structural fees now and the future 1

[rowingengineer]

Due to the Global financial crisis many engineering company are reducing their fees. I am wondering how much people are reducing their fees, and what their plan is once things start heading north again.

These are a few of the common ways of generating a Fee I know of:
1. % of construction (between 1.5 to 4%?)
2. % of total fee (between 10 to 15%?)
3. sq. ft of building footprint depending on the overall size, number of floors, construction materials ect; say ($0.5 to $3 sq ft)
4. Means Facilities Construction Cost Data fee
5. Base fee of drawings sheets ($1500- $3000 a sheet?)
6. Hourly charge out rates ($100 to $200 per hour)
The fees are normally adjusted up or down depending on complexity and people with whom you’re dealing.

I am wondering if you use any of the above method or others, if so have I listed fees that you are charging? Are you lower/ higher?
What are people feelings on fee at the moment by themselves or others? Are they to low/good in general?

My questions are to generate discussion, so feel free to highjack and ask other questions/discuss other issues in regards to fees.


Arguing with an engineer is like wrestling with a pig in mud. After a while you realize that they like it

 

[Ron]

Lowering your fees is a bad practice. I realize it might have to be done on occasion, but it is extremely difficult to raise them again, particularly for the same client. It can stick you with reduced fees long after economic recovery.

Get creative and do things on a lump sum or other basis that doesn't show a reduced rate. You might actually be lowering your effective rate; however, it won't stick you to a lower unit rate later if you need to raise it.

Even telling your client you'll work 1.5 hours for each hour you charge is better than lowering the stated rate.

 

[photoengineer]

Ron,

You're sure right about that. During the bad economy, I see all sorts of businesses doing a bunch of things that effectively make it less expensive to do business with them but keep their published price high.

For example, I was in Las Vegas and they were advertising buffets for $XX.XX, but you get to eat all day for that price (instead of just one meal).

Or one of the restaurant chains around here is advertising free pie with dinner, and several chains are offering 2 entrees for $20 or whatever. All techniques designed to allow you to eat cheaper without lowering the price of the individual item.

 

[msquared48]

Item #1 can go as low as 0.5% for larger, repetetitive projects.

Other than that... you got it.

Mike McCann
MMC Engineering
Motto: KISS
Motivation: Don't ask

 

[southard2]

In my practice most of our fees are generated via doing work for architects. For walk in work from contractors and small owners I haven't yet felt the pressure to reduce fees. For my architect clients I have for a very long time now worked for a percentage of their fee.

The thinking is to share in the spoils of all the projects as a team. When fees are good we profit more. If the architect feels the need to cut his fee in order to keep getting the work we take a bath too.

I have found that this method fosters loyalty. However it comes with a price. For one thing I can't always be assured that the "cry me a river I'm a poor architect" story is true. The second thing is that architects are much more likely to tell me when things are cut rate and much less likely to tell me when things are rich. The easiest way to cut through this is to ask for the total buildings construction budget. You can ask this in a round about way by expressing concern for busting the budget. So in your effort to make sure you aren't heading into a situation where you have to redraw you can get an idea of what the real construction cost will be, etc...

Another problem with this method is that when things get bad like they are now construction prices and rates drop at the same time. Here in Florida when real estate was way overheated plain vanilla schools were being built for $180 to $200 per square foot. Owners started (and architects too easily complied) demanding reduced architectural fee rates. Now that construction prices have dropped they expect the same lowered fee rates. Because I have traditionally worked as a percentage of architects fee this has been bad for my fees as well.

I really don't know what to tell you guys. If you can't get enough fee then move on to another profession. I personally think things in Florida (in terms of construction) are still slowing down. I dont' expect to see an upturn in 2010. Maybe in 2011 sometime but I think next year is going to be bloody. I really really hope I'm wrong.

In general there is no shortage of architects who only care about LOW BID price. I suggest avoiding them like the plague. I plan on moving to places where the market supports a proper fee one way or the other. Low fees will eventually ruin your life one way or the other.

John Southard, M.S., P.E.

http://www.pdhlibrary.com

 

[ash060]

All I know is that fees are at a cutthroat point. Quality is a non-issue. Price is the only factor. Architects shop fees and either ask for a price cut because someone else submitted a lower fee or they go with the other engineer. How can you compete with the engineer out of his garage.

I have used all the methods rowingengineer mentioned, but they are not very relevent at this current point in time for me. I look at the project and try and gauge how much I can get for it, not how much it will cost me to do. The two will never match up.

Boy, I hope that things do start turning around soon.

Good luck southard2, becuase I guess you are going to be avoiding all the architects in Florida

 

[rowingengineer]

Thanks for all the great replies.

Given the push for low price bids, how is everyone marketing themselves for the future. The rule of thumb I have heard a few times is you can have quality, time or cost, however generally you can only deliver 2 out of the 3. While I know most people when reducing cost reduce quality, I am wondering if anyone is reducing the costs by increasing the time of the projects.

I also wonder what it is that you rely on you get you your next job, Quality, cost or speed? How do you market yourself to match your quality?





Arguing with an engineer is like wrestling with a pig in mud. After a while you realize that they like it

 

[rheim]

rowingengineer,

I don't like the approach of reducing quality to make up for a reduced fee and therefore try to avoid it whenever I can. Reduced quality leads to either an unsatisfied client, reducing my chances of getting referrals, or to more correction notes from DPD and more phone calls from the contractor during construction, i.e. I loose all the time I gained during the design phase, or even more.

I usually ask for an extended turnaround time, telling the client that in return for the reduced fee I reserve the right to squeeze in other jobs to make up for his reduced rate. This also gives me the option to work on this project only on slow days, when I can spend more hours on it in one sitting, rather than splitting it into a large number of short design periods. This way I am actually way more efficient, meaning that the money I make per hour is not reduced or even increased, while the quality is the same or even better, as with less distractions I am less prone to make mistakes.

 

[strguy11]

The only way I would reduce the fee is if you can you reduce scope to justify the reduction. For instance,you could:

1. Do performance specs for the stud cladding instead of doing them yourself.
2. Delgate connection design and only show loads on plans.

There are other things that could be done as well. Tighten up your scope, and make things you would normally do an extra if unsure it is needed. My experience has been that Architects look at the bottom line, and dont always compare it back to the scope of work proposed.

Think of it as a way that a structural engineer can play contractor and get alot of change orders!! hahaha