Construction Services Fees by A&E Firm 1

[bugeyebug]

We're trying to budget for an upcoming large scale construction project. Our building designs and specifications are complete, and we're now out getting bids for construction. As subcontractors put together bids, they're asking questions that we pass back along to the A&E firm. Once we get a subcontractor under contract, there will be shop drawing reviews and submittals that we also need input on from our A&E firm.

Is there a rule of thumb for estimating the amount of money we'll need to cover these requests for information (RFIs), submittals, and shop drawing reviews? Our overall estimated cost of construction is ~$30M, and our base A&E fees are about 8% at this point. We have 1% set aside (i.e., $300K) for RFI and submittals, but I fear this is not enough.

Any good rules of thumb or experiences you folks know of would be greatly appreciated.

Cheers, Mark

 

[fel3]

IMHO, the construction phase is the most difficult phase of a project to estimate fees for because so much depends on the contractor. Worse yet, for design-bid-build projects we often don't know who the contractor will be prior to calculating our fee.

Contractors who turn in lousy submitals and/or who RFI a project to death and/or who routinely write unclear RFIs force the design team to spend quite a bit more time on construction support than contractors who turn in good submittals and who write clear RFIs, and then only when really needed. The ratio between the upper and lower extremes of the effort required for these two tasks can easily be 2:1.

In addition, an owner who needs a lot of hand-holding will cost you more time than an owner who doesn't. This can be very hard to quantify, but if you know the owner well enough you can probably estimate this pretty well.

Consequently, I would not rely on percent of construction cost to determine my construction support fees. It should only be used as a sanity check. BTW, this applies to both design-bid-build and design-build projects. Also, the complexity of the project affects the percent of construction cost rule-of-thumb.

Certain parts of a construction support fee are easy enough to calculate. For example, if the project is scheduled to take 18 months to construct, you will have 18x whatever time you need each month for project management plus some more time at the front and back ends. In addition, if you have to attend a meeting on site and perform construction observation every two weeks (typically killing an entire day), then you know you've got 39 man-days to account for, which I would probably round up to 40 or even 42. You might also have a weekly conference call, regular time coordinating with the owner and the rest of the design team, etc. Since projects often run long, make sure your contract makes it easy to add fee for these repetitive tasks. You may also have somne one-time tasks such as attending the pre-construction meeting, doing a final walk through and punchlist, etc.

What I do for RFIs and submittals is to actually estimate how many I think I will get and how long it will take to get through them. It's far from an exact science, but the better you quantify these things, the better you will feel about your fee. It will also make it easier to ask for more money if you get one of the "bad" contractors described above and he ends up costing you more time.

For example, let's assume that I am responsible for 30 drawing sheets and 40 technical spec sections. Let's further stipulate that submittals will only come from the specs but that RFIs will come from both specs and drawings. Some drawings (e.g. list of abbreviations, symbols, etc) are not likely to generate any RFIs. The same is true for some very simple spec sections (for me, the spec for PE wrap for ductile iron pipe and fittings has NEVER generated an RFI in over 30 years). After analyzing our documents, let's assume we have concluded that 27 sheets and 35 spec sections might generate RFIs to the tune of 30 each (for a total of 60) and that the 40 spec sections will generate 55 submittals, 50 of them relatively simple and 5 that are big and require more effort (for me, that's things like pumps, water tanks, complex rebar layouts, etc).

If we assume that the average RFI requires 2.0 hours to handle (research, writing a response, processing, etc) and that 1/4 will require another 30 minutes to wrap up due to follow-up questions, then the 60 RFIs will require 60*2.0 + 15*0.5 = 127.5 hours, which I would round up at least a little. For simple projects the average effort might be closer to 1.0 hour per RFI and for complex projects it could be more than 3.0 hours. I have typically used 1.5 to 2.5 hours.

If we assume that the simple submittals require 3.0 hours to handle (review, processing, etc), and that 1/2 of them will require a 1-hour second review, then the 50 simple submittals will require 50*2.5 + 25*1 = 150 hours. If the remaining 5 submittals require 6 hrs, 8 hrs, 8 hrs, 12 hrs, and 16 hours (including some 2nd reviews), then we are up to 200 hours.

So, what do you do when you get a "bad" contractor and you have blown past these estimates? Make sure your contract includes the details of how you have estimated the hours required for RFIs and submittals and that it includes a provision for you to get compensated when reality exceeds your contractural estimates. Also, some owners have language in their construction contracts that stipuate that the contractor is due a first review on every submittal and second review (if needed) on all or some fraction of the submittals, but that subsequent reviews are charged to the contractor. In this case, your contract with the owner needs to say that you get compensated for any reviews beyond what the contractor is owed in his contract. BTW, I once had a contractor take 6 submittals to get it right and on something simple, no less (out-of-date certification for an aggregate, next certification was for a different aggregate, changed them both and they still didn't match, and so on).

I hope this helps.



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