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Why do Engineers constantly cut throat each other ?
12

Why do Engineers constantly cut throat each other ?

Why do Engineers constantly cut throat each other ?

(OP)
Why do engineers constantly cut throat each others prices? Specifically I'm talking about civil/structurals, maybe others do to. Is the business sense of engineers in general that bad? We only hurt ourselves.
Replies continue below

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RE: Why do Engineers constantly cut throat each other ?

5
Let me tell you - it's all the architect's fault.
I'm not sure how, but it is, believe me.

RE: Why do Engineers constantly cut throat each other ?

(OP)
They don't help that's for sure!! I do my best not to work for them.

RE: Why do Engineers constantly cut throat each other ?

A star to JAE because it's true.

I'm employed at a small firm and as a young man (26) entering this profession the cut throat nature of job pricing and the near slave-like hours demanded required to complete the job adequately on schedule and under budget from me and other employees at times have already caused me to consider leaving it.

Particularly bad over the past few months has been a lack of communication from the top down regarding appropriate project scope and deadlines. I sometimes wonder if any fore-thought is placed into our project fee's/schedule/scope at all or if we are not simply throwing darts at a dart board.

Add to that managers who have let their grasp of design standards/codes slip and the increasing complex nature of the codes (which are making things worse not better) and I sometimes ask myself why anyone would want to be a structural engineer at all.

/Rant off.

Maybe it will all get better one day after all you old fart's retire and there isn't quite so much competition? ;) Just kidding, I wouldn't know my A$$ from my elbow if some "old fart" hadn't pointed it out to me.

I hope you all have a great week and get the fee/time you deserve on all your projects.

Best,

-Huck

RE: Why do Engineers constantly cut throat each other ?

It's called a free market. Other professions would do the same thing if they had to perform in a free market as well.

Hydrology, Drainage Analysis, Flood Studies, and Complex Stormwater Litigation for Atlanta and the South East - http://www.campbellcivil.com

RE: Why do Engineers constantly cut throat each other ?

That's called supply and demand; it's basic Econ 101. Prices fall until the supply meets demand.

The only thing that bucks that trend is a cartel.

TTFN
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RE: Why do Engineers constantly cut throat each other ?

2
Because we are f&*%$##@ stupid!
There was a time when engineers in the US were precluded from bidding on jobs by ethical standards. The Supreme Court canned that in the late 70's. Most older line firms tried hard to maintain that practice for many years...some still do (round of applause for those!). Several recessions, scared engineers, arrogant architects (yes, JAE is correct...at least for one component), and loathesome financial vs. engineering management have led to the decline of our profession into its present state.

One major factor is the change from engineers managing engineering firms to accountants managing engineering firms. (I deplore non-engineers managing licensed professionals almost as much as Snorgy hates MBA's...same vein). I am convinced that this will be the ultimate killer of our profession.

What to do, what to do?

Don't get sucked into competing on price. Keep your head high and educate your clients that qualifications based selection is the proper approach. Set your fee structure and only change it upward as time progresses. If you must reduce the total fee to a client, reduce the scope of work, not the unit rate!! THERE IS A BIG DIFFERENCE IN THE TWO!!! If you reduce your unit rate, you are bidding. If you reduce the scope, you are saying to your client....I give you value for my services. Here is what I can do for you within your budget. If you want more, YOU will have to increase your budget. They will respect that more than they will respect the crappy job they'll get because some idiot engineer didn't value his fee and ended up reducing the scope anyway (without telling the client!) in order to stay within HIS budget.

Rant over, for now(...it will return, I promise)

RE: Why do Engineers constantly cut throat each other ?

"are f&*%$##@ stupid"

That's the whole point in a nutshell. Price differential is primarily required because the product, or service, offers nothing more than the bare minimum as a discriminator. That's why you go to Walmart; you get cheap products that do not last long or do not have a full range of features, and you don't care what brand it is.

That's why, while it was still alive, Jugos were absurdly cheap; they were mostly pieces of junk. Had they attempted to sell at the same price of an equivalent sized Toyota, they would have gone out of business even sooner than they did.

Therefore, by extension, if an engineer were "f&*%$##@ stupid" then one would indeed expect that they would be forced to sell their services at a discount. Aso Econ 101.

TTFN
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RE: Why do Engineers constantly cut throat each other ?

A star for JAE because I love blaming architects for things.

