Company A and Company B quote? 7

[SteelPE]

We were approached by company A to prepare some preliminary drawings for a small office building. The job consisted of running quick calculations and preparing some drawings so the job could be estimated by a fabricator. We quoted company A a small fee to perform the work and get them the information they required (which would take 3-4 days to complete). We submitted a quote to company A and never heard from them again.

Company B comes to us with the same job as company A. We give Company B the same quote to do the same work as company A. Company B gives us the go ahead to perform the work. We complete the work and give a bill to company B (it takes a little longer than estimated but that’s not their fault) and company B pays the bill. Everyone is happy. Company B knows we were in contact with Company A.

If the job goes forward, company B will be paying us to complete the job.

Now we get a call from company A to go ahead on the preliminary drawings for same job we just did with Company B…. and there is the dilemma.

Do we charge company A the agreed to price or do we give a credit to company B and split the bill between the two companies? What would others do in this situation? It’s unfair to only charge B and I believe it’s unfair to the owner (who is getting quotes from Company A and B) to charge 2x for services that were only done once.

 

[hokie66]

Charging for hours is not what is involved here. "You don't pay me for what I do, you pay me for what I know". In some design/build projects, there are limited viable options for some of the services. What is wrong with making yourself indispensable?

 

[MintJulep]

I'm not billing for hours, I'm billing for an end product - a design package of drawings.

The value of the package is determined by the hours required to produce it the first time.

I'm not selling a design, I'm selling a license to use that end product for a specific use.

All that your unnecessarily conservative interpretation is doing is reducing your profit.

 

[zdas04]

MintJulep,
Different fields have different paradigms. What you described is exactly like you were making vehicles or designer shoes. If you can sell the same thing a million times you get the price a million times. No ethical considerations at all. My usual income stream is to sell my time (although I have one patent pending that I'll talk about in a minute). Selling the same time more than once is a violation of ethics rules.

In the case where I start selling my invention, I put $40k of engineering time into developing it. No one was paying for that time and I own the product. I sell the result of that work for $2k more than the materials cost (profit is about 18% of sales price) and until I sell 20 of them I haven't made a dime. I have no problem (beyond finding buyers) in selling thousands of these widgets and making a fortune.

But I have do a big problem changing the title block on a drawing that one company paid me to prepare and charging a second company as though I had started with a blank computer file.

David

 

[SteelPE]

A nice lively discussion.

It almost appears that the opinions are split down with the different disciplines. It appears that most structural engineers think that this is unethical and that most engineers in the mfr industry don't have a problem with charging twice.

We have done everything we can to make sure that we don't give one company a cost advantage over the other so far. Although I believe Company A has benefited from some of the work we did for Company B. However, I believe that this was only to Company B's advantage. This is because the site is so bad that it is having an influence on the design of the structure and foundation system. Something Company A would have never known and would have gone in with a lower bid.

In the end, this is not my decision. This is something that came up in my small office. I thought it would be fair to split the bill between the two parties involved but the other person didn't. I can definitely see how it would be a difficult call to make to Company B.

In the end we are just trying to win a job and pick up some more work. We are also trying to make sure we are appropriately getting compensated for our work to prepare the preliminary drawings (which did take about a week to complete). Bidding with multiple contractors for the same job is something we commonly do. However, we have never had both companies ask for a preliminary design.

 

[MintJulep]

David,

Selling the same time more than once is a violation of ethics rules.

Absolutely, no question there.

Now, consider a little twist on the subject.

Imagine you contract with a client to solve a problem. You arrive at the site, take some measurements, interview staff, whatever. You determine that this problem is exactly like a problem that you solved before.

You go back into your files, read your past report to refresh your memory, then write a new report for the current client. "Here is how to solve your problem".

You have effectively leveraged your past experience and knowledge gained in working for past clients to aid a new client. This is the essence of consulting engineering, and is the reason why experienced consultants can charge higher rates than inexperienced ones.

Why pretend that design engineering is any different. A client comes to you with a set of needs and asks you to quote a solution. You look at those needs and realize that you already have the right solution.

