Asked to "bid" for professional services
Asked to "bid" for professional services
(OP)
It seems like the new trend for architects is to "bid" consulting services when putting together their teams; meaning they ask us to submit estimated fees for a particular project and then select the low bidder from several consultants. I think this is HIGHLY dangerous for us as a profession to engage in. It completely undermines the professionalism of our work and cheapens our services to commodity level. We can talk until we are blue in the face about providing exceptional service but if architects are only going to base their project teams on "fees" then there isn't much we can do to demonstrate value to our clients.
Has anyone else noticed this trend? What does your firm do to counter this threat?
PE, SE
Eastern United States
"If a builder builds a house for someone, and does not construct it properly, and the house which he built falls in and kills its owner, then that builder shall be put to death!"
~Code of Hammurabi
Has anyone else noticed this trend? What does your firm do to counter this threat?
PE, SE
Eastern United States
"If a builder builds a house for someone, and does not construct it properly, and the house which he built falls in and kills its owner, then that builder shall be put to death!"
~Code of Hammurabi





RE: Asked to "bid" for professional services
Often the owner will choose, base on cost, but also experience.
We commonly provide fee proposals for differing teams (different architects) who are putting together a proposal.
Whether we like it or not, what we provide is a commodity and sometime the owner gets what he pays for when he picks the lowest bidder.
RE: Asked to "bid" for professional services
Also: you want to change the color of the door from green to blue where is says green in the contract, its going to cost you a million bucks.
I find that architects will get multiple proposals for big projects where the client is a developer and tight with money. In reality for me it only happens maybe a quarter of the time, but in previous firms it happened literally every time.
RE: Asked to "bid" for professional services
However, it is the case, not only with Architects, but owners too, particularly the bean counter crowd.
Mike McCann
MMC Engineering
RE: Asked to "bid" for professional services
The issue I have is an architect solely deciding who to put on their team based on fees. I even had a architect recently tell me "just to let you know, we already have a number from another structural engineer and his was pretty low". In this specific case, I intentionally made our fee high knowing he wasn't going to pick up. We didn't really like working for him in the past anyway and I'm not playing stupid games. But now it seems even some of our more 'reputable' client architects are trying this and it just isn't setting well.
PE, SE
Eastern United States
"If a builder builds a house for someone, and does not construct it properly, and the house which he built falls in and kills its owner, then that builder shall be put to death!"
~Code of Hammurabi
RE: Asked to "bid" for professional services
I have a take it or leave it approach. You can shop around if you want but the price I give you is the one I will accept. I'd like to think my rate is very reasonable and I normally estimate based on how many hours I think I'm going to need to finish. This is a prime reason why I don't work on those patio roof additions / already built patio but needs a permit projects unless I'm doing it as a favor for a preferred client.
No stress on my part and I can choose the projects that I'd work on. I know this strategy would not work on someone practicing with a big monthly overhead (i.e., payroll, rent, etc.). That is the key though, reduce your overhead as much as you can so you don't have that monthly cash flow problem then you don't have to play the game with the bottom feeders.
RE: Asked to "bid" for professional services
Even in these examples of buildings and structures, the overall cost of the project is definitely a consideration, and while the lowest bidder might get chucked out, a lower bid is certainly more likely to win that a higher bid. Does everyone really expect the lower cost to be sucked up solely by the construction contractors and not by the "professionals?"
TTFN

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RE: Asked to "bid" for professional services
I'm with Mike on this. Tell them no if you know you are in a bidding situation. Selection should be on qualifications, not price......and no, I'm not naïve. I've been doing this for over 35 years and have thus far avoiding bidding when I am the decider (which is all the time for most of the past 20 years). It really pisses me off when architects and others treat the engineering profession a sub/para professional. OK..I'm off my soapbox
RE: Asked to "bid" for professional services
We've had clients opt for us when we've pointed out what we can do and what value we bring to them, and we've had clients walk.
I don't care about those that walk. Good riddance.
You can only be sold cheaply and turned into an Engslave if you allow this. I have been known to openly tell clients that they should understand they are hiring a Professional (W-expletive) and not a (S-expletive); I am talented, able, and willing... And I expect to be paid for every service, without exception.