I'm sure the current employment situation plays a roll in everything as well. You have to remember that you are paying for professionals and as long as the professional is licensed not much else matters (I know it does). Now when the economy went south you had companies laying off licensed mid-level engineers and keeping younger/"cheaper" unlicensed engineers. Well, now all those qualified engineers need is insurance and some business cards and they can make money on their own working out of their spare bedroom. They can then bid against his former employer (if they desires) and probably make more money with little to no overhead that his old company had (no office to rent, no secretary to employ, no copiers to rent, no HR people etc).

This is kind of similar to what had happened to myself (but my company went out of business). Now I have bid on projects against other larger engineering companies and have blown their doors off. Basically I looked at the job and tried to figure out how long it would take me to complete, multiply it by my rate add in a little fudge and I ended up with a bid that was less than my larger competition (made me think I might have done something wrong). Didn't get the job because the larger company had more "political" pull with the owner but I was much less than they were.

RE: Why do Engineers constantly cut throat each other ?

You need to get out of commodity areas and into more specialized ones. In a company seminar one of our owners gave a talk that compared our area as boutique work and the other areas as "curb and gutter" (sorry, I'm sure it's not an insult). His point was that we could never compete, price wise, with curb and gutter engineering. We needed to leverage our expertise to justify our rates. They might win a job from us, even in our area of expertise, every once in a while. But our knowledge of the technology will make it more likely that we'll be successful (and they'll screw up).
As a structural engineer, I've worked in Power Generation and Water and Wastewater. In both we were considered part of a boutique (some times a huge boutique) firm and were paid accordingly. The downside is you'll never own the place. If you want to hang out your shingle and own a structural engineering firm, unless you've got a speciality, it's likely you'll be viewed as a commodity and paid like one.

RE: Why do Engineers constantly cut throat each other ?

I don't know who is at fault. But from a cliant point of view, we are required to bid every major project. A standard fee structure is fine, but if you don't bid the job, you won't get the work.

And we don't like it any more than you. Having to deal with companies who don't have the experence, equipment, or means to complete the job. It would really be better if you just told us what you can and can't do up front. Take an exception. If your competer can't complete the job, then he gets a black mark on bids in the future. And don't stick us with the newby if you can't back him up.

Anyway, if the firm you work for sucks so bad, why do you work for them?

RE: Why do Engineers constantly cut throat each other ?

"get out of commodity areas and into more specialized ones"

That's product differentiation. However, there's probably a 10:1 reduction in available contracts. Moreover, specialization comes with the inherent risk that should the market direction change, you may be left hanging in the breeze.

TTFN
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RE: Why do Engineers constantly cut throat each other ?

2
I agree with Ron,
"Don't get sucked into competing on price."

Price is important, but I think reputation and quality has a bigger role than many realize. In a crappy economy, that doesn't always work so well.

Some architects are better than others. There is one I refuse to work with. Another consistently would tell his clients how much engineering should be, but he was always low-balling the price then trying to coerce the engineer to lower the price down to what he told the client. I've not worked for him in some time either.

As a singleton, I have one competitor in particular (I'll call him "R") who has consistently underbid jobs only to end up charging much more than the original estimate. I have several architect/designer clients who won't recommend him because of this. One job I remember clearly, the Architect told me I had supplied the lowest estimate and he was fairly certain I would be getting the job, but someone told the owner about "R" and received an estimate from him less than half of mine. In the end, "R" took far longer than promised to complete the work and his final bill exceeded my estimate by several hundred dollars. (It was probably not ethical for the architect to have divulged this information to me, but I appreciated it none the less.) Engineers like "R" eventually slit their own throats with this behavior.

My estimates always come with a complete scope of work, indicating everything the client will receive for that price. I very rarely perform flat fee services and charge hourly, but unless there are significant changes to the scope, I typically come in very close, and often under the estimate. There are no surprises with me and my regular clients know this, appreciate it and they keep coming back. When I hear, "So-and-so can do it cheaper.", I encourage the caller to hire So-and-so.

These last couple of years have been tough and I've underbid myself in order to increase my chances of getting the job, but I made sure that the final bill reflected the original estimate and ended up writing off some time. I hated doing it, but I hate not eating more. BUT - I always showed the real fee and the subsequent write off so that clients didn't get the impression that what they paid was the actual cost of the work.

For a lot of people, price is their focus, but for those in the know, they will take quality and integrity over "cheap".

LJ

RE: Why do Engineers constantly cut throat each other ?

