Residential concrete foundation inspection subcontractiing

[bobtcha]

As a structural engineer with experience in concrete design and construction inspection, I was asked to perform foundation inspections for a home inspection company that needed to be done by a professional engineer. The fee that the company will be charging the client is $650. They will cover me for E&O and they will provide the clients. What percentage of the $650 fee would make sense to negotiate?

 

[oldestguy]

Are you proficient in valuating the supporting soil for that support? Soil evaluating may take test borings, tests, etc. that could exceed that amount.

 

[bobtcha]

I could consult with a geotech if I suspect a soil support issue. This is a visual inspection of the foundation concrete for settlement, shrinkage cracks, excessive moisture, drainage issues, spider cracking, ASR, honeycombing, workmanship, etc. Anything that requires further non-destructive or invasive testing I may recommend based on the result of the visual inspection.

 

[SlideRuleEra]

What percentage of the $650 fee would make sense to negotiate?

$520. Based on the Pareto Principle (80/20 Rule). Whether it's accepted or not, will most like be received as a "reasonable" first offer.

http://www.SlideRuleEra.net

 

[gte447f]

SRE, that is bold, but I like it.

 

[Ron]

150% of the $650. You are accepting a liability for a long time! Look up your state's statute of limitations and statute of repose for engineers.

 

[TehMightyEngineer]

I'd go the opposite direction from Ron. Keep the fee low enough to cover your time and then have a bulletproof contract. This is not engineering, you should not be liable for anything other than your $520 fee. Limit your liability to the fee charged. Warranty nothing. Use clear contract language that this is a non-destructive, visual inspection that is not guaranteed to find any defects, hidden or visible. Etc.

My old boss did home inspections and was quite good at them. Generally caught everything. One homeowner bought a house and did some renovation (probably to flip the house or something), discovered rotting sills. Claimed it cost him $30,000 to fix. Knew they were in the wrong but still went after my old boss. Made a complaint with the state PE board, lawsuits all around, complaints wherever he could post them, etc. Boss man had a good contract, refunded the fee for inspection but still had to fight the lawsuits and respond to queries from the board. Owner tried to claim things that weren't true. In the end it went away but not before boss man had his name dragged through the mud a bit and likely his E&O insurance had to fight the lawsuits for a while.

It can make money but make sure you're covered.

Ian Riley, PE, SE
Professional Engineer (ME, NH, VT, CT, MA, FL) Structural Engineer (IL, HI)

 

[MotorCity]

What would your fee be if you had not seen what the client was being charged? It is not honest business to artificially inflate your fee simply because you feel you deserve a bigger piece of the pie. Your effort will still be the same regardless of what the end user is being charged, right?

 

[Ron247]

I do inspections similar to what you are describing. I do not live is a high cost area like NYC, San Francisco etc. My minimum fee is $275 and that is to look at one place on a Slab on Grade. By the time I drive both ways, look inside and outside, gather my data and write a somewhat boiler plate report, I have tied up close to 3 hours assuming a 25 minute each way drive. When you go to crawl spaces, the price goes to $375 to $425 because my on-site inspection effort triples. Belly crawling a 2000 sf house at times can be like a 4000 sf house. Since you mostly want to see the exterior wall areas, if you can circle the perimeter and then exit is far less work than circling until you encounter an obstruction you cannot pass under/over so you have to re-trace your path back to the entrance can double the crawl space time. My price varies depending on:
[li]Slab on grade versus crawl space versus basement[/li]
[li]square footage of house at ground level and possibly age[/li]
[li]how many different places or items I am to assess[/li]

Your problem is a one-size fits all fee. If I could only have one fee, it would be at least $425 and probably closer to $475. You may not be their only supplier. If your fee for the harder jobs is not enough, you will get all of those hard jobs. I believe any fee less than $325 you will seriously regret.

The advice you have already been given is good about limiting liability, lack of information like soils reports you need to really listen to. I have done hundreds of these over the years.

Also, you will spend a lot of upfront time creating standard documents, verbiage and so on. You may not make much net profit on the first few because of this but later it will get easier.

 

[gte447f]

Motorcity, not sure about the OP, but if it were me, I would probably be inclined to charge more than the $650 if it was a one off project and just me with no middleman home inspector involved, so no inflated fee and no dishonesty. I would only consider doing it for less for a piece of the home inspector's pie if I thought it would be worth doing it for less because it would mean a high volume of of guaranteed work.

