Pricing Question 1

[SteelPE]

I have the opportunity to put a proposal in on a project that is quite large.... but the information is a little vague at this point as the project is still in the site permitting and design phase The project is a 600,000 square foot single story warehouse structure with an eave height of approximately 35'-0" +/-. Perimeter skin will be CMU lower section with metal panel upper section. At this point, there is only a 5,000 square foot mezzanine in the structure. We do not know the dimensions at this time but are figuring it will need to be split into 3-4 separate structures for thermal reasons.

So the problem I have is figuring costs on something of this size. The project at this point is extremely repetitive, so on the surface there doesn't really appear to be much work to do. If I approach the design from an hourly standpoint (break down the project into tasks and then figure out the hours to complete the tasks) then my number ends up ridiculous low when compared to % of construction costs.

What do others do in this instance?

As a base, I put in a proposal on a similar project with this same client about 2 weeks ago. This project was 129,600 square feet with a similar set of requirements. This proposal was accepted by the client. I was thinking of just doing a straight comparison of square foot costs..... I think that is reasonable, each project has a similar scope with some differences..... if we use this method we would be about 0.25% of construction costs (which seems low.... but is still much higher than my hourly method).

 

[dik]

Whenever I've put together a price for a major project... I do an estimate of the time involved for doing the work... base on foundation, main floor, roof, mezz, columns, lateral, etc. with an idea of how all the lateral loadings will be accommodated. If you are responsible for drawings, specifications, construction review (note I didn't use the term inspection), shop drawings, site meetings, etc.

I then estimate the value of the structural work and use a percentage of this as a number... fudging it for amount of 'gingerbread'.

I then do a workup for the number of drawings that will be required, and the types... for example, I may have 4 sheets of project notes, and I know within nickels that these will take 16 hours each (drafting and engineering) by the time the project is finished. Foundation, main floor, elevations, roof, sections and details... and assign hours for each type. On some complex projects, there may be 80 hours of engineering and drafting...

I then look at the numbers I've prepared and use a value based on them... If I'm looking for work, I may knock it back a bit... If I've got lots of work, I may bump it up a bit... it depends... I then 'sleep on it for a day'.

It gets silly sometimes...about 40 years back I put together a fee on an 18 storey building and an estimate for the cost of the building over lunch with the client on a paper napkin... on another one, that I had no input into the fee... a 400,000 sq.ft. cargo terminal building outside of Toronto... I had over 1000 hours of budget left... so, it's an educated 'turkey shoot'.

Rather than think climate change and the corona virus as science, think of it as the wrath of God. Feel any better?

-Dik

 

[phamENG]

0.25% is pretty low. For something that big and that repetitive...in my market the big (local/regional) firms could probably justify charging 0.5% estimated construction costs for it...maybe up to 0.6% if they have enough clout with the client. I'd start there and then reduce based on my operating size and overhead. Then again, you've established a baseline. Too much of a departure from it and it could cost you.

The bigger the project, the more opportunities for a mistake - either in design due to missed coordination, or in the field - especially on projects that lend themselves to complacency. Just because you don't need to run a unique calculation for every column line doesn't mean you won't have a unique RFI for each column line. The more you can absorb those in your base fee, the less you're perceived as nickle and diming your client.

 

[JLNJ]

The tough part comes when things which seem like they should be repetitive end up being one offs. It’s hard to write that in (or out) of the contract.

Maybe the Owner wants to eliminate your bracing in certain areas. Area A has truck docks but Area D doesn’t. Area C has a big air handler which is different from the one in Area D. The architect changes the siding material and your girt spacings all change. Doors get added and deleted. It can go on and on.

 

[dcw815]

I would take the lower end of typical percentage fees in your area unless you really need the work, then compare it to the number of drawings you need and cost per dwg. You can spend lots of time on the slabs and miscellaneous little components for jobs like that. Some little mezzanine will find a way to take 10% of your effort. They'll change their mind 10x about the bay sizes building height or something.

 

[SteelPE]

I guess the question boils down to.... if you have a seemingly simple structure, that will not take much time to analyze, but the overall cost is extremely high, how do you handle this?

I hear everyone's comments regarding items that may creep their way into the design, but at this point we have been told these items are not an issue. If you have a $40M structure where you were just responsible for deigning a steel joist, joist girder, column and footing repeated 500x then how would you factor this into your fee schedule?

