Owner of company changes timesheet 11

[MetalFighter]

My timesheet is usually about 90-95% billable each week. However, I notice that after the owner of our company reviews timesheets for payroll, all my non-billable time has miraculously disappeared into the billable projects' time. Most times its rounding half hours up to full hours and things like that. But there are other times when whole hours are being added to a client's project that was actually time spent on non-billable tasks.

Is this ethical? I think I know the answer, but the owner is adamant that its fine.

 

[TenPenny]

I think that a whole lot of the ethics/legality of this would hinge upon the details of the contract with the customer, and without knowing that, we are all simply bystanders speculating on something we don't know the details of.

 

[beej67]

lacajun:

If you don't have accurate accounting per project, which should be task oriented, you reach a point of not knowing how to bid projects because your estimates are inaccurate.

Yep.

But bids aren't based on what it'll take you to do the work anyway, usually. They're based on how much you think you can get the client to pay you, and how much you think your competition is bidding. It's like poker - you don't bet your hand, you bet the other guy's hand. The only thing you need to be sure of, when bidding, is you won't lose a LOT of money on the project.

Hell, in today's marketplace, many engineering firms are choosing to lose money on jobs just to get the work. It's cheaper to work and lose money on a job than it is to sit around and twiddle your thumbs not working and making zero. Contractors call it "buying work."

Maybe that's not how it is in electrical, but it's how it's been in Civil since 08.

It's nice to pretend that all your employees would work at the same rate, and you could quantify progress on a task by hour, and use that knowledge, plus a task breakdown, to bid a job. But that's simply not the real world. What happens in the real world is everybody does all this accounting, then it goes up to the guy bidding a job, and then he picks a number out of a hat that he thinks will win him the work. If that number is low, then the "shinola rolls down hill," and the production engineers have to work overtime. That's the business, if you're in a fixed fee project environment. In AEC at least.



Hydrology, Drainage Analysis, Flood Studies, and Complex Stormwater Litigation for Atlanta and the South East -

http://www.campbellcivil.com

 

[SNORGY]

beej67:

I soooooooo wish that you were hopelessly wrong.

But...you're not.

It is called "MBA" bidding. (Must Bid Awfully).

Not that I am in any way bitter...

Regards,

SNORGY.

 

[looslib]

Worked for one company that was preparing bids for radar systems. We had lost a few recently becasue the bids were too high. Figured out that what we had bid wasn't what the customer wanted. Our bids were made from taking existing designs and submitting them with the extra things not in the RFQ being passed off as 'make the package better'. No sale on a few of these. Now the comapny realizes what they had done and the next RFQ comes along. They put together a proposal, only including what the RFQ wanted, and priced it at what would be a profit yet we felt would win the contract. Sent it to corporate and they raised the price because we didn't have a 8% profit. Submit the bid and it losses to a bid that was between the original and the 8% profit one. Unfortunately, losing that bid was too much and the layoffs began. From 1300 to 300 in 6 months.


"Wildfires are dangerous, hard to control, and economically catastrophic."

Ben Loosli

 

[lacajun]

beej67, I've not worked in engineering firms but manufacturing plants. We had to be really close to our estimates and ROI or our merit reviews weren't good. This was particularly true for our individual projects.

A finance friend criticized engineers for our "inability" to properly estimate projects and always asked for more money on the large capital projects. True enough. However, the engineers did engineering estimates but those never hit the ROI HQ wanted. HQ would request another estimate, a lower one. The plant would provide it. HQ would request another lowered estimate because it still wasn't going to provide the ROI sought. They never said what ROI would fund the project. It was a guessing game. They'd finally hit that magical number and the project would get funded. Then the Engineering Change Notices began. Eventually, on some projects, supplemental funding was requested. You can only strip so much out of a design and get away with it. Eventually, they would have just about everything back in the design according to the original engineering estimate and the ROI wasn't as expected.

They're called engineering estimates for a reason. They are not ROI estimates or accounting estimates. It seems a lot of places have accounting "rules."

I had to pay for a parking lot on one of my projects and I did I&C work. It was a payback for another I&C project that overran its budget and borrowed from another project to get completed.

Life sure gets messy sometimes, eh?

