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Engineering fees - % of lowest bid or engineer's estimate

Engineering fees - % of lowest bid or engineer's estimate

Engineering fees - % of lowest bid or engineer's estimate

I was recently reviewing an engineering scope and fee proposal between a municipality and a design engineer for a city street and was a little bit surprised when I got to the fee portion of the proposal. Has anyone ever seen anything like this before? Isn't there a conflict of interest if you directly set your fee based on construction cost? Yes we often use a percent of construction to come up with a fee, but it's a fixed fee. Just curious what others think. This in the US if it matters.

Surveying: Lump sum payment upon completion
Engineering: Lump sum payment equal to 5% of the lowest bid.
Engineering: Lump sum payment equal to 5% of the construction estimate when advertising is
delayed for 30 calendar days or more.

RE: Engineering fees - % of lowest bid or engineer's estimate

You're right. I'm not sure there's a conflict of interest, but there is sure no incentive to keep costs down. And I've had clients (not many) grumble when the bid came in low that our fee was too high.
We use some company metrics to estimate our fee and confirm it vs. the estimated cost. Just using a percentage might get you in trouble. Sometimes there's reasons the percentage is more than 10% (working on existing facilities, poor records, reinforcing existing buildings, etc.) and sometimes we can go lower (large repetitive civil projects).

RE: Engineering fees - % of lowest bid or engineer's estimate

This is a thin line for ethical considerations. In the US, our codes of ethics prevent us from using a contingent fee basis of payment. This is close to that since the fee is based on an outcome that is not controlled by the engineer.

It's ok to use the percentage as a guide, but the actual fee should be lump sum or hourly based on the activities of the engineer, not the activities of the contractor.

RE: Engineering fees - % of lowest bid or engineer's estimate

I have seen this before and it is no surprise this is a roadworks job. This boils down to dollars per mile of road. I would assume the design will provide a plan and profile showing utilities and grades in some standard fixed length portions of the street.

The unit costs on roads jobs are pretty standard. The design engineer can probably tell you which contractors will bid and how much per item they will bid. So I don't think that there is a conflict as the work they are performing is going to be based on the dollars per mile.

RE: Engineering fees - % of lowest bid or engineer's estimate

They could have a straw-man low-bid to keep engineering fees down.

RE: Engineering fees - % of lowest bid or engineer's estimate

the Tick: I would think that straw man company then would have to build the road.....

Fee based on bid price..... I would just spec everything to be made of gold

RE: Engineering fees - % of lowest bid or engineer's estimate

New Bridge Design: Titanium Girders with hand placed diamond aggregate!

RE: Engineering fees - % of lowest bid or engineer's estimate

Ron and Jed my thought was you can increase the fee you get paid by making the design more expensive. Also there is no not to exceed amount. What if you only get one or two bidders who bid high because everyone is busy? The owner could pay out a lot more than expected. I agree lump sum or hourly with a not to exceed amount.

You are right it depends on the size of the job and how complex it is as well.

I often figure my fee based on how many hours I estimate it will take me for all the necessary task, multiplied by the various hourly rates for project managers, project engineers, CAD technicians, etc. As a check I see what percentage of the estimated construction cost my fee is. I have an old graph from ASCE that plots fee versus estimated construction cost, but it's got to be almost 40 years old and outdated.

This just looks and smells bad.

RE: Engineering fees - % of lowest bid or engineer's estimate

I write a lot of engineering scopes of services. My corporation uses a format that stipulates a maximum allowable payment with some contractual language stating that the amount can be exceeded if justified. However, the acceptance of the justification lies 100% with the owner (my corporation).

I know a few folks in residential design that charge based on square feet of the house. In fact, I've never seen it done any other way in my part of the country (Northeast).

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