Compensation Question for Consulting Engineers
Compensation Question for Consulting Engineers
(OP)
I am working with a client who has started a new business. He has a need for some FEA work to confirm his patented design will match or exceed the stresses found in other commercially available designs, but is finding the cost for such work more than he wants his new business to have to pay at present. Would it be an acceptable and ethical proposition for me to offer to do the work at no up front charge, but to ask that I be given a % of the revenue he obtains from the sale of his product up to a fixed and acceptable amount we both agree to? The obvious downside for me is that I may not get any compensation, but the work will not take more than a week or so of my time. If my potential client does sell his product, and he likely will because it is a really good idea, then I would be compensated more than my original not to exceed price.





RE: Compensation Question for Consulting Engineers
I imagine you would need to get lawyers involved up front to make sure you are going to be compensated. By the time you guys are done paying for the lawyers he might as well have paid you up front to do the weeks work.... I mean, how much are we actually talking about in up front charges? Even if you charge $250/hour we are only talking about $10,000 for a weeks worth of work.
What about insurance? Are you going to seal anything for him? If the product fails, are you going to get sued by the person using the product? That would kind of stink to be sued over the design of a product you never got paid for.
RE: Compensation Question for Consulting Engineers
Now if the client does not pay... Well lesson learned and I'm out a week or so of time.
Thanks again.
RE: Compensation Question for Consulting Engineers
RE: Compensation Question for Consulting Engineers
RE: Compensation Question for Consulting Engineers
RE: Compensation Question for Consulting Engineers
RE: Compensation Question for Consulting Engineers
You are a kill joy sometimes
GJD56,
I took company stock as compensation once (at current market price), got my full charge rate and had a market valuation for the stock so games were not being played. It felt kind of close to the line that Ron mentions (and a bit like insider trading since I was sure that the work I was doing was going to send the stock through the roof), but my attorney said it was well on the ethical side of the line and not insider trading. On the other hand the company eventually went bust and I got nothing for the work, but that was my risk. I rationalized it as though I had taken money and then bought their stock (without the broker's fees). That might be a way to legally do what you are trying to do.
Coloeng,
That is a good point that often gets skipped in these discussions. Any agreement can only be binding with regard to the signatories. An injured third party can bring action against anyone they think they can prove harmed them. I've entered into a couple of agreements where the company reserved the right to fight any action against my company for actions related to the contract (i.e., the contract required their approval to settle an action, and if they rejected the settlement then they assumed all liability), but those are really rare in recent years. An agreement between two parties that limits liability to the amount paid feel really warm and fuzzy, but they don't provide a lot of protection.
David Simpson, PE
MuleShoe Engineering
"Belief" is the acceptance of an hypotheses in the absence of data.
"Prejudice" is having an opinion not supported by the preponderance of the data.
"Knowledge" is only found through the accumulation and analysis of data.
The plural of anecdote is not "data"
RE: Compensation Question for Consulting Engineers
RE: Compensation Question for Consulting Engineers
RE: Compensation Question for Consulting Engineers
On the contingency fee issue, Companies offer stock to their employees all the time. This does not mean that this is 'insider trading' or that there is a 'conflict of interest' because you know the stock will go up if you design that box well. Microsoft engineers would not be allowed to perform engineering for Microsoft if this were the case.
RE: Compensation Question for Consulting Engineers
RE: Compensation Question for Consulting Engineers
What is not ethical for a P.E. would not be ethical for an Engineer with an industry exemption, but for the latter there is no one looking to enforce ethics on you except you and your employer.
David Simpson, PE
MuleShoe Engineering
"Belief" is the acceptance of an hypotheses in the absence of data.
"Prejudice" is having an opinion not supported by the preponderance of the data.
"Knowledge" is only found through the accumulation and analysis of data.