While a very new firm, our approach has resulted in 100% payment for nearly a year now. Not near 100%. One-hundred-percent.
Speak plainly, and tell them no. Tell them what you expect, and what they can expect in return. Our pitch is that we meet our deadlines, speak truth to power, and will protect the Owner's money as if our own. In many ways it is; We will only get repeat business when we prove our value through merit and our superiour mettle.
RE: Asked to "bid" for professional services
The difference between a contractor and professional is that the contractor's scope revolves around the delivery of an object which can be measured against defined performance parameters. A professional provides a much more elastic service. Occasionally a client hires me to just run and black and white calculation, but far more often its more a matter of navigating them through a process.
RE: Asked to "bid" for professional services
At the end of the job I show them how much extra the bid process cost them and they rarely reject my T&M offer again.
Discounting your time is a good way to drive the value of your time into the dirt.
David Simpson, PE
MuleShoe Engineering
Law is the common force organized to act as an obstacle of injustice Frédéric Bastiat
RE: Asked to "bid" for professional services
RE: Asked to "bid" for professional services
I don't know Oil and Gas, but in Structural Engineering the "failure to pay" runs to about 30% of billable. Generalising you'll find that Ten to Twenty percent are late paying, into the 90 and 120 days, and between ten and fifteen percent simply never pay.
I saw an article (WISH I could find it again to link here!) which stated that Engineering firms typically spend close to $1.15 (If memory serves) for every $1 in aged receivables they eventually collect.
I base my required hourly rate on what I require to break even, times four (for design work - much a commodity in the eyes of clients), times five (for site work and value engineering) and times eight (for forensic & detailed investigative work). This is generous, so I am able to discount by twenty percent comfortably.
The firm is small, and we have made a business decision that works for us. No one with a bricks and mortar office can compete with our rates, and we prefer to be paid a little less if this means we don't do the unpaid/unrecorded/thankless chasing, etc, on unpaid bills. My business is far more profitable than any of the large engineering offices I worked in before...
Three bids and buy is far more likely to see rates in the dirt than simply discounting rates to pass along the savings of not having an office and not needing to chase bills. You see, in the final computation, our ENGINEERING rates are actually much higher than our competition's; We're just being smart about how to build a business.
RE: Asked to "bid" for professional services
I had an offer to do a job that I REALLY wanted to do last week. They could only pay $55/hour (30% of my normal rate). One of my regular clients knew what this job was paying and was watching closely. If I had taken it, I would have defined my rate with my second client at a number I could not have tolerated and would have had to drop them. Didn't want to drop them so I stood firm on my rate. Now the job will be done by people willing to take $55/hour and is unlikely to be the result that anyone wants.
David Simpson, PE
MuleShoe Engineering
Law is the common force organized to act as an obstacle of injustice Frédéric Bastiat
RE: Asked to "bid" for professional services
Do you know who they did employ? Are they hiring a firm from somewhere else and getting the added advantage of a significant dollar conversion?
I don't think the average firm can pay salary, EI, insurances, utilities, rent/mortgage/maintenance/whatever, etc, and break even at $55/hour.
RE: Asked to "bid" for professional services
David Simpson, PE
MuleShoe Engineering
Law is the common force organized to act as an obstacle of injustice Frédéric Bastiat
RE: Asked to "bid" for professional services
Ron
RE: Asked to "bid" for professional services
A proper bid evaluation includes far more than cost. If your architects aren't doing it properly then they will be ultimately out-competed by grown-ups. Perhaps you need to educate them.
Cheers
Greg Locock
New here? Try reading these, they might help FAQ731-376: Eng-Tips.com Forum Policies http://eng-tips.com/market.cfm?
RE: Asked to "bid" for professional services
PE, SE
Eastern United States
"If a builder builds a house for someone, and does not construct it properly, and the house which he built falls in and kills its owner, then that builder shall be put to death!"
~Code of Hammurabi
RE: Asked to "bid" for professional services
There's a push for "qualifications-based selection" for engineering services on publicly tendered projects. That means the firm which can field the best experience list and resumes is supposed to get the work, irrespective of the price. They're of course free to put the "B" team on it after award, though. It can be and is used as a means for big firms to exclude low-cost competition springing up and eating their lunches.