Now, stop being an engineer and be a business man. How much is that solution worth to the client? The client probably contacted other engineers for additional quotes. How might they price the job? If one of them doesn't already have an on-hand solution then they will quote a price the covers their full anticipated time to develop a solution from first principles and make a profit. That sets the maximum value. How much money are you willing to leave on the table?

 

[SteelPE]

So here was the solution.

My colleague called Company B and told him that Company A had asked us to perform the same work (which Company B knew we has some relations with on this project). He informed him that the quote that we had done previously for Company A on the preliminary design did not include certain aspects which Company B requested and we performed free of charge. He asked Company B for permission in giving the same drawings and information to Company A. In return he would reduce the bill by 1/3 and submit the same bill reduced bill to Company A in order to recoup some of the lost expenses due to scope creep.

Company B was receptive of the idea and thanked my colleague for notifying them of his intentions. He then gave him permission to send the information to Company A.

Company A will be informed of the situation.

 

[btrueblood]

" Selling the same time more than once is a violation of ethics rules."

Is it? You're being paid to perform a task.

Performers record their performances sometimes, and then re-sell that performance (or the product of that performance if you will) many times over. If the customer is willing to pay for that end product, who is harmed?

 

[BAretired]

SteelPE,

An excellent solution and completely ethical.

MintJulep,

So in your world BAretired, if I do anything for one client I can never do the exact same thing for another client, ever?

In my world, if I am invited by a contractor to participate with him in a design-build contract and I accept, I consider myself to be part of a team including the contractor, mechanical, electrical and structural engineers. The goal is to land the project for all of us. In such a case, I would not share preliminary design information with a member of a competing team.


BA

 

[RacingAZ]

swertel, no I don't have the exact ARS number. I just read it from their monthly newsletter a while back under the "Substantive Policy Statements" that they do to explain specific rules.

SteelPE, that is a classy and smart move. That's how I want to be treated, if I'm the customer. Your colleague also created goodwill towards your company.

 

[ztengguy]

if you provide the same service, design, and fee, then its up to the two companies to price it to the owner. Your part is fixed, they decide if they jack up the price to make more on your price.

 

[jmw]

Well, more and conflicting and somewhat puzzling information is coming through. In fact It looks like a whole new ball game.

As I understood it originally, both Company A and Company B submitted the same set of specifications (which I assumed both received from the client as part of the bid documents/specification and thus this data is the client's)for the drawings and calculations to be done by STeelPe's company to then taken to a foundation subcontractor to complete the final bid to the client.

That both Company A & B chose SteelPE's company and the same foundation subcontractor is co-incidental.

Both SteelPEs company and the foundation subcontractor should have treated each company as unique and kept confidential any information from one about the other, including that they were quoting the other.

My assumption from my reading of the original post was that neither SteelPE's company discussions with A or B produced any original differences that would have resulted in a different quotation or final product by SteelPE's company.

Then both bought the solution and both went to a foundation contractor.
Here I understood they each found a different approach, but Company B's innovation which would have generated a different (better?) solution was revealed to Company A which caused Company B to comment on this to SteelPE's company.

I thought they were just whinging to SteelPEs company because they were upset by the foundation subcontractor's actions.

But subsequent posts make me think differently:

I believe Company A has benefited from some of the work we did for Company B. However, I believe that this was only to Company B's advantage. This is because the site is so bad that it is having an influence on the design of the structure and foundation system. Something Company A would have never known and would have gone in with a lower bid.

It appears the SteelPE bid to B should have been different to the bid to A but it wasn't, Company A benefited from company B's initiative.

How and why?
Is this is because there was a mistake in the bid to A or was simply a better bid was generated for B?

If SteelPE's company made a mistake and the bid to A was unsound and SteelPEs recognised the mistake independently then they can remedy the defect and make good the quote to A.
If a mistake and the discussion with B resulted in this mistake being discovered, SteelPe's company should simply rescind the quote to A and recommend they approach another contractor.

This is because if A and B approached different contractors and A's made a mistake, and A didn't ask the questions that discovered it, then A is stuck with it.
Hence the only quote that should be improved because of Bs astuteness is B's quote. SteelPE's company cannot maintain a wrong quote and they cannot rectify it becasue then A benefits from B's input, hence they should rescind it as invalid but without detail.