 

[IRstuff]

My experience has been, for the past 30 yrs, that the initial engineering estimate was almost always the correct project cost. Invariably, someone, BD, etc., would demand a "cut" or a "challenge" to be more competitive. The bid would get reduced by 20%, 30%, or whatever; we'd win, and then we'd overrun.

I've always wondered whether this was technically ethical, but no one dares to actually address the question, for fear that it might be so. And, of course, "everyone" does it, so we have to; the customer often attempts to second-guess our bids with their own "cost realism" models, but they're often pretty crude anyway. Net result is that there are few development contracts that come in on budget. Production is another matter altogether; costs are generally substantially firmer, although often there are systems that aren't yet ready for prime time, and the production costs go through the roof because there are the Rumsfeldt "unk-unks" that have to be fixed after production starts.

TTFN

FAQ731-376
Chinese prisoner wins Nobel Peace Prize

 

[moltenmetal]

The games get interesting when the "client" is the source of the scope cuts for the reasons discussed above. They get a bid based on a scope that meets the bean-counters' needs, then attempt to creep the "contractor's" scope to get back into the design what they never felt they should have cut out of it in the first place.

 

[beej67]

So lets keep talking this through, because it's something that has bugged me for almost two decades, and I have some creative ideas on how to fix it.

The fundamental problem goes back to trying to shoehorn a salary based compensation system into a lump sum contract. If all your guys are on salary, then you carve their efforts up into hours and budget them that way, which produces all the problems we've enumerated. But what if you didn't do salary at all? What if you did an engineering version of piece work, and completely changed your project accounting paradigm to match that?

Say I'm the boss/owner, and I get a $100k engineering job. I take 20% off the top for O&P, another 10% contingency, which leaves $70k left for engineering labor. I divide all the tasks up by ratio / difficulty, and then I offer shares in the project to my employees. They buy a share with their labor, and get paid when the project gets paid. So it's more like a team of 1099s than a typical project team. One employee takes four shares for the grading, another takes three for the erosion control, one takes two for the permitting activities, etc. Pay the shares out as you get paid on the project.

It's got some drawbacks in that your employee income is variable, not fixed, but it has some great benefits too. One benefit is you never have to worry about laying people off, since people only get paid for billable work. Another is "project ownership" - you don't get slackers who don't care about finishing a project up, because finishing the project up is how they get paid. And your project accounting is built from the ground up to reflect what you want it to reflect - the percent completion of the project - without having to translate things into hours and back out of hours, when that process of translation is so often gamed or tweaked or monkeyed with in the accounting. Another superb benefit is your employees make as much money as they want to make. Want more? Work more. Want to work less? Take fewer shares, earn a little less, and spend time with your kids.

Seems like a very sensible way to build a company to me, but some others I've posed the idea to seem to think it'd never work. Then again, older engineers like to manage by walking up and down the cube farm looking over shoulders, instead of checking out the cad files at the end of the day to see what got done.



Hydrology, Drainage Analysis, Flood Studies, and Complex Stormwater Litigation for Atlanta and the South East -

http://www.campbellcivil.com

 

[IRstuff]

The primary reason this won't work is that unbillable time is unpaid time. As a piece-part worker, you can't always get full time employment; if my piece is serially dependent on someone else's, then what am I doing for possibly months at a time? Were I in that situation, I'd need some bridge work to maintain my own cash flow, and I wouldn't necessarily be available anymore when my piece needs to start, which puts you behind schedule and potentially defaulting, unless you immediately find a replacement.

This is the primary reason companies aren't set up that way; paying for the unbillable parts are the premium for ensuring that workers are available, if and when and whenever the company needs them. In a sufficiently large enough company, you try to run a variety of projects on different schedules to try and maximize the billable time, AND ensure that you bodies when you need them. Once you go this route, you're at the way companies are run currently.

TTFN

FAQ731-376
Chinese prisoner wins Nobel Peace Prize

 

[berkshire]

"""It's got some drawbacks in that your employee income is variable, not fixed, but it has some great benefits too. One benefit is you never have to worry about laying people off, since people only get paid for billable work. Another is "project ownership" - you don't get slackers who don't care about finishing a project up, because finishing the project up is how they get paid. And your project accounting is built from the ground up to reflect what you want it to reflect - the percent completion of the project - without having to translate things into hours and back out of hours, when that process of translation is so often gamed or tweaked or monkeyed with in the accounting. Another superb benefit is your employees make as much money as they want to make. Want more? Work more. Want to work less? Take fewer shares, earn a little less, and spend time with your kids."""

