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Engineering costs for scope of work

Engineering costs for scope of work

Engineering costs for scope of work

(OP)
We are currently experiencing electrical issues (motors burning up, starters exploding, etc) at one of our plants.

Because we don't have the electrical expertise, we investigated electrical companies in the area and chose an engineering firm with what seemed to be good background (as much as one can over the phone and via marketing pamplets).

We met the engineering firm's electrical engineer and technician at the plant to review the issues, the plant layout, and scope of work.

The Engineer and technician were both well versed and seemed very capable.

We were asking them to give us a scope of work as they understood it, their deliverables, and estimate to help us troubleshoot the issues.

Now, we just recieved an invoice for several hours of work for them to develope their estimate!  Is this ethical?  I've never seen this before.  It's usually rolled up in overhead costs or marketing or something.  Unfortunately, we don't have time (with those kind of issues) to investigate another company.

What should our response be?

______________________________________________________________________________
This is normally the space where people post something insightful.

RE: Engineering costs for scope of work

I'm in structural, but my electrical co-workers do the same thing...if we are asked to understand a problem and provide a proposal for engineering services, we do not first charge the potential client for our time.  This is simple marketing courtesy and marketing sense.  If we spend a lot of up-front time at the site, trying to get a handle on the scope, then we will include some of that time in our proposal.  But we won't bill it up front before we even have a contractual relationship with our client.

RE: Engineering costs for scope of work

This may not be the first surprise.
respectfully

RE: Engineering costs for scope of work

Did you hire the guys to come onsite and then ask them to give you a proposal for future work? How was the initial call worded and what did you agree upon in advance?

If they came a long distance / spent a lot of hours onsite, then an invoice for that time could be normal as some companies try to get their problems solved for free under the guise of "a proposal for work" visit.

On the other hand, a lot of companies will roll that time into the proposal or put it on marketing in the hope to get the work.

If you plan to use them, I would negotiate with them and say that you want to be billed all at once when complete. They may just be trying to establish a payment history with you before investing a lot of time / money in you or your project.

ZCP
www.phoenix-engineer.com

RE: Engineering costs for scope of work

Well it's not unethical, but it certainly doesn't seem smart.

Obviously it leaves a bad taste in a potential client's mouth.

However, JAE may be on to something.  What was the purpose of the first visit - as they would reasonably expect based on your initial phone call.

Did you ask for someone to come take a look at a problem, or did you ask for someone to come to a meeting to discuss further work.

If the former it is not unreasonable for them to bill for their time (although I certainly would have waited to bill until after submitting a proposal for more work).  If the latter than these guys may be good engineers but bad businessmen.

What exactly is the invoice for?

RE: Engineering costs for scope of work

Pay the bill.  Smile, and say "It was a pleasure doing business with you."  Then stop returning their calls.

RE: Engineering costs for scope of work

The only situation I know of where quotes/estimates are not free is where they are for insurance purposes.  The firm is performing a service and unlikely to actually get any work (especially if te insurance company writes the wreck off).

RE: Engineering costs for scope of work

zcp has a point there, some companies try to get their problems solved for free. This does happen often enough to be a pain for the firm.

One aspect seems to have missed notice, though: What is the quality of advice provided to the client? Is it of substantial value, whether actually quantifiable or not?

I would not be joking when I quote an anecdote here. An IBM Engineer was called to check a client's mainframe system. The Engineer spent an entire forenoon systematically checking every thing per procedure. Finally, he located a jumper (a very small removable wire connecting "jumping between" two points). It was promptly replaced and the system got back to life.

IBM billed the client one hundred dollars (in those days). The client protested that the cost of the minuscule piece of wire could not be anywhere that figure. IBM promptly explained that the cost of the jumper was, indeed, $1.05 and the $98.95 was the technical fees for identifying the right jumper to replace.

I guess no one was trying to be smart. It's just a matter of perspective.

RE: Engineering costs for scope of work

Agreeing with JAE and MintJulep...

If you called a mom & pop type electrical company to "come take a look and tell us what is wrong and what it's going to take to fix it"....then the bill seems perfectly reasonable.  

