Structural Engineering Fees - is it broken? 20

[Enhineyero]

Hi guys and gals, do you think that the current level of our fees is where it should be? In my experience, structural + civil fee is usually no more than 2% of the total construction cost.

I've seen numerous debates about how real estate agents get 5% commission for what seems to be less responsibility and work, this is for each time the property is sold (imagine selling the property 10x over and benefiting from the capital gains!). Do we (engineers) just have it bad? or do they (Real estate agents) just have it soooo good?

If we have it bad, does anyone have a solution? Most engineers talk about this issue but no one really does something or tables a solution for it. I even saw a video of Ashraf (founder of ETABS) discussing this issue but, again, no solution presented.

 

[canwesteng]

Do realtors get 5% if they get to sell and entire new build? Usually less I think, same as if they were to sell a large commercial facility.

 

[phamENG]

There are a number of threads about it around here. The problem is multifaceted and the comparison with real estate agents, while popular, is fraught with oversimplifications.

To address the real estate issue:
1) Real estate agents are not immune to liability.
2) Real estate agents are a whole lot more visible than a structural engineer. Their benefits are also a bit more tangible. You can easily demonstrate that you can get a licensed real estate agent that is awesome and can save or earn you a LOT more money on a sale/purchase and also that there are terrible ones that can cost you - if not directly in money than in time as your house sits on the market because they don't know how to market it. Perception may not be reality, but it's the only way most people know how to interact with reality and, as a result, the higher perceived value of a real estate agent increases the amount of money people are willing to pay for the service.

For a structural engineer, what is a bad engineer? Sure, you could have somebody rubber stamping shite drawings that eventually results in a collapse. But we all know how very rare that is. More than likely it ends up being a few extra percent of construction cost due to an inefficient design. The flip side is that a really good engineer probably won't benefit the average project by all that much. (I'm not talking about the mega projects and super talls - I imagine they do pretty well on those fees.) Add to that the fact that on a lot of projects the engineer is seen through the lens provided by the contractor. And most contractors have a few things to say about those kids who never leave the office and over design everything.

So it's ultimately a perception thing. We have to find a way to prove our value to the community, which is hard to do. What are we going to do? Let a bunch of buildings collapse and then say, well, if you pay us more we'll do better next time? I think not. We also have to stop undercutting each other at every turn. It's hard, and I'm probably part of problem at times. For instance, I got a call today about a project with an architect I don't have a relationship with and he wants me to give him a fee. He could be a fantastic client. So I'm willing to "buy" the project if I have to to get a chance to prove myself to him so I can get more work in the future. If anyone has an pointers on how to get new clients without having a lower price than your competitors, I'm all ears...

 

[structuralCADspecialist]

phamENG you make some extremely good points. Where I live, Real Estate agents are making an absolute killing. My province's governing body for real estate holds agents to a very low standard. The typical scenario playing out is that a real estate agent will enrich themselves by committing an absolutely egregious act, get busted, and then receive a fine amounting to a fraction of the cost. The association in fact protects them from litigation so I think they behave even worse. Engineers have a much higher level of ability and accountability. And add way more value to society than real estate agents do. The 'wild card' here is that a successful real estate agent needs to be physically attractive and charismatic to find real success. They need to be an influencer. Many otherwise incompetent people have become incredibly successful and rich just on that alone. An engineer on the other hand is a magician when it comes to influencing... say the behavior of reinforced concrete... but winning a room is another matter altogether. I've seen 'charismatic' engineers. Most of them aren't great at design work. Very rarely some are, and other's claim to be but aren't. And some are people who just happen to have a degree but morphed into a 'marketer' or sales agent.

