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.

 

[phamENG]

(discounted in about 20%) for first time client

Profit margins on good building projects usually run in the 20-30% range, so it sounds like you agreed to not take any profit. Yikes. Also, the 'first time client discount' just sets you up to have a lot of first time clients getting discounts and then pissed off when you jack the price up on the next one. Not a good idea (but certainly an easy trap to fall into).

Glad you didn't get sucked into it.

 

[dik]

This could be one of the three great lies... This thread has been quite interesting, and informative.

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

-Dik

 

[Aesur]

There is a reason architects like this "design a lot of buildings".. it's because their fees are too cheap; you made the right choice in sticking to your guns. Based on what you said, I would have been in the 15 to 20k range to even consider taking it and I would push back on a schedule that gave me time to squeeze it in without affecting over projects at that fee.

 

[gte447f]

4 stories, 25,000 sf

At the low end of commercial construction, I would expect this to be at least a $5M building.

$25K would be 0.5%, and that's borderline too low in my opinion.

Depending on location and construction type, a building this size could easily be in the $10M-$15M range.

Under $10K sounds laughable. You did the right thing by letting this one go.

 

[CWB1]

I agree that they are separate, but they do both relate to the cost of services from a design firm.

Sure, but every expense affects the total cost. The same argument could be made that your rate should reflect the cost of office space, software, supplies, etc but ultimately its irrelevant. There is always cost and only so much reduction possible, so profit is really a function of your rate and volume.

The problem with trying to tie labor rates to arbitrary measures like risk is that causes your rates to become inconsistent across projects like kissy mentioned, which is extremely unprofessional and burns bridges with customers.

 

[mfstructural]

Agreed. I think the rates and the fees that are ultimately based on the estimated number of hours should be consistent across the board, and should be such that they account for the risk inherent to what we do.

 

[phamENG]

The problem with trying to tie labor rates to arbitrary measures like risk

So should a guy changing a light bulb at the top of a transmission tower get paid the same as the janitor at a school changing light bulbs in the bathroom? Climb ladder, open enclosure, unscrew old bulb, screw in new one, close enclosure, climb down. Same procedure, but different risk, so they should get paid the same?

Whether the risk is physical or financial, it should be compensated. In our profession, though, the risk to the individual is tiny so long as appropriate measures are taken through employment agreements/contracts, company policies, etc. that indemnify employees for their actions in service of the employer. Which is why nobody ties risk to labor rates. This discussion isn't about that - it's about overall risk/liability and how that impacts the total fee for the project.

So as you said - all overhead should be considered in that baseline price. The labor rate is what the labor market dictates, just like the total fee is what the market dictates. I charge the same flat rate for billing hourly. But most of my projects are lump sum - most clients want to know exactly what they'll spend on the design. The labor rates don't change, but the profit will vary.

 

[Enhineyero]

Agree with phamENG that risk should be considered when we charge. My opinion is that both no. of hours and risk/liability should be considered in fees.

Valuing services is a very difficult task especially if consumers of your services don't know how to gauge what is 'good' and 'bad' engineering. Admittedly, structural engineering has lots of redundancies that even buildings with 'bad' engineering are functional. Understandably, if clients view that all engineering designs/documents are equal (which they aren't) then other criteria such as level of service and price would be the main drivers in awarding projects.

I reckon that this is the main reason why our industry is so miserable and know lots of people who left the industry. Not sure if there will come a time when there are not enough engineers that we could actually demand a decent fee.