Fee for small residential vs commercial

[glass99]

If an engineer offers to perform a defined service for a client, should it matter whether the project is small or large in respect to the fee? Imagine the service is exactly the same in both scenarios - the number of hours spent, the number of drawings, pages of calculations, time on site, client hand holding, etc.

A particular bread and butter service of mine is designing glass balustrades, for which there is a standard commercial rate for engineering fee. It is mostly commercial clients like universities and shopping malls who buy such things, though the occasional residential client requests it. High end residential is no problem, its the people who are spending $500k on a renovation that baulk at the fee. Should I lower my fee for such people?

 

[rowingengineer]

no, same fee for all!

An expert is a man who has made all the mistakes which can be made in a very narrow field

 

[beej67]

There are many fields in civil engineering that charge different fees depending on the nature of the work, because of the variation in liability / exposure, and how that impacts your professional liability insurance rates. Multifamily projects, for instance, tend to get you sued more often than office projects.

If my workload was low, I might cut a client a deal, but I'd tell him to keep his lips sealed about the terms of the deal so that discounted rate didn't become your base rate inadvertently.

Hydrology, Drainage Analysis, Flood Studies, and Complex Stormwater Litigation for Atlanta and the South East -

http://www.campbellcivil.com

 

[glass99]

Its true that in my particular instance the liability would be greater on the commercial project than in the single family residential project, though that alone would not account for the difference in fee.

Right now I am turning down anything that I consider to be inadequate fee wise because I have the luxury of being reasonably busy.

There does seem to be a difference in the hourly rate you can charge for small residential vs large commercial work too.

 

[crossframe]

At the end of the day, you have to decide what fees you can live with (or what fees you can't live without). But, how long do you think it will be before your commercial and high-end residential clients figure out your "economy pricing?"

 

[glass99]

Crossframe: Yes, undercutting myself and the market has issues, which is part of why I don't do it. Small residential work is really just a backup plan for me, not a major income source, so its not hard to let it slide...

I have been shocked/appalled to learn that many structural engineers consider $500 to be a reasonable fee to do a modification to a residential slab or take out beam or many other small design jobs, including calcs and a stamped drawings. It takes at least half a day to just to figure out what the client really wants and get the information you need. The only way I could see it being sustainable would be if you were doing it on a moonlighting basis.

 

[moltenmetal]

I have a good friend who has made a booming business serving the structural engineering needs of residential projects. He's got a team of lower-cost labour to prepare the drawings etc.- he uses the division of labour to full effect. His fees are reasonable and by no means does he put the public safety at risk. Rather, he's developed an efficient system to execute large numbers of small projects competently, and as a consequence he is able to beat the pants off competitors who serve primarily commercial/industrial clients.

The short answer is that you should not lower your fees, but you should not whinge too much if someone else takes those projects from you for far less money. That's just the marketplace at work.

 

[brandoncdg]

We charge about the same for both types.

Seems like the commercial projects get some crazy low bids though and I just walk away laughing that I would make more money at McDonalds than trying to compete with some of the people who can't get work and have to bid low.

Not sure what the developers are thinking when they use these consultants for their 10+ million projects.

Civil Development Group, LLC
Los Angeles Civil Engineering specializing in Hillside Grading

http://www.civildevelopmentgroup.com

http://www.civildevelopmentgroup.com/blog

 

[ForceMultiplier]

I use as a starting point my hourly rate, and by experience know how much time it takes to do something. I used to give homeowners breaks on inspection fees (i.e. - $350 instead of $500), as it is the mortgage lenders requiring the inspections usually. After losing money on a few I just realized I can't apologize for the fees. Already had 3 turn me down, but if an extra $150 is an issue, they should probably not be getting into the larger fiscal situation. My attorney does not cut me a break...MoltenMetal is right, if some joe out there wants to do it for less, go ahead and see how long it will last.

That said, if I am really hungry, maybe I;ll cut fees too. But it's not sustainable - after all, everything I pay for to practice engineering keeps going up. Anybody ever see Autodesk give discounts for small operators? Nope, didn;t think so...

 

[Ron]

Agree with others...in some respect, whether directly or not, our fees are time-based. Time is time, without regard to commercial or residential. You are also more likely to not get paid on residential than commercial.....so if you lower your fee and don't get paid anyway.....

My fees are the same without regard to the size, character or complexity of the project.

 

[glass99]

I think part of the issue is that commercial work is generally done by larger firms with higher overhead to cover managers, marketing people, conference rooms, etc, and the hourly rates are accordingly higher.

What is the normal hourly rate for small residential work for a small firm?

 

[Ron]

I don't set rates by business type. I set my rates by what I consider to be representative of my value to the process and by what I should receive in recompense.

If you only consider the value of what YOU think you need to survive, that's not reasonable nor consistent with the intent or needs of the profession. That's different for everyone. Some engineers are willing to accept the salary of a plumber...others consider that we are a PROFESSION and should be compensated accordingly.

Don't demean the profession by subverting the rates we should be getting for professional services.

 

[glass99]

Ron,

You are preaching to the choir about engineers deserving fair fees. I like to think that I generally compete on quality and relationships far more than price, and will be working hard to keep it that way. I feel my rates are fair to both me in respect to the risk I assume and to the value I bring my clients.

If I did my current job but worked for say Arup or Buro Happold in NYC, they would be charging my time at probably 30% more than what I currently charge, whereas the small residential structural work seems to happen at about 30% less. I think there are many engineers in the Midwest working for as little as $50/hr. A top facade engineer at Arup a few years ago was charging at $320/hr. At my old firm, I was charging $160/hr, and consistently had more work than I could handle (thus I started my own practice). Rightly or wrongly, these are market rates, and its quite a big range.

 

[Ron]

glass99..I agree, there's a wide range. If you are in a specialty practice area, you can generally command more of an hourly rate. For general practice, the rate goes down.

In the specialty areas, there's a good reason for the elevated fees. It isn't because of the rarity of the person, necessarily, but the rarity of the specialized experience that person might have and their efficiency at getting the issues resolved.

I have seen, on numerous occasions, a person charging lower rates end up billing more to the client than one charging higher rates who got the job done quicker because of experience and expertise.

 

[MacGyverS2000]

I do find some irony in the people who proclaim that doctors make (and deserve) the amount of money they do because they had to spend many years in school and had expensive tuition... are the same people who don't think twice about trying to weasel me down in price on my engineering costs.

It always brings me back to athletes making 7-8 figures per year, engineers making 6 figures, teachers making 5, etc. Societies sense of what's valuable is seriously skewed.

I keep hoping for Atlas to shrug...

Dan - Owner

http://www.Hi-TecDesigns.com