The plural of anecdote is not "data"
RE: Compensation Question for Consulting Engineers
Obviously the ethical concern might still be there, but documenting the work, ensuring that the reports are referenced and made available to the public for review and then providing the report to the prospective customers for their review seems to me to be a legitimate method of addressing the concern voiced by Ron above. I am a PE and intend to check further into this issue relative to my state's NSPE chapter.
As far as liability is concerned....your notes pertaining to this issue are well founded and well stated. I intend to look further into the liability questions by addressing them to my attorney and asking if my terms and conditions would suffice to protect my practice given that I state in the T&C's as follows:
"Documents and Information: All documents, data, calculations and work papers prepared
or furnished by CONSULTANT are instruments of service and will
remain CONSULTANT’s property. Designs, reports, data and other work
product delivered to or on behalf of the Client are for Client’s use only for the limited
purposes disclosed to CONSULTANT and subject to Client paying for the services to provide said work product. Any delayed use, use at another site, use on
another project, or use by a third party will be at the user’s sole risk and Client agrees to
indemnify and defend CONSULTANT against any liabilities resulting
there from. Any technology, methodology, or technical information learned or developed by
CONSULTANT will remain its property."
There is additional verbiage in the T&C's, but obviously if someone wants to sue, they can and if they prevail in court, even professional liability insurance will only go so far. Thus, creating the LLC. Anyway....thanks again, folks. Great to know that I have colleagues in the field willing to give of their time to answer my questions.
Best regards to you all!
RE: Compensation Question for Consulting Engineers
RE: Compensation Question for Consulting Engineers
RE: Compensation Question for Consulting Engineers
Keep telling yourself that the LLC protects your personal assets. It isn't true, but keep telling yourself that. According to the corporate attorney of the major company I used to work for, when a P.E. is sued, the company is forbidden by law from participating--the P.E. is on his own since the P.E.'s work and stamp represent individual effort not corporate effort. The suit names the P.E. as an individual (often in addition to naming the company) and the liability is personal.
David Simpson, PE
MuleShoe Engineering
"Belief" is the acceptance of an hypotheses in the absence of data.
"Prejudice" is having an opinion not supported by the preponderance of the data.
"Knowledge" is only found through the accumulation and analysis of data.
The plural of anecdote is not "data"
RE: Compensation Question for Consulting Engineers
RE: Compensation Question for Consulting Engineers
David Simpson, PE
MuleShoe Engineering
"Belief" is the acceptance of an hypotheses in the absence of data.
"Prejudice" is having an opinion not supported by the preponderance of the data.
"Knowledge" is only found through the accumulation and analysis of data.
The plural of anecdote is not "data"
RE: Compensation Question for Consulting Engineers
It seems to me that the OP is being asked to carry out a work of invention: to take the inventor's item and modify it so that it is safe but its native advantages, whatever they may be, over whatever is out there on the market right now, are also retained.
Works of invention can be carried out on one of two bases: either you are paid your normal fees and retain zero ownership over what you produce, or you are paid something less than fair market value for your work NOW in return for a piece of future profit. Which of these is chosen is a contractual matter, not an ethical matter in my view. There are entire businesses set up to carry out works of invention for others via joint development agreements, with part or all of the "pay" given on a contingent basis. That pay can be via royalties, licensing fees or other measures of ownership in return for work and expertise given "free" or below market rates. It is obviously "cleaner" to do work for hire only, but not fundamentally unethical to do otherwise. Doing work "for hire" is no guarantee of being paid for it either - though given the ratio of inventions which dramatically succeed versus those which fail to generate a penny for the inventor, betting on the winners only is on average a losing strategy.
Professional engineers are ethically bound to hold the public safety as paramount, to use the language of our own local licensure body. It doesn't matter how you are paid- that ethical responsibility is always there. An employee could be tempted to do negligent work or to take unacceptable risks in a design to keep their employer from going bankrupt and finding themselves out of a job, just as easily as a contractor could be tempted to fudge the results of an analysis in order to be paid- or merely to keep a good client. It is unethical to bend to that temptation, but not unethical to enter into a situation merely because it might tempt you.