But if the original bid to A is valid and sound and the difference, that was only generated by discussions with B, results in a better offer? then both bids should be separate and valid and different.

There were some questions (and raised eyebrows) at this point but a subsequent post makes this unnecessary:

It emerges :

He (SteelPE's colleague) informed him (B) that the quote that we had done previously for Company A on the preliminary design did not include certain aspects which Company B requested and we performed free of charge. (i.e. the result of Company B's initiative, the fee is irrelevant)He asked Company B for permission in giving the same drawings and information to Company A.

This doesn't sound right to me.
If this happened before Company A got hold of the improved offer and as described here, then why are we having this dialogue on ethics?
It would appear this is agreed by consenting adults.
It appears from the following B agreed.
I don't see/completely believe this version.
If I was B I'd be very very pleased to have found an advantage and I'd want it kept quiet - but I shouldn't know I had an advantage because I shouldn't know that I have a different quote or even that A is getting a quote from SteelPe's company.

This all now sounds like some after the event cover up.
The only way A should get the same result would be if they asked the right questions, as B did.

In return he would reduce the bill by 1/3 and submit the same bill reduced bill to Company A in order to recoup some of the lost expenses due to scope creep.

Company B was receptive of the idea and thanked my colleague for notifying them of his intentions. He then gave him permission to send the information to Company A.

I'd suspect company B was only receptive of the idea (getting some of their money back) if this was all enacted after the horse had bolted.
Otherwise If I were company B I'd be saying "No. You don't volunteer a thing to A! Its their lookout if they didn't ask the right questions."
It sounds to me that offering 1/3 off was an attempt to mollify B who was upset that A had access to the benefits of B's initiative.
If this reading is correct then I'd not expect to see B come back as a client in future.


JMW

http://www.ViscoAnalyser.com

 

[MacGyverS2000]

It all depends on who owns the drawings. The Architect that reuses drawings over and over owns those drawings. I have a drip design that I did on spec, no one paid for my time to prepare it that I have provided to 10 different clients. If a particular client needs something different (extra nozzle, etc.) then I charge them for the modifications to the design drawings and calculations, not for generating them in the first place. Then I don't use the modified drawings for other clients.

I'm sure we would agree that architects don't spend weeks of unpaid time when first getting started to create details drawings... they do it as a course of the first few projects they work on. This means a client was charged for their creation early on. From that point forward, all detail drawings should be included free of charge.

They may use the same drawings for their entire career, only making small changes as code requirements change. It may seem slightly contrived, but I think it would be naive to think the first few clients weren't charged for the work. And we know the architect charges for a bundle of these stock detail drawings. Charges are added for changes to them... that seems fair, but the stock drawings should be free, if we follow the rules set forth in this thread.


Dan - Owner

http://www.Hi-TecDesigns.com

 

[KENAT]

Why should the stock drawings be free?

If selling a product, once you've sold enough to amortize your costs should you then start selling the product at cost?

I'm not usually on the side of 'big business' but come on, let them make some profit.

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[SteelPE]

Wow that was a long post JMW

I always try to be as short as possible with my posts and sometimes things get lost in the shuffle. Here is the time line for you:

1. We receive a lead from another engineer about Company A needing some work done that is outside of that engineers qualifications.
2. We contact the Company A and discuss what they are looking for.
3. We receive a preliminary set of architectural drawings and Company A tells us about the soils problem. They discuss using a certain proprietary foundation system.
4. We look at the job an come up with a quote to do the preliminary and final design.
5. We look at the drawings and come up with a framing scheme an plan of attack.
6. Company A does not sign our quote and tells us that they are still working with the owner and will let us know if they need our help. We don't hear from Company A for a few weeks.



