That's a tricky question. Much higher than 3 possibly means that they are way overpriced, which would need to be backed up by exceedingly high quality or value. This is certainly not something our company would volunteer, unless it was required by the customer to verify our cost realism. I don't know about other industries, but aerospace has cost multipliers ranging from about 2.5 to 3.5, depending on their size and their actual control of overhead and amount of production, since production tends to have much lower multipliers and generally makes up for the the higher multipliers for the purely engineering efforts.
TTFN
I can do absolutely anything. I'm an expert!
faq731-376 forum1529
I was going by an old number from a horizontal study by some consultancy or other, maybe Oracle. Three is marginal in automotive.
Mind you defence is a whole different ballgame, I know of one company that bid the base program at one and a bit, and then charged all extra work (scope change etc) at some eye bleeding multiple.
Cheers
Greg Locock
New here? Try reading these, they might help FAQ731-376
I'll never understand the obsession with such a crude measure like hourly multiplier. Like the medical communities obsession with BMI another crude measure that ignores so many factors.
People on this site often get so upset when people bring up rules of thumb on technical matters. However, when it comes to financial or medical issues folks obsess about them.
Engineers use rules of thumb all the time, and I think they don't overtly obsess about THOSE RoT only because they've used them for a long time. Our servo guys use a 5x factor between open loop and closed loop bandwidths. The MEs use factors of safety like 2x, etc.
TTFN
I can do absolutely anything. I'm an expert!
faq731-376 forum1529
Multipliers vary widely with the nature of the business. In our business, multipliers are low to begin with, and some senior staff are billed out at very low multipliers. We absorb a lower margin on their hours so that projects are not unduly burdened by their participation, which is there for the benefit of both our clients and of our own company. If we weren't "adequately profitable", we wouldn't be able to do that...
Talking multipliers is fine while you're negotiating salary, but I doubt it would be taken either seriously or kindly if brought up too early in an interview process.
Asking about multipliers at that particular point in time seems to me to be over-reaching and possibly a bit offensive, as if you know so much that you can make a judgement about how they run their business.
A more meaningful question might be about what their "hit" rate is, i.e., what's their win ratio
TTFN
I can do absolutely anything. I'm an expert!
faq731-376 forum1529
The staff that consultants make their money on from what I have seen is junior engineers. It is beyond me that clients don't complain more with getting saddled with a $100/Hr fresh grad. Senior engineers take home a larger cut of their billable hours and sometimes I wonder if it is a push in some cases.
I don't really see an issue with the concept of multipliers. If the customers think that they can hire, manage, train, etc., cheap engineers for less, they're perfectly welcome to try. I think that after one round of hirings and layoffs, they'll be able to hire no one else. The customer is paying for a lot more than just the engineer's time:
> office space and utilities
> training
> computers, equipment, etc.
> senior engineer oversight
> program management
> support staff
> medical/dental
> vacation
> sick leave
> overhead to cover engineers when they're not able to bill on contract
> other overhead
> etc.
TTFN
I can do absolutely anything. I'm an expert!
faq731-376 forum1529
Depends on the industry, but these days if they're still bidding "full multiplers" then they are either in really good shape, or in denial about what they need to do to stay afloat. Any answer other than "it depends" or "we're still trying to adjust that" would scare me. I guess "none of your damn business" would be an acceptable answer too.
HamburgerHelper - the classic bait and switch is to staff the negotiating team with seniors, and then as the project gets under way, rapidly promote the juniors inside the team, freeing up the seniors to work on the next proposal.
Cheers
Greg Locock
New here? Try reading these, they might help FAQ731-376
It's often not so well behaved, i.e., yes, proposal was built around using seniors, but once underway, it's often the PM that gets to decide on the actual team makeup, and the seniors are only called in for specific consults and then cast off to drift and find their own way, without having a safe harbor of another proposal to work on.
TTFN
I can do absolutely anything. I'm an expert!
faq731-376 forum1529
