Project Liability

[H57]

How much do you figure in a given job's potential liability in determining your fee?

If you have two jobs that both take 100 hours to complete, but have different levels of potential liability, would you charge a different fee?

For example - a metal building foundation design compared to an excavation design next to a large building.

 

[kslee1000]

From a technical point of view, let change the scenario a little for ease of comparison:

Foundation design for identical metal buildings, one in wild open area, one in the city adjacent to an open excavation. For this case, I would say the later is more expensive than the former, because you need to spend more time and energy on the later.

Also, for the later case, you may want to talk to your layer and insurance agent in case un-foreseen event happens.

 

[kslee1000]

Sorry, my second case is identical to you had described - open excavation next to existing buildings.

 

[H57]

I guess I'm thinking more along the lines of two totally separate projects. When you calculate the required design time for each it is identical. Would you give the same price to do each? Or would you increase this price if you felt there was some additional potential liability?

In either case you are covered by E&O insurance and/or limitation of liability. It's more of a "if something goes wrong it could be really bad so I'm going to charge more" mentality.

 

[kslee1000]

In your latest thinking, you are already charging the client extra for a project with fewer structural features but a lot of other concerns, compared to a project with much more structural details but anything else. Only this way, the hours could be the same, isn't that right?
But, if you are the one to set fees, I don't see anything wrong to charge higher for something that would give you more headaches. The only catch is you may lose your competitive edge then.

 

[civilperson]

As much as the market will bear! The more difficult and greater liability gets fewer competitors and thus a much greater fee schedule.

 

[DonPhillips]

I do figure an higher mark-up for clients that I do not know or if I suspect cashflow will be an issue.

Another factor is the knowledge of the client. The more they know, the less liability I expect since they understand shit happens on a jobsite and do not blame the engineer for extras.

For someone with no clue of the design and construction industry, much higher fee including construction observation, is in my proposal. If they want to cut that, no problem, I give them a couple of friends that may be interested in the work.

As lastly, get your agreement in writing.


Don Phillips

http://worthingtonengineering.com

 

[lrhg]

Sometimes when I think there is potential for "something to go wrong," rather than raise the fee, I propose a reasonable limit of professional liability. You need to talk to your attorney and/or insurance agent about whether this will hold up in your state. We have used 10x our fee on smaller projects where our full E/O insurance coverage significantly exceeds the fee. At the beginning of a project, when the client is more concerned with your fee than terms, and cannot foresee things "going wrong," they usually sign it.

 

[DonPhillips]

I agree with lrhg. I have a standard limit of $50,000 in my contracts. I have not had a client balk yet, but I suspect, they do not read the agreement anyway.



Don Phillips

http://worthingtonengineering.com

 

[msucog]

we have clients balk at that figure fairly regularly. we've been advised by the lawyers to increase that figure (maybe double) so that if it goes to litigation, the judge doesn't deam it unreasonable and then decide what is "reasonable" for you (which could have many more zeros behind it). in other words, if you set that figure too low (in the eyes of the court), it won't hold up in court.

 

[DonPhillips]

I should have added that the bulk of my fees are based on hourly consulting and the contracts I am refering to are typically less than $10,000 on $50k to $100k projects. The $50k limit is normally seen as reasonable - although I have a few people balk at my fee.

Don Phillips

http://worthingtonengineering.com

 

[msucog]

yes, i would agree with that. clients on jobs that size are usually fine with $50k and i think this is reasonable on small or maybe even moderate sized projects depending on what our overall fees are.