Anyways... I have a pretty well though-out opinion on this matter. I work in the Residential sector so much of my opinion is contingent on being involved in that arena. My experience tells me that there is TONS of money on the table when it comes to the structural engineering of a building.
The issues preventing engineers from earning what they are worth comes down to multiple factors. I'll try not to type out an entire essay, but going from the 'top' down:
There is a very weak contractual obligation between the ownership group and the structural engineer. And also, very little communication. Most of the communication is usually along the lines of "well the other firm will design our building for $X... can you beat that?". The owners aren't aware that better structural designs will be well-worth the extra money spent. They only care about the price point in front of their faces and therefore get the cheapest possible product. If an Engineering firm doubled their fees, but saved 10x that by making the project run much smoother, would an owner listen? This is something I'm working on right now.
After the owners themselves, I think the organization of the engineering industry where I live creates the next biggest hurdle to better compensation. The system doesn't really promote quality or real competition (rather an oligopoly). Bad structural engineering firms keep making huge mistakes and getting away with it. And those same firms keep underbidding the other firms. The more ethical and diligent engineering firms are at a huge disadvantage.
The next culprit is the engineering companies. I've seen them devolve into entities offering a low-cost, low-quality service. Pay is incredibly low especially in the residential sector. I've seen 'respectable' engineers offering fresh grads and Jr. Engineers with less than two years experience salaries equivalent to about $35,000 USD per year (in a city with the 4th or 5th highest cost of living in North America). Training is really bad and completely non-existent at some firms. Many talented designers are leaving for other positions (such as management).
Lastly, I'll comment on engineers themselves, specifically Jr (or perma-junior) engineers. I think a lot of the 'burn-out' or poor performance seen by many Jr. Engineers is very much due to the conditions they end up working in. An engineering undergraduate degree isn't a cake walk. And I doubt most of them expect things to be easy when they land their first job. But to end up somewhere completely lacking any level of professionalism for a wage lower than what they could probably earn had they not even attended university... I can see that as being de-motivating. One still has to do their job no matter what. Where design engineers themselves, especially newer ones, seem to be dropping the ball are: Many seem to have a very poor grasp of load paths and need to review/refresh their statics knowledge; Not reading/adhering to the design references/manuals specific to the material their designing with, especially reinforced concrete; Having a very poor grasp of 'constructability' (and 'inspectability'); And in general, having a very poor grasp of the construction process as a whole, for example, failing to properly coordinate with the Architects. I'll also add something here that should probably be included with my previous paragraph: I've seen very random promotion of engineers. Some really amazing ones were never given opportunities to grow and I've seen some absolutely terrible ones given tasks way above their ability level. I've often seen promotion based more on 'personality'. The best design engineers are very quite and reserved and perhaps not the best 'wingman' or beer buddy. I mention this because the distribution of pay is way off in many firms and therefore offers little incentive for engineers to perform at their best.

To get into the 'fixes' would make my post way too long. But I think there is real potential especially in the residential sector. On the last big project I worked on, I could easily see that $1,000,000 went up in smoke mostly due to the structural drawings. That's not to say that if the drawings weren't bad, the rodman would have just used that as an excuse to f'up even worse... But I'm optimistic for sure.

To summarize:

The owners are cheap and only consider front-end costs.

The way the industry is organized promotes low fees and low wages.

The behavior of individual firms dictates a negative outcome, especially the worst firms as they seem to set the prices.

Many Engineers themselves are becoming disengaged and inefficient. This effectively lowers everyone's wages not just the poor performers.

 

[dik]

It's broken... Engineers have a fatal flaw (and I'm afflicted, too). I can do anything better than you, faster than you, and less costly than you. I rest my case...

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

-Dik

 

[IRstuff]

Beyond those above, real estate agents only make the money when an actual sale occurs, and they had an actual part in it; a gigantic chunk of their time is consumed by dragging (pre-COVID) buyers around to a gazillion houses and more likely than not, to no final sales conclusion. We looked at probably 30 houses over several months before settling on our first house. We spent probably about the same amount of time for our 3rd house, but the agent we started with was not the agent we finished with, so the first guy got bupkis, but still has us on his Christmas card mailing list. While open houses are reputedly a poor way to actually sell a house, it was, pre-COVID, still the thing, and appears to be basic scut work for entry-level agents.

And the 5% is not ALL for the agent; it's firstly split 50/50 between buying and selling agents, and it's further split at most 50/50 between each agent and their broker. So that means the typical agent only gets about 1.25%, not 5%.

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[phamENG]

Agree on the up front issue. Just look at the disparity between fees you can get for being EOR on a steel framed building vs what you can get for doing the connections. As EOR, the owner is paying you up front and usually from their cash account. The connection designer's fee can be 4x the EOR's fee and it'll just get lost in the noise of the steel fabricators fee and then be financed with the rest of the construction.

 

[rapt]

But the real estate agents get the fees every time the building or part thereof is sold!