 

[dik]

One thing to remember is that the bigger the project... no matter how simple... the bigger the liability.

Rather than think climate change and the corona virus as science, think of it as the wrath of God. Feel any better?

-Dik

 

[canwesteng]

If you have a good relationship with the client and are confident that stuff won't creep into scope (or you'll get paid for it if it does), then I would think being on low end isn't so bad. Already they've come back to you a second time in two weeks, seems like a good opportunity for more repeat work.

 

[KootK]

I've been doing it like this.

EFFORT: my fee based on perceived effort.

LIABILITY: my fee based on scale of the project, percent construction cost.

FINAL FEE = MAX ( 1.0 x EFFORT, ( MIN (1.5 x EFFORT, LIABILITY ) )

Our fees wind up being governed by the usual laws of supply and demand and there's usually somebody out there willing to price close to the effort number even if you're not. For your situation, my algorithm probably yields 1.5 x EFFORT. I feel that's a happy middle ground as:

1) you've remained somewhat competitive.
2) you've got some contingency.
3) you've not failed to capitalize on the opportunity to make a little easy money if all goes smoothly.

 

[gte447f]

SteelPE, please don't take this as a personal criticism or attack. I empathize with you, because I have faced similar decisions over what fees to charge even on much smaller projects. Personally, I have arrived at this: you should charge very close to the going rate for the services, which is going to be a percentage of construction cost. It is common knowledge that the types of simple, straight forward, yet very large scale buildings, that you have described garner lower design fees as a percentage of construction cost, but that is already basked into the cake. In my opinion, there is no reason to go even lower. Doing so squanders an opportunity, erodes your value and the value of the profession. This is why the 10% rule for professional services is now the 6% rule and fast approaching the 3% rule. The only entity that benefits from going the bargain basement route is the owner, and you could argue that it is not even a recognizable benefit to them because it ends up being a fraction of a percent of the total project budget.

 

[SteelPE]

Well, I have worked with this company off and on for years.... so coming back within a few weeks is typical. I used to work with them at my old company with my old boss prior to his death and the demise of the company in 2012. They are very loyal.... as long as you are not reaching into their pocket.

Honestly, I don't even know the cost of the project. I am just basing my numbers off some estimates from and old RS Means. Do I know if there will be scope creep.... no.... but we try to outline our criteria in the proposal.... and plead to the client when there is creep.

gte447f...... no offense taken, it's why I started this thread....and if my skin was that thin then I would need to find a new profession.

 

[Aesur]

Based on your description, the project seems simple at a glance, however I have the following cautions:
1. You mention that the lower section is CMU with Metal Panel upper section of the walls, I assume this will require cantilever CMU walls to prevent a pin in the middle of the walls in the out of plane direction. Expect that there will be discussion and VE's during design that you will be expected to look at without additional fee.
2. Building Joints - these will most likely be required and could require creative detailing; recently we had one where they wanted the expansion joint, but wanted to share the same braced frame, not too difficult, but a little unique.
3. There may be exterior "structural features" hanging from the structure.
4. There is a possibility that the column grids will vary depending on client needs and may not be typical, therefore resulting in non-repetitive joist and girder designs.
5. Expect that there may be areas of storefront to deal with.
6. Is there a TI phase for this? If so and concurrent with your design, this may result in you redoing designs as the client figures out what their tenant wants and needs.

I assume your area may have a typical square foot cost range, I would expect the building as described to be on the lower end of the range.

Please make sure you don't under estimate your value, far too often we engineers under estimate our value and reduce prices because we feel like it may be too high, doing so sets precedents that hurt our industry. It is my opinion that building fees have hit their low point, yet are still being squeezed. It's very sad that we get fees to design a building that are lower than the commission real estate agents get for much less work.

 

[dik]

Minimum fee is not the object... I used to do a lot of stiffened slab foundations for houses... and had rectangular, L shaped and T shaped plans, with standard notes and details... I could 'stretch' the plans to suit almost any house... all I had to do was add a soil profile... the title block were all attributes. I could do a plan in 1/2 hour... fixed fee of $1000. Similar things for septic system designs...

Rather than think climate change and the corona virus as science, think of it as the wrath of God. Feel any better?

-Dik

 

[skeletron]

I'm feeling relieved while reading this thread, because it seems like we all face uncertainty and trepidation with the non-engineering side of engineering.