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]

I generally price things based on three items:
Project Value,
Number of Drawings Prepared, and
Estimate of the Amount of Time required to do the work.

Project value is used to determine the fee based on a percent... depends on local and experience. The number of drawings fee is based on 40 hours per normal sheet, 50 hours for detailed sheets and 12 hours for drawing notes; there may be 4 or 5 drawing notes sheets. I tend to put lots of information on the drawings... not much 'white' space. I don't like 3 part specs. The third item is based on how much time you need for doing the project. The three numbers will give you an idea of what the fee should be.

If specs are required I usually budget 4 hours per section. Construction review and testing is on top of this as well as preparation of bid documents. Also if there are specific requirements that are time consuming... like weekly project meetings that run a whole day, etc.

Hope that doesn't confuse you too badly.

Dik

 

[FreddyNurk]

Cross posting is not going to make you popular either.

EDMS Australia

 

[dik]

As long as it's not excessive... not everyone reads all the forums.

Dik

 

[Christopher C]

I appreciate the feedback FreddyNurk, my apologies. I'm somewhat new to the forum.

 

[dik]

Not to worry... we were all new, once upon a time... I've occasionally cross-posted. The structural engineering forum is a good 'catch all' and is viewed by many.

and, Welcome to the site.

Dik

 

[atrizzy]

I'm pretty new at business ownership as well and found pricing to be the trickiest part (next to finding clients).

You'll get the hang of it though. Take dik's advice. Approach the thing from 3 separate angles and if the values don't converge at all, try to reason out why.

I would also suggest a rough estimate of $2500 per drawing, if you can get it, just as a starting point. This is pretty accurate for most of the work I do. But still, for every project I begin by defining a scope of what's required, and putting a reasonable # of hours to it. Where I make my money is by improving on the hours expectations.

If you're hungry and want to attract a client, lower your price a bit. If it looks like a PITA, add a complexity factor. Don't sell yourself short, and don't be OVERLY concerned about overpricing. In my experience a reasonable client will talk to you about the price rather than being offended at your audacity. Whereas if people are bringing you on board willy-nilly you're probably charging too little.

Good luck!

 

[dik]

atrizzy... good points.

Dik

 

[JedClampett]

atrizzy, your numbers don't pencil out. If dik is right, and he usually is, that means your cost per drawing hour is $50. If you deduct rent, heat, taxes, overheads and profit, that means you're paying yourself maybe $28/hour. And as you say, that's if you can get $2500 a sheet.
Now maybe you're willing to work for $28/hour to get your business off the ground. You bust tail, and get a good rolodex of clients. You're going to be the structural equivalent of Microsoft. It's time to hire your first employee. You might get a minimally skilled CAD operator for $28 an hour. But minimally skilled means more checking and spoon feeding, eating into your 50 hours. And for sure you're not getting an engineer for $28 an hour.
If all your drawings have a lot of typical details and your work is routine, with standard notes and the such, maybe $2500 works. But if you're spending 50 hours on them, you're going to be applying for a job with me pretty quick.
Back to the OP. Our numbers are pretty close to dik's. Say 40 hours a sheet, (20 Engineering and 20 CAD) plus something for specifications and general notes. Apply your salary and that of your employees times a multiplier. This multiplier can vary between 1.8 (working in a cardboard box, no training budget, very minimal perks, no Christmas party) and 3.2 (what a specialist gets, Class A space, separate business development budget, open bar at the Christmas party) and that's your price per sheet.

 

[IRstuff]

My background is radically different. We typically do a conceptual design as part of the bidding process. Part of this, obviously, depends on your experience, and whether you've done anything similar. Complexity factors can also be used to get some degree of scaling of scope based on previous work, i.e., a 2-story building is x-times more complex than a 1-story, etc.

TTFN (ta ta for now)
I can do absolutely anything. I'm an expert!

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[dik]

and 3.2 (what a specialist gets, Class A space, separate business development budget, open bar at the Christmas party) and that's your price per sheet.

...

That's what our company's multiplier is... but, just for the plebes... the shareholders see the benefit... and we live like the 1.8 multiplier. Our IT department 'skims' off $5 for each hour for each employee... and if they spent the money on equipment, it would reduce their profit... I generally use my own laptop and upload work at the end of the day/week; I can be working on mine before the company desktop has reached the login screen.

