Pricing Help 1

[Christopher C]

Hello everyone,
I started my own firm back in September of last year, and I've been slowly figuring out the art of pricing structural engineering work. I recently met my first potentially large client, and I am trying to put together a quote for him. I don't really have any mentors here in town I can turn to with these kinds of business related questions, so I am hoping that I can crowd source some help on this one.

The project is located in Texas, and consists of a 3 story metal building supported by a boat dock. The boat dock will be designed by another company so, essentially, it's just a 3 story metal building with foundation by others. I have attached the preliminary drawings for reference. I have a figure in mind already, but I'd like to get a sense of what the market bears on something like this. I would hate to underbid this project because of obvious reasons, but also because I would hate to contribute to the reduction of engineering fees in my region. Any input will be greatly appreciated. Thank you all in advance for your time.

Christopher C.

P.S. If any of you business veterans out there have any resources for small firm owners you can point me towards, I'd love to hear about them.

 

[dik]

Make sure you let us know how it went...

Dik

 

[FLCraneBuilder]

17 year business owner here..
Design & Build
Rule #1 - Know your costs... Sounds easy.. It is not... Need to spend a significant portion of your career evaluating the costs of performing the work. Keep historical data. Keep lessons Learned. Keep pace with changes in the market; both cost changes and changes in the way things are done. Evaluate your performance after the project is complete.

I simply summarize costs and add a margin that I feel is reasonable considering all the variables..
These include: Risk, Manpower, how close is the project's technical requirement aligned with your firm's skill set, Can you find out the price range that you competitors are in, Don't leave out the costs of training your people and mentoring replacements for when your people retire (this one has recently become a challenge for me). Watch out for inflation! This one is coming. I've survived a few recessions and expansions where inflation was a big cost hit. Beware.

Lastly... I find that pricing jobs is easy once the scope of work is clearly defined... but all too often, the scope of work is not clear and it leads to disagreements with both clients and service providers. I cannot stress enough that all contracts should clearly state what is included and excluded.

Never underestimate the value of an estimator

Best regards

 

[CCox]

I agree with FL CraneBuilder. Keeping historical project costing data is essential. Maybe you already have this, but if not, start a simple spreadsheet with the cost of your projects. Break out drafting and engineering hours based on that proposal. Track these two components of work throughout the project to determine how many hours you spent on the project and total cost you have into the project. If you complete each project by working the exact number of drafting hours and engineering hours you estimated, you made money. That is because you should have a profit margin built into your billing rate.

I use this exact method. I also track square footage costs and building types. I.e., wood framed, steel, concrete, PEMB foundations, equipment foundations, etc. With several projects under your belt of each type, you will hone in on accurate project costs.

About profit margins: you should have an idea of tracking overhead costs as they relate to profitability. Basically, your overhead costs need to be smaller than the difference between your billing rate and direct hours billed. Otherwise, you won't make any money. For example, if you bill out at $100/hr, and your salary is $50/hr, then your overhead costs need to be less than $50/hr for every hour worked. That shouldn't be a problem. Say that with overhead factored in, your cost to the company is $70/hr. Then, for every project you complete on time with the exact budgeted hours worked, you make the company $30/hr profit. Make since? That is about 30% profit for each project. This is a real rudimentary example not considering interest, taxes, depreciation, etc. But with this profit margin, you can afford to lose your shorts once in awhile intentionally or unintentionally.

 

[dik]

Lastly... I find that pricing jobs is easy once the scope of work is clearly defined... but all too often, the scope of work is not clear and it leads to disagreements with both clients and service providers. I cannot stress enough that all contracts should clearly state what is included and excluded.

The biggest source of cost over runs... Catch a recent eMail of mine on a project...

I'd pretty much closed the door on this project... it was started in Sept, 2015 and it's almost Mar, 2018. It is likely vastly over budget.

The last 18 or so hours I haven't bothered to bill for because of budget conditions. It's been a dismal project.

When I did the Cornwall Centre in Regina, I was on it for 3 years and did [xxx] all in the same time.

I hope they fab it and install it without issue; it's simple and there should be no problems. The documents are well prepared. Its minimal area limits its use.

The only thing outstanding is the energy efficiency and compliance with the National Energy Code for Buildings. Doug of [xxx] should be able to look after that. I started a spreadsheet for calculating R values and sent it on months back.

Good luck with it.

Sometimes, even if you know what you're doing... ya get sucked in... beware of the fan... It was a small building and should have taken less than a month...

Dik