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Value based v. effort based billing

Value based v. effort based billing

Value based v. effort based billing

I have come across some opportunities to do some curtain wall and exterior facade engineering.  In many cases, the work is fairly simple and typical, but the value of the projects can be in the millions.  I am having a difficult time switching from my usual hourly rate (effort-based billing) to a minimum fee (value based billing) rate to reflect the liability factor.  If I used minimum fees based on value, I wouldn't know where to start.

I don't want to be greedy, but I don't want to take too much liability for the price.  And I don't want to be one of those engineers that lowers the bar on engineering fees.

Anyone have any thoughts on fee minimums?  And for this type of work?

RE: Value based v. effort based billing

Hi jwilson33,

You may find the devil in the details, like pressure testing and temperature gradient issues.

Someone said "you never get what you deserve, you get what you negotiate".  Give them a price and see if they agree.
There are many factors that dictate high or low pricing.



RE: Value based v. effort based billing

I agree. You set the price of what you are willing to do the work for. Your client sets the price for what they are willing to pay. If they meet, you have a good chance for business.

How you arrive at your rate (for that matter, how your client arrives at their cost) is really immaterial.

"Do not worry about your problems with mathematics, I assure you mine are far greater."   
Albert Einstein
Have you read FAQ731-376: Eng-Tips.com Forum Policies to make the best use of Eng-Tips Forums?

RE: Value based v. effort based billing

You have to take into account the liability as well, if there is ever a problem with any of the facade then your liability will be proportionate to the value, not the fee.

I was at a risk conference once and the engineer explained about an engineer that designed a hundred footbridges all the same - and got the calculation wrong!

Of course you couldnt charge 100 times as much for a hundred bridges, but somewhere in between 1 and 100 times. Give them some added value for the higher fee such as value engineering, free changes, that sort of thing.


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