Dik

 

[atrizzy]

Jed, yeah the 2500 is kind of a low starting point. I'm running a startup as I imagine OP is.

If OP is doing the design and drafting themselves, using a blended rate of about 100 bucks for eng/drafting, that's 25 hours of 'work' that one can likely do in 5-10 hours. So you're not paying yourself as little as you think for doing lump sum work. But indeed established companies with built up reputations and good client relationships can get away with charging more.

Also, as we know, 'a drawing' can vary greatly in complexity and effort. It's important to note that if the number of drawings isn't representative of the amount of effort required to complete the work, then it's an equally poor representation of what you should be charging.

 

[dik]

Also, as we know, 'a drawing' can vary greatly in complexity and effort. It's important to note that if the number of drawings isn't representative of the amount of effort required to complete the work, then it's an equally poor representation of what you should be charging.

That's the reason for looking at pricing from 3 different methods... Drawing count is not a bad representation of actual costs. After a period of time, you can get to price using drawing count and value, quite well. It's also something that you can accumulate a metric from past work.

Dik

 

[Christopher C]

Thank you all for your input so far. It seems as though that $2500 per sheet figure is a good place to get a ballpark from, for comparison at least. Please bear with me while I think this one through "out loud"...

If we assume ANSI D or E drawings, then I can imagine the following sheets:

[ul]
[li]First Floor Framing[/li]
[li]Second Floor Framing[/li]
[li]Roof Framing[/li]
[li]Sections[/li]
[li]Details[/li]
[/ul]

At $2500 each, we're looking at a $12,500... maybe $10,000 if we get sections and details on one page.

The method I've been using so far has been based on time estimates @$1200/day with a resolution of 0.5 days. Thus:

[ul]
[li]RISA model and large member optimization... 1 day[/li]
[li]Sub-floor, roof cladding, and/or slab design (3 levels)... 1 day[/li]
[li]Stud framing, Bracing, and headers... 1 day[/li]
[li]Misc:[/li]

[li]Elevator Hoist Beams... 0.5 days[/li]​

[li]HVAC Framing... 0.5 days[/li]​

[li]Railing... 0.5 days[/li]​

[li]Stairs... 0.5 day[/li]​

[/ul]

5 days @$1,200/day yields $6,000 ==> Double that to include drafting time ==> That's $12,000

Hey!... pretty close results

How does that all look to the rest of you. Do you think I might be missing something?

 

[JedClampett]

Last check, as the others have said, is to compare this to the cost of the project. If the structural design is about 1 to 2 percent of the project cost, than the project needs to be worth about $600,000 to $1,200,000 to justify that price.

 

[dik]

Do you have a project value? What level of service is required? Any specs? construction review? site meetings? bid docs? interface with AHJ? review of testing? other?

Dik

 

[atrizzy]

I don't want to tell you what I think it should cost because I could well be off based on a number of factors. It looks like you've got the right mindset with what you're thinking. I could offer a few more points.

-If it's one of your first projects and you're happy with the fee, go for it. You'll know at the end of it if you charged enough or not.

-Keep track of how much time it actually takes you and make adjustments in the future.

-One of the most intimidating things when you start out is submitting a price and then flipping out for days before you hear back terrified that it was too much. This is certainly a concern of sorts but at least in my opinion is a bit overrated. More often than not, if you've thought it through, you're in the right ballpark. Relax, and wait to hear back.

 

[dik]

...and another thing to think about in the background... How much of your fee goes to paying others that work on the project? In the event of cost overuns, can you afford to pay them?

Dik

 

[Christopher C]

Thank you all again for the added thoughts and pointers. It really helps to have a community to bounce this off of. There are still some conversations I need to have with the client about levels of service, but I have a much better sense of what a "typical" fee for this project should be. Or better yet, I have gained a bit more confidence in my estimating approach.

Does anybody know of any resources that address the pricing of engineering services?... I've looked around, but I haven't had any luck. I know there is quite a bit of literature on construction estimating, but there's nothing I've really seen on design and/or engineering.

 

[dik]

I suspect that there are a few manuals out there dealing with this... but, working with the info provided above will likely give you a real 'heads up' about what is required.

Dik