Accurate Quote? 1

[SteelPE]

Due to some recent problems, the company I currently work for is going to be no longer in a few weeks. I have applied for positions in other companies and have had a few interviews but nothing has really come through yet, so I am beginning to go down the path of self-employment. It’s this or unemployment.

That being said, after 12 years of working as an engineer (6 of which have been licensed) I have never really priced a job from an engineer perspective. I have the opportunity to price 3 separate projects with 2 contractors. I am doing the best that I can to figure out the amount of time that it would take me to complete a project and then place an hourly rate on that time. As a check, I have dug up a copy of the 2009 RS means which will give me the construction costs for different projects based upon the type of facility and the square foot of the facility. I was always told that structural engineering costs should run 0.5% - 1.5% depending on the complexity/size of the project. I have had other engineers say that 0.75%. Now, most of my projects will be 1-3 story office buildings, warehouses, retail plazas/shopping centers etc. (based upon my previous experience).
Is this a reasonable way to go about pricing a project…… what do others do?

Just to put everyone’s minds at ease, I have already contacted an insurance company and have spoken to my accountant about the possible switch.

 

[zdas04]

Ron,
Amen to that. When I have to bid a job, I estimate the number of hours, double it, multiply times my hourly rate, and add 20% just for fun. Then I give the company the quote and say that we can either do it time and materials (they take the risk) or put the bid in the hopper (I take the risk). Mostly they take the time and materials route and projects are under half my bid. If not, they pay the whole inflated amount. I can do that because I really don't care if I ever get a bid (when in fact I've never failed to get a bid). You might say that I'm leaving too much on the table if the traffic will bear a doubling of my rate, but I would respond that my rate provides me with a great living and the ability to put some money away--I'm a contented individual and don't want to screw it up by getting greedy.

David

 

[Ron]

David,
Same here. I get those who must get "3 proposals" for comparison. Not even a good disguise for bidding...funny how I'm almost always the high one....wonder how that happens....I must be using the "Muleshoe formula".

Ron

 

[ornerynorsk]

A pint for you Ron! Spot on.

It is better to have enough ideas for some of them to be wrong, than to be always right by having no ideas at all.

 

[IceNine]

Ron,
We're almost always high as well. A few of our clients say 'so and so will do it for X$, will you lower your fee to match theirs?' No! We're not going to be part of a race to the bottom!

Luckily, the majority of our clients use a qualifications based selection with a negotiate fee.

 

[fasboater]

Ron and David,

That works great when you have more clients than you know what to do with. However when your first starting out you need to develop that client base and you have to start somewhere. When your working for the contractor they only have so much money in the project for engineering and if your to high they go on to the next engineer. Once you have the relationship with the contractor then its a little easier to press the qualification based design.

http://www.bowerseng.com

 

[SteelPE]

I pretty much agree with everyone. We should not be "bidding jobs" however in order to get my foot in the door and prove that I can do the work, I am going to have no other option. It is going to be very tricky going forward trying to balance bringing in work while not trying to underbid projects (which is why I asked the question here). I am just trying to gauge where I should be on price and how others people handle the "bidding" phase of a project.

One problem I am fighting is the fact that my current employer would give insanely low bids for engineering work. Some of my clients are going to be the smaller companies that break off from this one. I just gave a verbal bid on a project to test the waters that averaged out to around $0.32/square foot (simple building, no drafting required). I estimated that it would take me about 3 weeks to complete and the number above reflects my hourly rate x 3 weeks of work. I was told "We can't overprice ourselves now an lose the job to someone else". I laughed and went about my business.

 

[ImminentCollapse]

fasboater,
It is much more likely that the contractor will come back to you for the next project and ask if you can do it for a little cheaper, rather than come back and say you did such a great job we will pay a little more. You have to demonstrate high value, by either saving them a good deal of money or getting them out of a jam in construction; even then, it is very difficult to raise rates.

Steel PE,
"One problem I am fighting is the fact that my current employer would give insanely low bids for engineering work." Thus they are going out of business.

As said above, do an hours estimate based on a consulting rate, a per sheet estimate and a % of construction cost. Compare, contrast then massage as necessary. Good luck.

IC

 

[Ron]

fasboater....I had the same philosophy and approach when I worked for large engineering firms and I've carried it from Day 1 with both engineering firms I've started.

If a contractor has only so much money in the job, then give him only so much service....reduce your scope to match the budget, don't reduce your price to match his scope and budget. When you reduce your scope, it will give you an opportunity to achieve the same revenue that you would have otherwise gotten, but you now have more time to make up the difference with other clients. If you don't reduce the scope, you'll work your a$$ off, get the same revenue and have no time to devote to other clients.

IceNine....when a client asks if you will reduce your price to match some other consultant, you might tell them that you know what your services are worth...and obviously your competition knows what their services are worth.

 

[SteelPE]

Ron,

Interesting point about reducing your scope of work..... but how do you handle that from a structural engineering prospective? If I am asked to design a structure, I am basically asked to be the EOR with respect to the structural aspects of the project. In my eyes, this means that I must do any work necessary to make sure the structure meets the requirements of the code and is safe for the general public. If something happens then i am responsible, and the board is not going to go for "well, I removed this part of the project from my scope because the budget was tight".

Maybe I just have no clue what my responsibilities are.

 

[Ron]

SteelPE....no, you are correct. When designing, there is a minimum scope that you can live with to comply with good service and satisfy the standard of care. Your scope must be based on that. If there are peripherals (multiple meetings, coordination with contractors, contract administration, etc.), then you reduce those, eliminate them or give the client an "on-call, hourly rate".