From what I hear, in Australia engineering consultants would love to get 2%.

 

[Aesur]

It is my opinion that engineering fees are at the point where it's almost impossible to do the work "per code" and complete on budget, especially if you don't have EIT's doing all the engineering work with minimal oversight of a senior engineer, which is commonly the case. Additionally, engineering fees have not kept up with inflation over the years, nor increased due to complexity of the building code and the use or Revit and other BIM software. We are continually making the contractors life easier, and their fees are going up while ours go down.

I don't know much about Civil fees, but if you are getting 2% for combined Civil and Structural, I would say you are on the high side. We recently pricing a project at 0.75% estimated construction cost for Structural only due to size, complexity, high snow loads and high seismic and we were undercut by another firm coming in at half our fee. Typically what I see if Structural gets 0.25 to 0.50% of construction costs, if they are lucky. I thought this was just the area we are in, but as we have been expanding into other areas of the US we are seeing the same trends.

Compared to specialty engineering, ie FRP, PEMB, Trusss, etc.. we are getting pennies to the dollar. For instance I am working on a project that consists of two PEMB's connected by a conventional steel framed building which is more complex than the two PEMB's. Our scope is for this steel framed connector building and foundations for the PEMB's. I was made privy to the PEMB fees and their fee is 3x our fee. Another example is FRP, I have seen strengthening of a deck on a house that had an engineering fee of over $40,000, whereas a beam and column strengthening solution would have been less than $1,000 in fees.

Engineers keep complaining about the fees, but let's be honest, no one is willing to actually raise their fees for fear of losing work. This is made even more difficult with the amount of "one man shops" who drastically drive fees down because they have low overhead and they want to compete on medium size commercial projects.

Engineers also typically fails at charging proper fees for Construction Administration and seem to fail at actually charging for items that really aren't CA, like RFI's asking for substitutions, field conditions in an existing structure that don't match as builts or contractor errors that require new designs and details.

We have done this to ourselves and I believe this is part of why retention in the field is so low, because it's really only profitable for yourself if you have others doing the work for you. We really should have fees similar to doctors and lawyers, especially considering the amount of liability we take on versus them.

 

[phamENG]

rapt - well there job is to facilitate the sale or lease of real estate, so that pay structure makes sense. Just as it makes sense that we get paid whenever the building is built or modified. We do very different jobs, so trying to draw a direct comparison to how and when we get paid is like comparing apples and purple. IRStuff brings up a really good point about the variability of a real estate agent's pay as well as the breakdown. Around here, average commercial construction will usually bring about 6% of construction costs to the design team. THAT is the number that is most appropriate to compare to the real estate commission. But then that gets broken out to the various consultants, then distributed as pay to employees, and paid to land lords, etc.

Aesur - around here, a good firm with a good reputation can typically get close to 0.7% on a good commercial project. More for industry work. Less for residential (0.5% is pretty optimistic, though I've pulled closer to 0.7% for more complicated remodels).

 

[SWComposites]

Well, if every one of you civil engineers would price your fee at a min of %5 construction cost and refuse to lower it ..............

 

[phamENG]

I wish. It would sure eliminate a lot of my competition! haha...

 

[rapt]

phamENG,

But you are responsible for the building performance for 7 years as well as doing the design detailing supervision, keeping up to date on design processes etc, often for about .5%.

They can sell it once a year for those 7 years and get 35% + inflation!

SWComposites
I agree.

 

[skeletron]

It's definitely messed up, that's for sure. I spend more time than necessary only so I can build up my processes to be a bit more robust in the future. But, at the same time, a lot of the jobs still require handholding or at least some form of documented due diligence. I'm not sure how long lone-wolf shops will continue to exist in the future.

 

[MIStructE_IRE]

Dik is spot on with the engineers fatal flaw. That said, I have no choice now but to start increasing fees with the absolutely criminal cost of PI Insurance this year. Our insurance has almost tripled from last year and we’ve never had a single claim! Another reason to really ask ourselves why are we doing this at all?! Not many professions carry this level of responsibility for such little reward.

 

[Tomfh]

Agree that engineers are terrible at colluding. You can’t expect the market to pay more than what engineers offer to do it for.

