Fee Estimation 1

[SteelPE]

When I am approached by a client to provide a proposal on a building I go out it in two ways. 1) I try to figure out how much time a project is going to take and then multiply that time by my hourly rate to get a design fee. 2) I try to estimate the cost of the building base upon RS Means and figure a % of that cost for engineering services. I have done OK with this in the past. I am never given the project budget up front.

On a recent project I was forwarded the cost estimates from the architect and now I am trying to figure out what to include in method 2. The cost estimates include items like earthwork, landscaping, utilities, electrical, plumbing etc including a contingency. I have a bottom line number for the cost of the project. Would I exclude items that are not part of the structural package (earthwork, landscaping, utilities etc) when trying to figure a %fee. The reason why I ask is because the square foot numbers are out of this world and not related to anything you can find in RS Means.

 

[DaveAtkins]

I have always used 0.75% to 1% of the TOTAL construction cost--but only as a check--on the design fee calculated using method 1.

Method 2 is really not very good for a lot of projects. For example, sometimes on a repair project, the investigation and engineering fee is MORE than the construction cost.

DaveAtkins

 

[msquared48]

Similar to Dave...

Sometimes I also base the fee on the number of anticipated drawings too based on a cost per drawing for the CAD and engineering.

It's a crap shoot sometimes and you have to bracket the solution with a reasonable bid in the end.

Mike McCann, PE, SE (WA)

 

[PEinc]

Method 1 only. I include: time to download and review applicable project documents, time to decide my required scope, time for required number of design cases, how many plans sheets to draw, time for a pre-design site visit, time for misc. meetings and phone calls during design, occasionally some for post design, etc.

http://www.PeirceEngineering.com

 

[southard2]

I pretty much use Dave Atkin's method. On small projects (under $1500) or anything that does not involve a lot of drafting I will simply estimate my time and multiply by my hourly rate for the type of work it is.

For larger projects and building designs where I must provide a set of drafted plans I will estimate my time and also use the percentage method and come to some sort of conclusion as to which price is better.

For large projects, say 10,000 square feet or more I will usually just go with the percentage method. I will estimate somewhere between 10% to 12% of the architect's fee based on the complexity of the design and how much drafting will be required.

The architect's fee of course is based on the project's budget and is usually 5% to 8% depending on the size. So larger cleaner projects will slide towards the 5% end of things and smaller or more complex projects towards the 7% range.

For construction cost I use the entire budget which includes whatever the contractor is being paid for. This usually includes sitework, furniture, carpet, everything. For architect's they are in play from the very beginning of the project all the way until the last piece of furniture gets moved in. So their fees are usually based on total construction cost.

In the end I guess my fee range would then be somewhere between 0.5% to 0.9% of TOTAL construction cost. Insurance usually requires that we know the construction budget of these projects and often architects only have very schematic looking plans at the time we must give our fee proposals so I'm not shy about simply asking what the budget is. And usually I'm told exactly what the budget is because they know structural expenses play into whether the design team has to redraw later on or not. So it is pretty easy to find out what the project budget is. If they won't share this with you I'd walk away from the project right there.

In fact in my fee proposals I will often not only cite the size of the proposed building but also the estimated construction budget. This way later on if scope changes begin to occur you can reasonably state whether something was included in your fee or not.


Over the long term if you stick with this methodology you will form a bond with your architect. When he doesn't do so well you won't either. But when they hit that home run they won't mind sharing in the spoils because they know you have billed them consistently. I also think it helps the architect's if they know you have a consistent way of billing. It helps them to also set their fees. If they know you charge this way. They will also get the hint that they are better off keeping projects simple and larger. Usually a series of smaller projects will eventually lead to some nice big ones as well. So over the long run it works out.

In the end if using the percentage method results in what seems like a low fee you must be willing to go with estimating your hours as a check on whether it is reasonable or not. And in those cases I'll just explain to the architect that for a small project it is too complex.

In general I will also explain to the architect how I formulated my fee (which is often the percentage method). Percentages are nice because budgets and scopes can change. And over the long term if the architect knows you are charging him consistently he or she will be willing to compensate you when those nice large simple projects come along.

In general I've found regardless of the billing method I can do better budget wise on larger projects. Usually they are simpler and more redundant and the drafting expenses don't eat you up as much.

John Southard, M.S., P.E.

https://www.pdhlibrary.com/

 

[CELinOttawa]

I have a simple rule for bidding work:

1. Fixed fees for known scope. Where re-work is required due to a change, the client must pay on hourly rates.
2. Submissions to the AHJ and all meetings with their staff/engineers/planners/code checkers are on hourly rates after the first meeting/response. We cannot control how difficult or demanding the Cities will be, so the client must pay for this.
3. Site visits are carried out at a fixed rate per visit on small jobs, or possibly on a percentage of construction cost for larger works.

Reports, investigations, etc, are hourly rates only.

I have had a lot of people question how we can be busy with such a fee structure. My attitude is unapologetic and seems to win results: those who have already decided they want *you* are going to pay, those who just want *anybody* are not worth having and will almost never give you jobs which will be profitable work for your firm.

 

[SteelPE]

I understand how to prepare proposals. I know some engineers base their fees on % of construction costs. Usually I try to estimate these costs, but in this instance I was given a breakdown. I am just wondering if this % should be based upon items outside the building which include earthwork, utilities, landscaping etc. or if I should base this off the bottom line.

In the end I threw out the construction costs as the numbers are really screwed on this project ($500/square foot) for a simple building and used a high rs means cost. I know why this is, and has nothing to do with the complexity of the building.

 

[XR250]

I am fortunate (or unfortunate depending on how you look at it) to be able to do 99% of my jobs hourly.

 

[thaidavid40]

We generally follow along with the approaches outlined by Dave, Mike, and CEL. However, we also try to evaluate the added value that our work scope adds to the owner's bottom line, and try to evaluate just what our work should be worth to the owner in the long run. Sometimes we discover that we can charge a higher fee that is fair and reasonable, and better covers our total effort input. You probably won't be able to do this on all jobs, but for those on which you can, it helps to keep you profitable.
Dave

Thaidavid