Then there are two-packet evaluation processes, where price or rates and qualifications or technical proposal are sent separately. The old joke is that this just reduces the work of the bid reviewers by putting all the useless irrelevant information into a separate package that can go right into the shredder...But done properly, a truly "quality-based" rather than merely qualifications-based selection process at least has a hope of obtaining good value for money for services without resorting to a purely rates-based selection process or merely dividing the work up amongst the old boys club.
The best way to get paid properly for the true value of engineering services, in my opinion and experience, is to sell a solution or product rather than engineering man-hours. Incorporate work which embodies, and allows you to profit from, a portion of the savings that your efficient and smart design, selection and procurement etc., offers to your customer. Sell it on a fixed price basis with a defined workscope. Tougher to get screwed with non-payment that way than if you're providing only paper drawings and specifications.
Yes, you can get screwed doing this too. I've seen a detailed workscope I developed in previous employ, as part of a free bid for a fixed-price project, used by the "client" to direct the work of the lowest fee T&M bottom-feeder. Giving out free detailed proposals is a mug's game which in some industries is played by all participants.
My current business does "studies" on a reimbursable basis at reasonable rates, which define the workscope and give the client at the end of this work, a fixed price for the complete execution of the design. It takes us far less work, and far less of their money, to get to that point than competitors who follow the fee-for-service design, then multiple bid construction, model that is prevalent in our industry. It works well for our clients, who get a firm price for very little up-front investment of time and money, and for us in that we don't give our engineering work product out free of charge. We do respond to requests for free bids sometimes, but there are ways to draw the client into our more normal model even then, as seldom is their workscope for the project complete enough to allow an apples to apples comparison amongst bidders.
RE: Asked to "bid" for professional services
RE: Asked to "bid" for professional services
If times are slow, and you want to keep your employees billable, the company may even take a slight loss (but not for long) just so their employees have something to charge their time against.
Also, a lower fee (or a loose scope) might be a door into a client who has future work.
It is all a juggling act - one in which I am glad I do not take a direct part in - but I see it a lot.
RE: Asked to "bid" for professional services
RE: Asked to "bid" for professional services
David Simpson, PE
MuleShoe Engineering
Law is the common force organized to act as an obstacle of injustice Frédéric Bastiat
RE: Asked to "bid" for professional services
This is probably off topic, but letting the American Petroleum Institute represent engineers is not ideal. Doctors are very well organized with the American Medical Association, and would never let a hospital represent them even if their interest was the same.
RE: Asked to "bid" for professional services
Not true in the least, at least for solo doctors. Their turf is being drastically eroded by nurse practitioners, who, with a scant 6 months of additional training, are allowed to diagnose patients and prescribe medicine, supposedly, "under physician supervision," but we all know how that turns out. My wife has tons of horror stories of NPs missing symptoms and misdiagnosing.
TTFN

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RE: Asked to "bid" for professional services
A good engineer is a value engine. The concepts applied, based on the experience, knowledge and skills of the individual Professional Engineer, are what a client should be purchasing. Those who do, profit. Those who don't are welcome to hire a crappy commodity for $55/hr.
RE: Asked to "bid" for professional services
I got into a conversation about this with my old boss, and the conclusion is that some retired guys might be really bored and instead of going for golf that week they decided to stay indoors and design something.
B+W Engineering and Design
Los Angeles Civil Engineer and Structural Engineer
http://bwengr.com
RE: Asked to "bid" for professional services
RE: Asked to "bid" for professional services
One of the challenges in the above is in keeping your scope tightly defined so that you can make sure you execute efficiently. Its hard to say "I'm done, stick a fork in it" if you have an open ended scope. But at the same time, this is key to unlocking all these higher value things which we can do for clients.