7. Company B calls us to do a preliminary design on a building.
8. Company B sends us the preliminary architectural drawings.
9. We see that it is the same architectural drawings as company A and give them the same preliminary design quote but a different final design quote due to an increase in scope requested by Company B. We inform company B that we have seen these drawing already but never heard from Company A as to proceed. Company B was aware of Company A.
10. Company B accepts the preliminary design quote.
11. We perform the work proposed. In the process the problem with the soils becomes very costly.
12. We submit our final work and recommendations to Company B.
13. Company B goes to a foundation contractor (the only contractor with a cost effective solution that is proprietary... the same one discussed by Company A) and get a price. This is under no influence by us.
14. Company B puts their quote together and presents it to the owner.
15. Company B calls us and says that the job presentation went well and that the owner said they have the same foundation price as another company (assumed company A). There is a 3rd company that has a vastly lower foundation price. Company B believes the lower price is due to the fact the the 3rd company did not cover the costs to properly support the slab on grade.

16. Company A calls us back about 2 months after we last heard from them and asks us to perform the preliminary design so they can make sure their structural quote is accurate.
17. We have a discussion on whether or not we should.
A. Charge them the full price original.
B. Split the costs between Company A and B.
C. Tell Company A to find someone else.
18. I ask the question on this forum.

There has been no cover up. The increase in scope was related to the information Company B was asking for that we did not promise to give to Company A during the preliminary design phase of our work. Due to the soils problem that reared it's ugly head during the design, we thought it would be prudent to give Company B the information they were asking for and make sure they have all the information when putting the quote together.

There was no advantage in figuring out the problem. In fact it was a disadvantage to Company B to find the problem as their foundation prices increase dramatically.

Since the project is a design-build contract, the fact that Company B would have had a much higher price then the other two would put them in a week position when considering price (unfortunately the owners I deal with do that). We did not give any information from one client to the other. That was done by the foundation contractor.

Hopefully this cleats things up... but it will probably only make it worse.

 

[MacGyverS2000]

Ken, that's my point...

Dan - Owner

http://www.Hi-TecDesigns.com

 

[hokie66]

Many design/build contractors want the type information produced by SteelPE to be provided on a speculative basis, even the preliminary drawings. Getting paid...that is refreshing to hear. On the other hand, maybe Company A and Company B got paid for their submissions. In which case, it is right for them to share.

 

[jmw]

Well, that seems clearer but doesn't explain the confusion and apparent conflict of the earlier posts which made me suspicious that something else was going on.
I'm still not sure where the problem is and I still have a problem reconciling the different statements earlier.

Why should A and B know of each other or know of any common elements?
Why should it matter?
They each apparently came up with different solutions with no cross-over of proprietary information (point 13).

A discusses soils and foundation, B extends scope.

Company A then comes back and wants the work done.
So why is there a discussion about what to charge them?
Each has a different solution differently arrived at.
There ought to be no discounts.
Each ought to be billed the full amount as if they were the only client.
The only commonality is it is the same project with the same original drawings and they both went to the same foundation company.



JMW

http://www.ViscoAnalyser.com

 

[SteelPE]

jmw

The question basically comes down to what is fair to both companies. The basic scope of work was generally the same between the two companies (design a building). Company B just required a little more (design a building and foundations in the future). No additional work was required to provide Company A with the preliminary design. I questioned whether it was ethical to charge both companies for the full amount of work when no additional work was performed. We had three options:

1. Charge each the full amount.
2. Split the costs between the two and tell both companies that we are bidding someone else for the same project.
3. Tell company A that we will not be able to help them even though we said we could previously

In the end we choose option two and moved on. Everyone is happy and we are moving on.

 

[MintJulep]

but the stock drawings should be free, if we follow the rules set forth in this thread.

So once something is done it belongs to everyone for free ever after? This is Communism.

 

[patprimmer]

So once something is done it belongs to everyone for free ever after? This is Communism.

I think this is also the teachings of some whacko christian religions as all human thoughts came from gods work so they belong to god, so they are for the benefit of all gods chosen people. One faction of the ID brigade I think, so it is not necessarily associated with Pinkos.

It was also a belief of an Aussie inventor who experimented with heavier than air flight via kites as he had no engines available to him. He was opposed to patents as he thought scientific discovery belonged to mankind. A few patents might have had a significant impact on the Wright Bros and their airframe. I have no idea of his religious or political leanings.

Regards
Pat
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