McLJ...your approach to showing all the time and then writing it off is, in my opinion, the correct way to do it. This lets the client know that it took you more time, but that you stuck to your word and didn't try to weasel a few more bucks out of him. Clients appreciate that.

RE: Why do Engineers constantly cut throat each other ?

It's the same in Building Services Engineering (MEP). In my area of the country the competition is increased due to Corporations buying up local medium sized firms over the last decade, which then spawns a bunch of new small start-ups as all the 40 year old senior designers and project managers flee the corporate culture to start small lean and mean operations of their own. Unfortunately a lot of the Building Industry sees the MEP services as a commodity that anyone can perform. Trying to sell quality falls on deaf ears (mostly Architects as clients). The bottom line (fees) is the only thing that is used as a differentiator.

RE: Why do Engineers constantly cut throat each other ?

What needs to happen, in my humble opinion, is all these guys who are commoditizing engineering need to be commoditized themselves.

Hydrology, Drainage Analysis, Flood Studies, and Complex Stormwater Litigation for Atlanta and the South East - http://www.campbellcivil.com

RE: Why do Engineers constantly cut throat each other ?

beej67....or removed from the gene pool!

RE: Why do Engineers constantly cut throat each other ?

So, for those of us that sell products (or work for companies that sell products) is it OK for us to compete on various factors that typically include price?

Extrapolating, as engineers should we not consider price when selecting what to buy (be it at home or at work)?

Posting guidelines FAQ731-376: Eng-Tips.com Forum Policies http://eng-tips.com/market.cfm? (probably not aimed specifically at you)
What is Engineering anyway: FAQ1088-1484: In layman terms, what is "engineering"?

RE: Why do Engineers constantly cut throat each other ?

Sure, we didn't spend all that time in algebra solving price point problems for nuttin...

The objective is, as always, from the dawn of time, to establish a price point that maximizes one's return. However, most players don't have the same price point, so ultimately, there's a massive semi-simultaneous solution to a many-variabled problem. Unfortunately, most engineering markets differ from commodity markets in their elasticity, or lack thereof, i.e., you either need engineering services or you don't, based on other factors. It's not like you can decide to buy some services now, because you think you'll need the service's answer 3 yrs from now.

Therefore, the price point must always slide down to accommodate uncertainty in snagging a customer. This is different in two respects from the medical market, the patient is sick NOW, and can't or won't wait until next week for an appointment with a cheaper doctor, and most people do have insurance and don't have to pay the full amount, or even know about the full amount. My son was in hospital for a total of two days last year, and incurred ~$12K in costs. But the insurance covered 90% of it, and it's not like I could shop for hospitals.

I think we'd all like to think that we could have a medical market business model, but I don't think that's apropos. There are too many differences to make those comparisons plausible. After all, I've yet to actually need to contract with a PE, but I've gone to the doctor dozens of times.

TTFN
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RE: Why do Engineers constantly cut throat each other ?

The whole premise only applies to licensed engineers, not exempt or non-licensed disciplines.

RE: Why do Engineers constantly cut throat each other ?

Like lawers, it is possible to pay a retainer for an engineer, or engineering firm. It is not that common though.

In some factories it is possible to sell products at below the cost of manufacturing, because it is cheeper than closing the factory and waiting for prices to go up. The same is possible in engineering firms, though also not common.

Then there is what is called a lost leader sale in business to attract new business that will be possible.

If you haven't studied business, you need to. If you have studied business, you know it is crazy.

RE: Why do Engineers constantly cut throat each other ?

"We lose a little on every job, but we make it up in volume?"

RE: Why do Engineers constantly cut throat each other ?

I never was good at spelling, but that is why I became an engineer.

RE: Why do Engineers constantly cut throat each other ?

Having just stumbled across and read this entire topic for the first time, I'm not sure that "Lost Leader" insn't appropriate.

RE: Why do Engineers constantly cut throat each other ?

Quote (Ron)

There was a time when engineers in the US were precluded from bidding on jobs by ethical standards. The Supreme Court canned that in the late 70's. Most older line firms tried hard to maintain that practice for many years...some still do (round of applause for those!). Several recessions, scared engineers, arrogant architects (yes, JAE is correct...at least for one component), and loathesome financial vs. engineering management have led to the decline of our profession into its present state.

Can you provide resources to read how that came about in the Supreme Court? I can use google but suspect it's buried in archives thus not easily found. Our current economic state highlights how loathsome, eh?