One of my strategies is before the project even is signed up, is to push the client to do more with the engineering, and make engineering more central to the project. Do longer spans in a more exotic material for a good reason etc. Yes they could technically steal your idea, but it more frequently leads to fees multiple times more than the human calculator model. On the same job, I was paid $15k to plug and chug some calcs, or $60k to make the whole thing happen. BTW: these are real numbers on a recent project where I had two similar clients with very similar scale and scope of construction, but a much different scale and scope of professional service. Neither contract was subject to bidding, and the client who paid more was much happier with the service!
And there is no limit to how far you can extend you scope. At my old firm we went as far as helping clients with fund raising. We did presentations to donors to get the Seattle public library built.
RE: Asked to "bid" for professional services
If so, then by the principles of economics I should be looking to solely maximize my profits by focusing solely on internal costs (overhead) since by definition a commodity industry is one where you cannot charge a price higher than any competitor without the risk of losing all of your customers. I have no control then over what I charge customers since everyone else could do the same job at a lower price.
I would disagree and adamantly argue that if our industry is in this state, or heading towards this state, we must stop it. If my profitability is solely measured by internal costs, then my priority is not the health, safety, and welfare of the public. And this is largely my argument against "bidding" for work. As a business, engineers cannot place both internal cost control and the health of the public at equal priorities. Eventually one will override the decision of the other. Choose safety and you may find yourself, and your employees, out of work. Choose profit and you run the risk of causing harm.
NSPE used to have a canon in their code of ethics addressing this very thing. They have since removed the language and I am very curious as to why.
If we are a commodity then we must not be held liable for the safety and welfare of our designs. If the health, safety, and welfare of the public remains in our charge, then we need to be compensated based on our ability to provide this safety more efficiently or to a higher degree than our competitors.
PE, SE
Eastern United States
"If a builder builds a house for someone, and does not construct it properly, and the house which he built falls in and kills its owner, then that builder shall be put to death!"
~Code of Hammurabi
RE: Asked to "bid" for professional services
RE: Asked to "bid" for professional services
But one point that I thought was important is that most firms do work for about the same amount. If someone can do it for way less, then they've probably got an unsustainable business model. If some retired guy wants to make a hobby of doing work for a few bucks, he can only do so much. And he needs to do his own CAD or hire someone. And, if you hire someone (assuming it's not some other old codger working out of his garage) now you need an office, a payroll department, and all those other expenses that drive up the costs. Or if he's successful, he needs to hire other engineers. And no one is going to work for less than the market rate, unless they're below market in talent.
Or maybe some firm has figured out how to do everything on schedules, without a lot of calculations or drawings. Don't you think the big guys are going to copy this? Or the drawings are so hard to build from that you have an unhappy client at the back end.
So my point is that we shouldn't be afraid to bid (although I think it's counter productive) projects. It's like that commercial, where someone opens up a $5 haircut place across from an existing barber shop. So the established guy puts up a sign, "We Fix $5 Haircuts" If you don't win this one, maybe you'll get the redesign. And don't be afraid to charge for that.
RE: Asked to "bid" for professional services
There is another facet to this dynamic. If I can start with an anecdote:
I bid on a job a few years back. I had an excellent idea how I would address the problem (the key to success was data management, not hard-core engineering) and I bid $96k (which was over twice the hours I thought I needed). A couple of middle-size engineering firms also bid on it and both were right around $1.5 million and their proposals made it clear that they didn't know it was basically a data-management job. The big difference in this case was that they didn't have anyone in the bid process that had ever done a similar job (both companies had people who had done similar jobs, but they were too senior to be bothered with a pissant bid). As a one-man company I was better positioned to properly evaluate it and my final hours on the job were within 5% of my original estimate so I made twice my normal hourly rate. Overhead alone did not account for a 15 fold difference in expected costs.
The point of this story is that in addition to the obvious issues with larger firms, there is also a significant difficulty with trying to apply appropriate experience to each bid--the guys that know are too busy to participate in too many cases. Sometimes the $5 haircut really is a bargain.
David Simpson, PE
MuleShoe Engineering
Law is the common force organized to act as an obstacle of injustice Frédéric Bastiat
RE: Asked to "bid" for professional services
RE: Asked to "bid" for professional services
RE: Asked to "bid" for professional services
I've been on projects where the cost of engineering effort was far greater than material and assembly costs.