If you called a mom & pop type electrical company and said: "we are interested in entering into contract with you, let's discuss"....then the bill seems a little strange.  

RE: Engineering costs for scope of work

Have you asked them about it? Perhaps it was an over eager accountant? Or some other form of mis-understanding. I bet if you asked you would get a reasonable answer. If not then I would certainly look elsewhere.

Why be offended? Try to clear it up with them.

-The future's so bright I gotta wear shades!

RE: Engineering costs for scope of work

Oh, by the way. As the supply of engineers in the high voltage electrical business has shrunk, and the demand has increased, I would expect more of this sort of thing. They can't let their guys go do work that is not billable as there is too much billable work to do...

-The future's so bright I gotta wear shades!

RE: Engineering costs for scope of work

One more data point:

My company charges for feasibility studies.  It does not charge for quotations.  It's important to not let a quotation become a feasibility study.

RE: Engineering costs for scope of work

(OP)
One thing I did not add was during the plant review, I could tell they were tyring to think of reasons why our problems existed.

I had to remind them several times that, although that is usually the first thing and Engineer wants to do, our goal today is to review the plant and issues to develope a scope of work.

I think I made it clear.

______________________________________________________________________________
This is normally the space where people post something insightful.

RE: Engineering costs for scope of work

Quote (controlnovice):

We were asking them to give us a scope of work as they understood it, their deliverables, and estimate to help us troubleshoot the issues.

Now, we just recieved an invoice for several hours of work for them to develope their estimate!

A quick answer - This is ethical.

People get paid to do work. Visiting you, sitting down for an afternoon, developing a scope of work, list of deliverables, and estimate to help you troubleshoot the issues. These are activities that takes time, their specialised expertise, and experience. This is not the same as sending you a price list.

The size of the company should not matter, whether it is Bechtel or Joes's LLP. The fact that many companies roll this up into their price, to be paid later, once they get the work, doesn't affect the ethicalness of asking to be paid for work already performed.

I have also seen many companies ask for a "scope of work", "estimate", "deliverables", expecting it to all be free. Many companies also require drawings, technical specifications, and schedules in these proposals that they expect for free. Then, they turn around and give all of this "free work" to another company to execute. I have personally worked on an estimate that took over 3 months ... and yes, the client thought that they should have gotten it for free. I have been on both sides of this practice. This, I think is unethical.

Hence, the trend here now is that people are not performing these "free" estimates, quotes, what ever you want to call it anymore. They are asking to be paid, or they are declining the work. This, I think, is ethical, and FAIR.

"Do not worry about your problems with mathematics, I assure you mine are far greater."   
Albert Einstein
Have you read FAQ731-376 to make the best use of Eng-Tips Forums?

RE: Engineering costs for scope of work

Your estimate is "their scope of work".
I would no be asking the question on this forum, rather I would call them and/or meet with them and ask them why and how?
The fact that there was a technition there indicates to me they did some poking around.
Can you hire the next engineer to fix the problem based on the information they provided?  ( not how much it cost but what to do)?
I think if they gave you information other than cost you owe them. If I was them and knew you were going to complain on a forum I would have sent you a one line estimate for $ XXXXX. If I outlined what to do and out I provided information. Did you get information and did it have value?
I have met with clients that said "We want you to fix this system that XYZ said was messed up"  I know that in some cases
I have also had companies insist on paying for estimates/evaluation because they did not want to be obligated to use the engineers that did the estimate. An estimate in these cases is more that money because it includes the work that needs to be done.  Some are nethically cheap.  If by some mistake I work for them I charge them for paperclips etc.

RE: Engineering costs for scope of work

Usually where I work it depends entirely on the size of the job as to whether we bill early for scoping, determining deliverables, etc....

Sometimes scoping can take an hour....and sometimes...like Ashereng said...it can take months and will become an entire project of its own.  We usually make an agreement with the client from the get go about how the billing will be sequenced.  BUT...the client (one way or the other), will pay for scoping.



