Are Typical Engineering Fees for 4 Story Building Too Low?
Are Typical Engineering Fees for 4 Story Building Too Low?
(OP)
I was recently contacted by an architect in the area that designs a lot of buildings. Their current structural engineer is dealing with some health issues and he was referred to me. He sent me his CAD files for the building and asked that I submit a proposal for structural design/dwgs. During the conversation we talked about this being a longer term relationship, as he doesn't know what the status of the other engineer is (they had worked together for over 10 years). After reviewing the drawings I estimated that the structural scope would take 3 to 4 weeks. I based my fee on $150 and hour. I ended up calling him to further discuss expectations, timeline, etc. I implied that I was thinking 3 to 4 weeks at the $150/hr rate and he kind of hesitated and said that his engineer was under 10k. I should say that the arch indicated that the other engineer typically took about 3 weeks to get the design back. I should note that the dwgs he sent were for a CMU structure with interior steel beams/cols and wood trusses.
Many of the buildings they design are somewhat similar but each may have its own uniqueness. In the dwgs he sent me, much of the front is windows, particularly first story. So I was thinking a steel moment frame on the first story for lateral system. The arch said that the engineers dwgs were very concise and he had a good system down.
All this being said, I understand discounting fees for the purpose of "getting your foot in the door" or doing volume work, but I feel like under 10k is too low for this type of building and the liability we as engineers are taking on. This could be a good opportunity, but I'm wondering if it's worth it for the fees. The day we spoke it was in the afternoon, and he was already emailing the next morning asking if I had the proposal....which is also alerting since it gives me the impression they will be pressuring me to finish these jobs.
I just wanted to get opinions on this...I don't understand why the fees are so low and this is not the first time I'm coming across this. If all us engineers stuck together the price discrepancies would not be so large.
Many of the buildings they design are somewhat similar but each may have its own uniqueness. In the dwgs he sent me, much of the front is windows, particularly first story. So I was thinking a steel moment frame on the first story for lateral system. The arch said that the engineers dwgs were very concise and he had a good system down.
All this being said, I understand discounting fees for the purpose of "getting your foot in the door" or doing volume work, but I feel like under 10k is too low for this type of building and the liability we as engineers are taking on. This could be a good opportunity, but I'm wondering if it's worth it for the fees. The day we spoke it was in the afternoon, and he was already emailing the next morning asking if I had the proposal....which is also alerting since it gives me the impression they will be pressuring me to finish these jobs.
I just wanted to get opinions on this...I don't understand why the fees are so low and this is not the first time I'm coming across this. If all us engineers stuck together the price discrepancies would not be so large.
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RE: Are Typical Engineering Fees for 4 Story Building Too Low?
Too many engineers are underestimating prices to get their "foot in the door." All you're doing is setting a baseline that is expected to be beat the next time. "...you did this for $10,000 last time, why not $8000 this time?"
I wouldn't suggest collusion, but the amount of liability we (structural engineers) are taking on is worth more than the price you are getting.
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
-----*****-----
So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates
-Dik
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
Your fee rate is +/- what I would expect with or without the currency conversion.
Your total fee seems reasonable, if not a bit low. Not sure if that includes field reviews or if they're billed separately.
$8k seems really low for design+field review. I've seen some people not be upfront of the expected field costs and then the client picks the "low bid" but actually ends up paying way more.
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
$9k for 120 hours is $75/hour. If you're working in parallel with a CAD operator for some of that, then the rate is even lower. I bet they would like for you to work for that. LOL.
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
Sadly, engineering fees will probably never go up until the big companies successfully collapse the market for small firms and sole practioners somehow...and then the extra rate will all be going to shareholders, accountants and admin staff and not engineers.
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
-----*****-----
So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates
-Dik
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
My thought process was that I could get this work and potentially hire someone but at these rates I don't believe that is not profitable. That being said let's say you do do this job for a low fee which equates to 50 to 75 an hour, there is still liability to deal with regardless if you're working as a one man shop. There is opportunity cost with other potential work.
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
-----*****-----
So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates
-Dik
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
I would stick to your quote and time frame. Next job add 10% just for the 'pain in the ass' clause the architect is. The more and more I work with Architects, the more and more I dont want to work with them.
Let them beat up someone else, so they are busy, and you can get the next job at the price it deserves. The low ballers cant take them all.
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
I am not sure what I would charge my client, but $10k does seem very low. The architect is probably tied to that engineers proposal, and when he was unable to deliver he has to find someone else to do it. If that person (you) comes in higher he probably has to cover your fees with the fees he was going to receive.... which is not really your problem.
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
They have an engineer that they have worked with forever but... health problems... too busy all of a sudden... etc. excuses... so they are looking for a new engineer and looking to establish a long term working relationship with lots of repeat work. It never happens, because what they don't say is... only if you are the cheapest option out there, beacuse they are continuously price shopping. Also, the story of why they are shopping for a new engineer is probably often BS. They may just be price shopping their previous engineer or pissed at him for some reason.