What is Engineering anyway: FAQ1088-1484: In layman terms, what is "engineering"?
RE: Asked to "bid" for professional services
PE, SE
Eastern United States
"If a builder builds a house for someone, and does not construct it properly, and the house which he built falls in and kills its owner, then that builder shall be put to death!"
~Code of Hammurabi
RE: Asked to "bid" for professional services
Cheers
Greg Locock
New here? Try reading these, they might help FAQ731-376: Eng-Tips.com Forum Policies http://eng-tips.com/market.cfm?
RE: Asked to "bid" for professional services
RE: Asked to "bid" for professional services
PE, SE
Eastern United States
"If a builder builds a house for someone, and does not construct it properly, and the house which he built falls in and kills its owner, then that builder shall be put to death!"
~Code of Hammurabi
RE: Asked to "bid" for professional services
RE: Asked to "bid" for professional services
I go to buy a watch. Maybe I buy the cheapest watch. Maybe I don't. Maybe I buy the watch that looks the best, or has the best features, or has the best combination of looks and features for my money.
I go to hire an engineer. Maybe I hire the cheapest engineer. Maybe I don't. Maybe I hire the engineer that has the cutest intern, or that has the project CV closest to my project, or has the best combination of experience and cute interns for my money. In truth, the chances are I hire the engineer that I have the best confidence will get done what I need done, for a fee that's somewhere in my budget.
I think you guys are getting your knickers way too in a twist about commoditization. Yes it sucks and impacts your fees, but the best thing for the economy isn't to somehow uncomodotize your services, it's to comodotize everyone else's, so nobody's making any more money than you are, and the consumer saves.
I have a friend who works at GE. He talks about how they intentionally tell their clients that if the client puts the project out for bid, GE will tell them to take a hike and not bid it at all. They do it as a threat to keep the project on a no-bid basis, so they can rake a higher profit. This guy's department makes 30% or 40% pure profit on their projects, by the way, while I'm over here in civil making much less.
Well sure, I'd probably do that too if I was them. But I'm a strong personal believer in a free marketplace, and that's not a free marketplace. That's a cartel.
Hydrology, Drainage Analysis, Flood Studies, and Complex Stormwater Litigation for Atlanta and the South East - http://www.campbellcivil.com
RE: Asked to "bid" for professional services
There's different disciplines in this thread, so there's some confusion. I'm a structural and I design structures. So let's say the client uses the engineer with the cutest intern. Will they put a sign on this building and say "Design by Hot Intern?"
The entity making these decisions will be one of many users of the facility. If they choose wrong, it might affect (kill) people who had no input in this decision, but simply entered the building.
RE: Asked to "bid" for professional services
RE: Asked to "bid" for professional services
RE: Asked to "bid" for professional services
RE: Asked to "bid" for professional services
And then ... a year later, wants a quote on something else. I realized that the project would require reworking a considerable portion of an existing system. Let's say my quote was $4.5k. Didn't get the job. Someone else quoted $2.5k. "No way. Does he realize that you are going to have to do this, and this, and this?" Not my problem. Sorry ...
The cheapskate clients get the service that they deserve. If they learn, perhaps you will get the next job. If they don't learn, they're probably not worth having as clients anyhow. I sure didn't lose any sleep over not getting either of the two jobs described above.
The cheapskate firms who undercut everyone have a fair chance of a hard ending, too. If they underpay their employees, they will only get inexperienced ones who will leave when they get enough experience (and once upon a time, I WAS that underpaid employee-engineer). If they have no profit margin, they won't survive. If they shortcut the work, we all know where that ends.
RE: Asked to "bid" for professional services
RE: Asked to "bid" for professional services
RE: Asked to "bid" for professional services
Dan - Owner
http://www.Hi-TecDesigns.com
RE: Asked to "bid" for professional services
RE: Asked to "bid" for professional services
At that time their general aviation radar was priced as a system at $15,000 but marketing said there is no way the heavy iron would accept a $15,000 radar as "good enough" to be installed in their aircraft. So marketing priced the system at $30,000 because that was in the range the heavy iron drivers expected to see.
I thought you might find this interesting.
RE: Asked to "bid" for professional services