RE: Engineering costs for scope of work


Considering the alternate scenarios:

1. The firm providing the estimate eventually gets the contract. It includes the expenses in its final bill, even making a clear separate mention of it. It gets paid, with a smile.

2. The firm doesn't get the contract. Nothing's paid to it. The order is placed on another firm, which does not undertake a study and does not charge for an estimate. It gets paid only for the actual work (according to the client).

In the second instance, what was the first firm's fault, to have to forego the charges, even as it has lost the contract? Rubbing salt...?

On which side is the "ethics" issue, now?

RE: Engineering costs for scope of work

We have been in a situation where we were asked for a detailed proposal for engineering work.  The proposal had to include technical information that rquired many hours of work for which we wer not paid.  The s.o.b.'s then sent our proposal to other consultants asking for prices based on the preliminary design work we had done.  If a prospective client isn't capable of providing a usable scope of work description, then he should expect to pay for that service.
 
Several people have alluded to the real question: What was said and agreed to at the inital contact?  In my opinion, if the electrical firm was asked to provide a Poposal, then they should not be billing for that work.  If they were asked to develop a scope of work that might not lead to a contract, then they should be paid.

RE: Engineering costs for scope of work

NOT FAIR.  

If they intended to charge for their time, they should have made it clear from the start.  The hourly rate, scope, etc., should have been clearly delineated beforehand.  

To me, this is very underhanded.  To charge you, it implies that there was a contract, verbal or otherwise.  Did someone misinterpret something?  

TTFN



RE: Engineering costs for scope of work

"People get paid to do work."

No.  Not all work is inherently billable.  For example, it takes weeks to develop a bid from a set of plans.  If you didn't win the bid in the end, that doesn't mean that you have the right to charge the potential client for the work you spent developing the bid.  It's called "cost of doing business".

Hg

Eng-Tips policies:  FAQ731-376

RE: Engineering costs for scope of work

None of our proposal work is charged to the customer.  The money comes out of the Business Development budget.  We've spent upwards of $1 million on big proposals.

TTFN



RE: Engineering costs for scope of work

So IRstuff, you ultimately spread your proposal costs among your existing and future paying customers in the form of "overheads", pro-rated according to contract size.

RE: Engineering costs for scope of work

My current employer was repeated hired by various clients to investigate potential building rennovation solutions. We would issue reports with our recommendations, paid for by the clients. The clients would continuously ask for more detail, so the reports would grow significantly. On many of these projects, we would not be asked to do construction drawings. Turned out that the clients gave our recommendation reports to contractors, who went ahead and constructed the new work on the sly. So the clients ended up paying for reports, but got to use them as construction documents.

RE: Engineering costs for scope of work

Effectively, indirect costs are amortized over all working hours.  By law, government contractors are not allowed to directly bill the cost of writing a proposal.  In most cases, a proposal includes a preliminary design, performance predictions and analysis, functional requirements allocations, work breakdown, etc.  The shortest proposal I've ever worked on lasted 21 days with about 8 people full time.

The OP's case of a few guys for a day is relatively small by comparison.  Nonetheless, to ask to be paid after the fact seems to be not strictly kosher.

TTFN



RE: Engineering costs for scope of work

I think the fact that the owner (controlnovice) called them (the electrical engineering consultants), the expectation is that they would be paid.

If the electrical engineering consultants called on the owner to put together a proposal to do work, then the expectation would be that this would not be paid (business development, marketing, sales, etc).

"Do not worry about your problems with mathematics, I assure you mine are far greater."   
Albert Einstein
Have you read FAQ731-376 to make the best use of Eng-Tips Forums?

RE: Engineering costs for scope of work

Maury
Been ther and done that.  I suggest wording on drawings and reports like "These drawings are for the use of XYZ company in evaluating the leaky roof problem. They are the property of US and not to be used for any other purpose."
I know that sounds lame but you can get the ideal"  Hire a lawyer to get it right.
 

 

RE: Engineering costs for scope of work

Quote (from the first post):

We met the engineering firm's electrical engineer and technician at the plant to review the issues, the plant layout, and scope of work.