 

[Ron247]

Where I live, it is 6% to 7% for the entire transaction. As IRstuff pointed out, this can be split from 2 to 4 ways. Buyer Broker and Buyer Agent get a fourth each, Selling Broker and Selling Agent get a 1/4 each. If the buying and selling occurs at the same real estate company, Broker gets 1/2 and agents split the other half. If the same agent represents Buyer and Seller, Agent gets the other 1/2. That is why so many agents first push one of their listings before you get to see other realtor and agency listings.

What I do not understand is why we are comparing our fees to a realtor. We are worth what we are worth, regardless of what a realtor gets. In case you have never noticed, good sales commissions are generally higher than good engineering fees. One is sales, the other is not. You only get paid on the successful sales. We get paid on every project we get involved in, including the losers. Selling an $80,000 house can require the same effort as selling an $800,000 one. The $80,000 one is $4,800 fee split however many ways. The agent may have listed that house and shown 10 people the house before it ever sold.

One of my complaints about engineering school and the practice of engineering in general, is that money is rarely discussed and in some circles appears taboo to discuss. I was told in the days of George Washington, engineering was the highest paid profession. It far exceeded law or medicine. It also exceeded sales in many cases. I doubt we are even 15th place now. I also bet architecture exceeds engineering by a considerable margin.

 

[phamENG]

The relative reduction in fees in engineering compared to law and medicine doesn't surprise me one bit.

In the past 100 years, medicine has grown exponentially. At the turn of the 20th century, hospitals were places to go for palliative care, surgery (yikes!), and what usually amounted to experimental treatments. Fast forward to today, and there are relatively few ailments that can't be cured by modern medicine. Getting there took a lot of resources, and maintaining that body of knowledge and continuing to grow it takes a lot, too. Law has gone through a similar growth. Ever tried to read the tax code or US Federal Code? Again, there's a massive body of knowledge to maintain. Adam Smith's Wealth of Nations has a good explanation of why the pay for these professions can be justified.

In the late 1700s, that's where engineering was. Hooke's law was still pretty new.(Sorry, that was late 1600s, wasn't it? My point still stands, though) We were building the body of engineering knowledge and simultaneously expanding a colony into a vast and plentiful continent. The number one thing we needed was engineers and surveyors. Sure, explorers went out and found the mountain peaks and the rivers, but the surveyors were out filling in the maps in between. The demand was very high, and relatively few people knew how to do it. Surveyors occupied high places in government (Thomas Jefferson, like his father before him, was a surveyor). We also needed infrastructure, which often meant canals - some of the largest engineer projects in the colonies in the era. Fast forward to today: we're a dime a dozen. We've been pushing as many people as we can into engineering, and the attrition rate isn't that high (this is a key factor in Smith's explanation referenced above). And let's face it - the body of knowledge that we have to maintain isn't that big in comparison. Sure, the codes keep getting longer, but at the core it's not changing that much.

Do I think we should be getting paid more considering the risk we assume? Yes. Do I think we should go around comparing ourselves to other professions? No. In some key technical considerations, sure - like risk allocation - but on the whole I think it's counterproductive. We're not going to elevate the sizing of a beam to replace a bearing wall in somebody's kitchen to that of removing an appendix. So talking about it serves only to depress us. We need to take a good look in the mirror and ask not why I don't make as much as a doctor, but how can I convince the market to accept a higher price for my services.

 

[Enable]

There are some good points made in this thread particularly by phamENG. I have my own quite strong views on the subject but they are mostly encapsulated by the tenor of the comments above.

What I will say is that I am in contracting / fabrication / shoring for a reason. I find it difficult to do proper engineering work given the rates in new builds and consequently, I stay away like it's the plague. As an engineer on the contracting side of that same project I can do relatively well AND feel like I am compensated adequately for the liability (which actually diminishes because I am paid to actually think about things over here).

 

[phamENG]

Thanks, Enable. I agree - construction is the better side to be on. I've tried to work with contractors when possible, especially those who actually value my contribution. I can easily get 1.6x my normal fee when working on that side of the fence. A couple months ago I priced a steel connection calculation package - no drawings, just calcs - for a fabricator. My fee was almost twice what I the EOR was probably able to get for the ENTIRE BUILDING and the fabricator didn't bat an eye. Accepted it without negotiation. Bit of bad luck, though - my contact got sick the next day and my proposal sat unsigned in his inbox while his boss called somebody else because he didn't know I'd sent it. Doh!