 

[gte447f]

Like Ron247, I do these types of inspections. I have done a hundreds over the years. I have done them 2 ways: 1) as the prime and only engineer working directly for the client/owner, and 2) as a subconsultant working for another engineer who has a relationship with a client that needs a lot of inspections all the time. In both scenarios, I do the work on a time and expense basis where I charge an hourly rate and I charge for reimbursable expenses (e.g. mileage). Except for when I started out years ago, I do not do this type of work for a set fee, because I find that the scope is too hard to anticipate because the person asking for the inspection usually has no idea what they really need.

When I work directly for the client/owner I charge a minimum fee up front that will cover several hours of work. I do this to weed out the those who are not serious, those with no money, the price shoppers, and to avoid scheduling a site visit and then getting canceled when someone finds a cheaper price. Then I don't deliver the final report until I receive the final payment in full.

When I do the work as a subconsultant for the other engineer, I just invoice him when I send him the report, because I know he is going to pay me. The only problem with this arrangement is you have to do the work for a reduced rate because there is a middleman between you and the client/owner. You have to decide if it is worth it to work cheap in return for a high volume of repeat, semi-repetitive work.

To the OP, how can a non-engineer, home inspector cover you for engineering E&O insurance?

 

[Ron247]

If you decide to do these, one more piece of advice. Always offer in your report to "perform a more in-depth investigation for an additional fee". No need to quote the fee amount, just make the offer. That sentence has saved me a ton of headaches. To not offer at all seems to be frowned on in the legal community. They will accuse you of not making it clear that a more involved inspection "could have" been chosen by the person suing you had they chose to pay more. Also, they will act like their client would have paid any amount you wanted, you just did not make the offer.

I know this from doing expert testimony. I have heard this several times from attorneys in court.

 

[gte447f]

Good advice Ron247.

 

[gte447f]

Not to derail the post, but what do people here think about non-engineers selling and subcontracting engineering services, like the home inspector in the OP, and how does this practice jive with engineering licensing laws? Obviously architects are allowed to do it, and contractors are allowed to do it through design-build. What about pharmacists, school teachers, or mail delivery men? Are they allowed to sell and subcontract engineering services? Serious question.

 

[Ron247]

I don't think home inspections are considered and engineering, arch or contractor service. They are generally supposed to be trained to perform home inspections although, the criteria is not that difficult to master. State laws vary, in my state you have to get a home inspector's license to offer the service.

 

[bobtcha]

If I had to use my own E&O my fee would have been around $500. The home inspection company will add a PE to their E&O policy in order for me to be covered. Thanks to all for the various advise, especially the price ranges and square foot costs, the 80/20 rule and the in-depth investigation for an additional fee or a proposal for addressing any problems found.

 

[bobtcha]

In my State home inspections have to be done by licensed home inspectors or a PE.

 

[KootK]

The home inspection company will add a PE to their E&O policy in order for me to be covered

I have a similar arrangement with a client and, therefore, specifically exclude that client from my E&O. My insurer is fond of reminding me that, since I don't control my client's policy, they could cancel it or remove me from it at their pleasure, leaving me uninsured from that point forward for the work for which I was insured at the time of execution. I still do it anyhow but it's something to consider.

 

[Ron247]

KootK,
Are you saying that when the Client decides to remove you from their E&O, your previous work for them would not be covered in the event of a future claim even if they still have a policy with the same E&O? I have never thought of that, but I think I need to check on that. I do very few projects with someone else's E&O but never thought of that issue.

 

[KootK]

I'm no expert at this stuff but, yeah, I suspect that's how it works. The exact situation that my broker taunted me with was the possibility of my client just cancelling their policy altogether and me being uninsured for the project work that I previously did with them from that point onward. I've since found out that, if you're a named insured under somebody else's E&O, you have to at least be informed of any changes to the policy. So there's that at least. For somebody to keep their policy and just turf you seems pretty malicious and, therefore, hopefully unlikely. I guess it's possible though since I believe that it generally costs money to carry a named insured. And who doesn't like to save a little money, right? There's some trust involved.

If this came to pass, I wonder if you could find your own insurer to cover you for the completed work from the point of policy termination onward. I suspect that you can find an insurer to cover anything if the price is right.