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tlhoo (Mechanical) (OP)
19 Jan 08 14:49
Just started up my design consulting firm, looking for some rules of thumb for MEP design fees.  What is typically used for creating proposals?  A percentage of construction cost?  $/SQ.FT?  percentage of architectural fees?

Thanks.
gepman (Electrical)
19 Jan 08 15:09
First I would like to say good luck with your new firm.  Second that the design fees are always too low to do a good job for the client.  

If it is standard commercial buildings the firms that I have worked for used either a % of construction cost or $/sq.ft.  You got the standard slam/bam design with nothing special or innovative.  I could only handle this for less than a year.

In the industrial side (which most people are not) we approached every job from the number of motors, number of piping connections, etc.  Some jobs may have one piece of expensive equipment and the MEP's would be simple where others were very complex.

I believe that the NSPE has some papers on how to set consulting fees.  See the Private Practice portion of the website at http://www.nspe.org/InterestGroups/PEPP/index.html
ChrisConley (Mechanical)
21 Jan 08 10:18
90% of our work is percentage. Our fees is based on mechanical construction dollars with everyone on the design team recieving the same % (7,8,9 on new 10,11,12 on reno). The percentage decreases with project size.

We then ship over 20-25% of our fee back to the architect as a co-ordination fee.
GMcD (Mechanical)
21 Jan 08 15:32
Chris- nice percentages.  Up here in the Pacific NW we are just coming out of a 20 year depression on fees for mechanical building services, but unfortunately many of the now partners were brought up through the "lean'n'mean" times and haven't caught up to "real fees" yet.  The industry locally in the commercial building sector is still being shopped on a fees basis with 3% to 3.5% fees common, and even lower for high-rise or "bottom feeding" light commercial office spaces.  The Institutional sector (Universities, post-secondary buildings) are generally able to provide the 6% fees (6.5% is "book fees") that most of us would like to see, but considering the way the Contracting industry is going (mostly fast-tracked design/build construction management) there is even more work required to stay on top of a construction project.

Percentage fees will be an interesting discussion for green/sustainable buildings that require more $$ thrown at the envelope to enable less mech/elec systems - so consider this- for a low energy green building with minimized mech systems, you do more work, but the mech construction cost goes down along with your percentage fee.  Right, do more work for a smaller fee.  The percentage of contract cost fee basis will have to get thrown out, and more performance and hourly fees used till a defined scope of work can be required.
willard3 (Mechanical)
21 Jan 08 17:28
You can do % construction, $/sq ft, $/drawing.

I work hourly and advise my clients that my fee will be least with an hourly fee.

I will point out that, if you let your client shop your price to get the lowest price, he will get the least Engineering care. It is also worth pointing out that, if you bid for consulting work like a contractor, your client will treat you like a contractor.......Engineering is a profession.
ChrisConley (Mechanical)
22 Jan 08 13:07
For our 'green' projects we tend to make-up fees lost on smaller mechanical systems with additional fees for building simulation as well as additional fees for commissioning. It all balances out fairly well.
CountOlaf (Mechanical)
22 Jan 08 16:58
You don't actually have to clarify your fee basis as a percent of construction cost, or $/SF, etc.  The fee in your proposal should probably be a lump sum or time/material "hourly" rate structure (perhaps not to exceed) as suggested.  You should run through a couple of these different iterations/approaches to arrive at a comfortable fee--compare the various methods suggested.

As an example of standard approach (assuming I'm not doing an industrial job and it leans itself to a more commercial type), I first figure the value of say the mechanical construction effort via Means or other similar resource (e.g., RSMeans Square Foot Costs).  This book also has architect fee percentiles, but other better resources include PSMJ's "A/E Fees and Pricing Survey" and ZweigWhite's "Fee & Billing Survey of AEP&Env Firms".  This will give you some good ideas on what other firms are doing and the percentiles will vary with the type of building, etc.

All three cited resources are annually issued products, and therefore there are costs associated with keeping up to date with these items.

I personnaly like to play with a spreadsheet with hourly billing rates assigned to the individuals/classes of personnel I will actually use on a job, and then plug in some hours based on various specific tasks (e.g, meetings, field trips, CAD time, etc.) and see if we can do it in that amount of time/for that amount of money.   
EmeraldCoastHVACR (Mechanical)
22 Jan 08 18:24
I'm hearing around 10% from licensed PE's.

I'm not too excited about using MEP -- very poor parametric modeler and export to CAE programs, but it doesn't make sense to go against the grain with Architects, etc.
EmeraldCoastHVACR (Mechanical)
22 Jan 08 18:30
ChrisConley,

Could you expand on those co-origination fees to architects.

Seems like a kick back or something.

thx
CountOlaf (Mechanical)
22 Jan 08 18:37
EmeraldCoast,

Could you expand on your reference to MEP as if it's some sort of software/modeling program?  I thought we were simply talking about mechanical/electrical/plumbing disciplines?
EmeraldCoastHVACR (Mechanical)
22 Jan 08 19:10
CountOlaf,

I assumed the poster used Autocad's MEP(mechanical/electrical/plumbing) software in his design venture and not about mechanical/electrical/plumbing design.

Wouldn't be surprised tlhoo uses Autocad MEP.


CountOlaf (Mechanical)
22 Jan 08 19:41
OK, good to know...but I'm still missing the connection here to the fee question.
EmeraldCoastHVACR (Mechanical)
22 Jan 08 21:50
omg -- I gave the gentleman a 10% parameter that PE's use --it's just a guideline.