Quote (Ron)

One major factor is the change from engineers managing engineering firms to accountants managing engineering firms. (I deplore non-engineers managing licensed professionals almost as much as Snorgy hates MBA's...same vein). I am convinced that this will be the ultimate killer of our profession.

I have to agree with your assessment. I listened to a company this week state they're in the midst of automating so they can eliminate operators and others. I shook my head at what they think their efforts will accomplish. They were financial types not technical. Like a lot of companies, they have underinvested in their workforce, which is causing problems as older employees retire. They think technology will solve this dilemma.

Quote (McLJ)

I always showed the real fee and the subsequent write off so that clients didn't get the impression that what they paid was the actual cost of the work.

Thanks for the idea, when I get to use it.

Pamela K. Quillin, P.E.
Quillin Engineering, LLC

RE: Why do Engineers constantly cut throat each other ?

Much of automation just simply hasn't gotten to the level needed; or has morphed into something else.

One amusing thing is CAD; wherein it started as simply moving paper drawings to the computer and working on them in there. Now, we have all this wonderful solid modelling, but our suppliers still need 2-D drawings to cut metal, but they can't be auto-generated from the solid models, so 2-D drawings are now an additional drawing that must be created, thereby increasing the amount of work that the engineer has to do. It's "better" but it's a lot more work. We now seem to need another "tool" that will generate machining drawings from the solid models directly without additional work.

TTFN
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RE: Why do Engineers constantly cut throat each other ?

My pleasure, Pamela. I have clients ask if I will give them a break on the fee. I show them that I already have and that pretty much shuts them up.

I have a friend, a residential home designer, who refuses to do this because she's afraid it will reflect badly on her. Her theory is that the client will think she's not good at her job if it took her longer than she estimated. When she gets a request to reduce her fee, she has nothing to show that she already has and then ends up resenting the client for not appreciating how much she did for them. These clients tell their friends what a great deal they got and recommend her because she is cheap and the next guy is unhappy because the estimate is more than his buddy paid. I think it's a bit nuts, but a lot of people think I am, too.

RE: Why do Engineers constantly cut throat each other ?

IRstuff, using automation in that manner is akin to the effort underway 20+ years ago to write manuals whereby any Joe Blow-Emup off the street could be an instrument tech. Just didn't work out somehow... Perhaps in another 50 years we'll have perfect technology for management. winky smile

McLJ, it seems you've found the more agreeable method, since it helps your clients understand the true nature of the job and you have no resentment over lack of appreciation. Your way, I thought upon reading it, is elegant.

Pamela K. Quillin, P.E.
Quillin Engineering, LLC

RE: Why do Engineers constantly cut throat each other ?

Thanks, Ron!

Pamela K. Quillin, P.E.
Quillin Engineering, LLC

RE: Why do Engineers constantly cut throat each other ?

I've noticed manuals have gone from bad to worse. Almost like the writer dosen't understand what they are writeing about. And some companies won't give you a manual unless you attend there $1000 class.
No wonder I shy away from there products. The sales glossys just don't cut it.

While on the subject of manuals, why can't someone make a notepad function that attaches to a PDF file? So we the users can make notes of mistakes for the next guy to watch out for.

This has little to do with cutting each others throats, except that product quality seems to be droping with the reduction of staff in manufacturing.

Maybe if the OP were to enter another field of engineering, where there is more of a need.

RE: Why do Engineers constantly cut throat each other ?

Acrobat has a note function. You can also annotate PDF files in a variety of ways.

RE: Why do Engineers constantly cut throat each other ?

Thank you Ron. I'm not as computer savy as the younger engineers. The computers we had in school, besides the main frame, were called Comde 64's (Pun intended).

The fact that we can communicate here is proof that engineers don't constantly cut throat each other. But we enter into competive business ventures. Sort of like when you go to a car dealer, and three or more sales people showup. They all are after the same thing, to take home a paycheck.

RE: Why do Engineers constantly cut throat each other ?

Ultimately, we all are after that. As a general rule, undercutting your competitors may keep you afloat in the short term, but chronic underbidding is one path to bankruptcy. Therefore, if someone is actually succeeding at undercutting for time frames exceeding a couple of years, then they are either money laundering or they are more efficient than you. In either case, you need to amp up your efficiencies to ensure that you can stay afloat yourself.

TTFN
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