating that the condo job costs more solely due to the increased liability.

The cost of the job and the liability of the work go hand in hand. Just because you cross your t's and dot your i's, producing immaculate work that even the most stringent plans reviewer would praise, you're not free from risk. You can certainly reduce your risk with good work, but the second you get included in the legal fun, you lose and the lawyers win.

 

[dik]

My first use is at 100%, the second use is at 50%, and the third and subsequent use is at 33% (all with only very minor changes)... simple, and easy to apply.

-----*****-----
So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates

-Dik

 

[Enhineyero]

Building size would be very helpful. If the construction cost is around $1M then 10k sounds okay...Not a lot of $1M 4-storey buildings around USA/Canada.

Stick to your price, let the low ballers take it, you don't want to be working with people who are looking for a bargain.

 

[mfstructural]

The building is 100'x62' and four stories in height. The front is almost all windows with narrow strips, which complicates lateral system design. I did end up mostly sticking to my price (discounted in about 20%) for first time client and sent the proposal over. It was still too high according to client so that was the end of our discussions. He said he'd keep me in mind for future projects but I don't think I'll be hearing from him any time soon. I personally am not willing to take on such a project for that price. If I were slow on work, maybe I would have thought about it. I definitely agree with charging for the additional liability with multiple condo units, etc.