I just wanted to state that I think Autocad's MEP software sucks, but it's what architects & engineers seem to use.
CountOlaf (Mechanical)
23 Jan 08 9:00
All right, sorry for dragging it out.  I can get caught up on details at times.  I get it now:  The 10% parameter is a good overall rule-of-thumb; and the other bit on the MEP software was independent and unrelated.
ChrisConley (Mechanical)
23 Jan 08 10:15
EmerardCoastHVACR, feels like a kick back, but the co-ordination fee is essentially that. All of the subconsultants (S,M and E) receive fee based on percentage of construction cost, as does the architect.

The architect is the prime consultant, because of that they feel that they can charge a 20-25% fee for: printing, having meetings, actually finding the clients, co-ordinating the disciplines.

The plus side is that they take a big chunk of the liabiltiy for design co-ordination. I actually enjoy having a beam/duct/light conflict and looking at the architect and saying: "Co-ordinate" :)

Just to clarify further on the MEP thing. In some places firms are classified as MEP, no referece to software was implied I believe.
EmeraldCoastHVACR (Mechanical)
25 Jan 08 16:17
ChrisConley,

well they don't call it "architorture" at GT for nothing.

The biggest complaint I see from PEs & Goverment Inspectors is that the architects draw up plans that show a poor understanding of HVACR principles -- duct routing, etc.

I like the idea that architects take the liability hit :), but the important concept is to communicate early in the design process -- as HVACR engineers, we need to express our voice LOUDLY early in the design process.

when I see MEP -- I think of Autocad's MEP software -- must be a brainfart.
PatBethea (Mechanical)
25 Jan 08 16:50
I've never charged out on a percentage basis - it's usually lump sum, but occasionally an hourly rate.  I've got a couple of questions on the practice:

1. What happens if the project doesn't go through?  I assume there is some sort of provision to get payment - what is it?

2. As stated above, it does seem to be a sort of kickback.  Do you have a more difficult time selling clients on systems with this arrangement?  I could envision a client being skeptical about what you say the "best" way to go is if the method increases your eventual payday by some percentage.

3. The percentage is on installed cost, right?  Or is it simply based on equipment and materials cost?

Thanks.
CountOlaf (Mechanical)
25 Jan 08 17:07
PatBethea:  There probably are other arrangements, but here's what I think:

1.  The percentage thing is just used to establish your fee which is still offered as a lump sum, hourly or other.  It's based on an anticipated cost of construction which is why I mentioned Means in my previous post. I suppose it could be tied into actual cost and go up (or down) depending on final outcome (like a performance-based contract).  Especially since (hopefully) you'll be getting paid before the thing is built.
2.  I'm confused on the kickback thing too.  Chris, you stated "We then ship over 20-25% of our fee back to the architect as a co-ordination fee."  Did you mean you simply deduct that from your number you arrive at in the proposal--it's built into your quote to the architect, right?.  It's not like you actually return money, right?
3.  The percentage is on labor and materials.
gepman (Electrical)
25 Jan 08 17:16
It sounds like a kickback to me also.  Coordination is part of the architects job and it should be built into his original fee to his client.  I have never had to pay this coordination fee back to an architect.  
DonPhillips (Structural)
25 Jan 08 19:33
On larger projects where the design takes months, my contract requires progress payments due each month.  If the project dies mid-stream, I get most of the fee that is due.

Don Phillips
http://worthingtonengineering.com

walkes (Mechanical)
28 Jan 08 12:03
The "kickback" to the architect is more like the consultants get 75% of the percentage fee associated with their component of the project.  

ie.  10% of construction cost will be the design fee.  Mech gets 7.5% of the construction cost of the mechanical stuff as their fee.  Architect gets 2.5% of the construction cost of the mechanical stuff included in their fee as part of their coordination efforts, plus 10% of the architectural stuff.

We have had projects in the past that didn't proceed to construction where our fee would then be based on the most recent construction cost estimate.  Our fee would be less the contract administration component or 80% of the total fee.
AbbyNormal (Mechanical)
7 Feb 08 13:13
lol, at least you canucks only have to deal with QS's on fed government jobs, they are a fact of life down here and dip into the fees

Take the "V" out of HVAC and you are left with a HAC(k) job.

electrical007 (Electrical)
21 May 08 14:13
Same question regarding Mechanical, Electrical and Plumbing design fees for International Healthcare facilities (Hospitals) based on the % of construction cost.  6-7% would be my estimate.

Any comments on additional items to be considered when calculating design fees for International projects, Healthcare, Commercial and Residential?
cry22 (Mechanical)
21 May 08 17:27
Electrical oo7
A few things to consider on international work.
1. They typically start building from design development type drawings (around 60% CD's). No need for deep details. Their specs are basically model numbers, not much to speak of. You can compete really well if you understand the deliverables for the local practice. But expect to answer lots of questions during construction.
2. It can be a pain with the local codes. Make sure that your meetings are billed separately. You could get 5 meetings with the local fire Marshall.
3. Translation of local codes. Not to take at face value.
4. Avoid local consultants if you can, they expect you to be the expert, and they just play secretary. you better off having your own local office with local staff. They can do better translation.
5. Of course, travel expenses (on business class) is at the client's expense. Do not use lump sum for this.


 
electrical007 (Electrical)
21 May 08 17:39
Cry22,
Thank you for the usefull information.  We are registered in the country the RFP is in (UAE) and will be submitted as % of construction.  Does a 6-7% design fee seem too low for a healthcare project over there, in your opinion?
thanks again

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