I had some first hand experience with this. Some years ago I was giving my employees 1/3 of the invoice for the labour part of the job. I had one guy who never made more than $250 per week, even though his hourly rate had doubled. It turned out that he lived at home with his mother, and this was all the money he needed to go out and play. So when he earned that much, he just stopped working. I eventually had to let him go.
B.E.

The good engineer does not need to memorize every formula; he just needs to know where he can find them when he needs them. Old professor

 

[ajack1]

The model you are describing bee67 is basically a company takes on a project and takes 30% of the cost to run that project and then sub contracts out all the work. Some companies do work this way, but it is not without problems.

The main problem is you effectively have lots of small companies whose main priority is not the same as yours it is what benefits them most. If one company does the project, at least in theory, they should all be working for one common goal.

The old saying goes a chain is only as strong as its weakest link. Whilst a company doing a whole project might take a 15% penalty clause for late delivery would someone who is only getting 1% of that amount also take the same 15%? Any one of the companies taking just 1% of the cost could see the whole project go over time.

You also seem to over look the fact that whilst you might consider a certain task to be worth 4% of the budget you might not find anyone willing to do it for less than 15%.

 

[MetalFighter]

It happened again. I print my timesheet now both after I submit it, and after the owner reviews it. I compared them this week, and 3 whole non-billable hours were each moved to three different projects. No rounding up...just flat out adding hours to projects that I never worked.

I hate this!!!!

 

[IRstuff]

Sounds like you need to ask your boss what's going on, in a casual way. His response will then determine what you should do next.

TTFN

FAQ731-376
Chinese prisoner wins Nobel Peace Prize

 

[berkshire]

MetalFighter,
Did you ask your boss whether or not your non productive time should be charged as billable hours?
Some companies require that every hour you are at work be billed to a job.
B.E.

The good engineer does not need to memorize every formula; he just needs to know where he can find them when he needs them. Old professor

 

[MetalFighter]

No, I didn't ask him about that. If I'm not working on a project, I'm not going to charge it to a project. Likewise, non-billable time is just something that must be accepted for a project manager like me. I'm not a drafter or somebody like that who can conceivably be 100% billable. We have no such mandate, and even when he changes our timesheets, he many times does not remove all of the unbillable time, just some of it.

The point is that, for example, invoices went out this past week, and I studied one project, and discovered the client will be paying $190 more on their invoice directly due to extra hours being added that I never worked on that project.

The directors are planning to talk to him about this tomorrow. If he refuses to budge, I have to start looking for another job. I just can't live with this. My real question at that point is whether I report what he's doing to the authorities. It's stealing!

 

[SAITAETGrad]

beej67- I have often thought of the model you suggest (eat what you kill) for a limited partnership. Overhead tasks are simply mutually agreed upon debt to be paid by each partner based on their share of the business.

I liked your 1099 reference. I assume you mean the old system of the artisan house where groups of artisans on the shop floor would bid for portions of the job. This system of course died when the build to engineering drawing transformed artisans from independents to dependents of the engineering office (which has been very good for engineers and later MBAs). Presumably we've seen the same idea- that engineering could be divided by the same business model as was previously employed by artisans.

You can make it work. I like the limited partnership as partners can either focus on sales or contract engineering or both with partners collectively deciding a fair exchange as well as shares in overhead. Partners can also make use of associates as paid employees until such time as they are deemed ready for partner status.

 

[bridgebuster]

What are all of us told by management? We're supposed to be ethical and charge our time where it belongs. Fine except when it's timesheet day, then management conveniently forgets and is only interested in weekly utilization.

Half-hour here; half hour there; does it matter? I suppose we could say there are times when the client calls at lunch or quitting time with a request and we dont bother to record it on a time sheet. So the boss makes up for it another time. When I worked for a government agency my boss took the position that the contract amount was what he was willing to pay; since he beat the consultant's fee down they should take every cent in the contract.

Perhaps consultants should employ moral philosophers to decide these questions.