Quote (also from the first post):

We were asking them to give us a scope of work as they understood it, their deliverables, and estimate to help us troubleshoot the issues.

RE: Engineering costs for scope of work

Opps, hit send too soon...

You have a problem.  You call a consultant to help you solve it.  "Please come out an take a look at our problem."

If the consultant comes out, pokes around for a few hours and says "Well there's your problem right there!  The flizbot on this hysterfactoid is out of line. Lend me a hammer..." and your problem is solved you happily pay the bill, right?

In the case at hand, you didn't get an immediate solution.  However the consultant did do some work towards generating a solution.  Whatever was seen, touched, learned goes into the knowledge base to work the problem.

Clearly a gray area in regards to billing.  Not unethical, but probably not best buisness practices either.  Is it possible that there was not a clear understanding - on either side of the table - of the intent of the original meeting.

RE: Engineering costs for scope of work

As said before, pick up the phone and speak with them and let us know how it went.
It is not the first time that an overzealous accountant sends an invoice bypassing the technical department.

RE: Engineering costs for scope of work

We had a plumber come out to the house recently, charged us $90 for the estimate. If we hired him, the cost of the estimate was amortized into the cost of the work. It's a crappy way to do business. Next time, I'm going to make sure that the estimate is free.  

Wes C.
------------------------------
When they broke open molecules, they found they were only stuffed with atoms. But when they broke open atoms, they found them stuffed with explosions...

RE: Engineering costs for scope of work

Hmmm, I seem to be in the minority here.

If you hire me to do an estimate, I will only do the work for pay.

Guess I won't be getting much work from most folks here.

"Do not worry about your problems with mathematics, I assure you mine are far greater."   
Albert Einstein
Have you read FAQ731-376 to make the best use of Eng-Tips Forums?

RE: Engineering costs for scope of work

"If you hire me to do an estimate, I will only do the work for pay."

Well, of course.  But if neither party verbally acknowledges "hire" then the demand for payment will not get honored.

And we've certainly have hired companies to do that type of work, when the scope is sufficiently demanding.  But, that's a rarity.

Normally, because of FAR, we're required to solicit proposals from a number of companies.  We could't afford to pay 10 companies their proposal costs and either select only one or none, if our bid doesn't win.

TTFN



RE: Engineering costs for scope of work

On the bidding front, I have recently experienced several companies who have declined to bid, citing that they were too busy. However, they do have a price list of the various packages currently sitting in their yard that they are more than happy to sell.

In my case, I don't know whether they just did not want to enter into a bidding situation, or that they didn't want to put a bid package together in response to our invitation, because they no longer wish to "eat" the cost of putting a bid package together, and end up not winning the work.

"Do not worry about your problems with mathematics, I assure you mine are far greater."   
Albert Einstein
Have you read FAQ731-376 to make the best use of Eng-Tips Forums?

RE: Engineering costs for scope of work

Ashereng
Sometimes you get ask to bid a job so the owner can keep "someone honest".  They know who they are going to give the contract to.  You get to bid so they can keep them "honest".  however if you make a big mistake on your bid you may get the job.

RE: Engineering costs for scope of work

And antics such as this, I think, may be in part driving many vendors to decline bidding without compensation.

"Do not worry about your problems with mathematics, I assure you mine are far greater."   
Albert Einstein
Have you read FAQ731-376 to make the best use of Eng-Tips Forums?

RE: Engineering costs for scope of work

(OP)
Yes, it was my plan to talk to the firm, and I did.

They gracefully withdrew the submitted invoice and said that once (or if) the job was awarded to them, they would then apply it to the project.

More than fair.  I have learned to be more clear next time.

Thanks for all of your replies!  Looks like we can all learn from this one.

______________________________________________________________________________
This is normally the space where people post something insightful.

RE: Engineering costs for scope of work

It all depends, estimates against a clearly defined scope should not be invoiced, being asked to develop a scope of work can be. I and my friends and colleagues have fallen victim to the 'get someone to develop an outline solution for free and pass it on to our lowest cost supplier' approach. However, as a supplier you should be clear up front that you will charge for this.

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