If you are unfortunate enough to work with these types on multiple projects, you will start to see another pattern emerge. They tend to always minimize your expectations of the project scope, no matter what the actual scope may be. For example, I cannot tell you how many times I have gotten the call that starts with the exact phrase, "I have small project... that involves blah blah blah...". They make sure to tell you before anything else that it is a small project, regardless of what the actual scope or size of the project really is, to immediately set your expectation that the fee is tight.
I could go on, but. Where do they all learn these tactics? It's as if it's part of the curriculum.
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
1) In building design, a problem for one consultant is a problem for all. My former employer was named in a lawsuit for HVAC issues. We don't design HVAC. We're structural engineers. But in many cases, the building owner's lawyer will name every consultant. Many times you can petition to have your name/firm taken off the suit, but even if its granted there will be lost time and legal fees associated with it. One of the other structural engineers on this forum has a great story about how he did a small job that got him sued by a third party. In the end the case was dismissed as he had done nothing wrong...after he'd racked up $10k in legal fees. So even if my QA/QC process is the best in my field, simply being there exposes me to risk. Such is life in building design/construction.
2) My E&O policy rates are based on risk exposure. They look at the markets in which I work, the value of construction that has been built using my designs, my claims history, and come up with a price. (Yes, I know - insurance pricing isn't that simple.) So a good chunk of my annual, non-wage overhead is tied directly to my risk and liability.
So it's a balancing act: how much do my employees need to be paid to retain them and keep them at least content? What is my non-wage overhead associated with/allocated to this project? How much will the market bear for this service? What's the difference/profit? As a business owner, I have to compare that number to the return I expect for the risks I'm taking - be it direct capital investment risks or potential liability risks. If it's not enough, I try to push the market higher or leave the project for somebody with a different risk profile/tolerance.
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
Here's another example, two identical apartment buildings undergoing the same remodel. However, one building is owned by a single entity, the other is condos. Same amount of work for each job, but I'm charging more to do the condo job due to their love of litigation. I'd think most other engineers would do the same, meaning the market is dictating that the condo job costs more solely due to the increased liability.
The cost of the job and the liability of the work go hand in hand. Just because you cross your t's and dot your i's, producing immaculate work that even the most stringent plans reviewer would praise, you're not free from risk. You can certainly reduce your risk with good work, but the second you get included in the legal fun, you lose and the lawyers win.
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
-----*****-----
So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates
-Dik
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
Stick to your price, let the low ballers take it, you don't want to be working with people who are looking for a bargain.
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
Profit margins on good building projects usually run in the 20-30% range, so it sounds like you agreed to not take any profit. Yikes. Also, the 'first time client discount' just sets you up to have a lot of first time clients getting discounts and then pissed off when you jack the price up on the next one. Not a good idea (but certainly an easy trap to fall into).
Glad you didn't get sucked into it.
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
This could be one of the three great lies... This thread has been quite interesting, and informative.
-----*****-----
So strange to see the singularity approaching while the entire planet is rapidly turning into a hellscape. -John Coates
-Dik
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
At the low end of commercial construction, I would expect this to be at least a $5M building.
$25K would be 0.5%, and that's borderline too low in my opinion.
Depending on location and construction type, a building this size could easily be in the $10M-$15M range.
Under $10K sounds laughable. You did the right thing by letting this one go.
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
Sure, but every expense affects the total cost. The same argument could be made that your rate should reflect the cost of office space, software, supplies, etc but ultimately its irrelevant. There is always cost and only so much reduction possible, so profit is really a function of your rate and volume.
The problem with trying to tie labor rates to arbitrary measures like risk is that causes your rates to become inconsistent across projects like kissy mentioned, which is extremely unprofessional and burns bridges with customers.
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
Agreed. I think the rates and the fees that are ultimately based on the estimated number of hours should be consistent across the board, and should be such that they account for the risk inherent to what we do.
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
So should a guy changing a light bulb at the top of a transmission tower get paid the same as the janitor at a school changing light bulbs in the bathroom? Climb ladder, open enclosure, unscrew old bulb, screw in new one, close enclosure, climb down. Same procedure, but different risk, so they should get paid the same?
Whether the risk is physical or financial, it should be compensated. In our profession, though, the risk to the individual is tiny so long as appropriate measures are taken through employment agreements/contracts, company policies, etc. that indemnify employees for their actions in service of the employer. Which is why nobody ties risk to labor rates. This discussion isn't about that - it's about overall risk/liability and how that impacts the total fee for the project.
So as you said - all overhead should be considered in that baseline price. The labor rate is what the labor market dictates, just like the total fee is what the market dictates. I charge the same flat rate for billing hourly. But most of my projects are lump sum - most clients want to know exactly what they'll spend on the design. The labor rates don't change, but the profit will vary.
RE: Are Typical Engineering Fees for 4 Story Building Too Low?
Valuing services is a very difficult task especially if consumers of your services don't know how to gauge what is 'good' and 'bad' engineering. Admittedly, structural engineering has lots of redundancies that even buildings with 'bad' engineering are functional. Understandably, if clients view that all engineering designs/documents are equal (which they aren't) then other criteria such as level of service and price would be the main drivers in awarding projects.
I reckon that this is the main reason why our industry is so miserable and know lots of people who left the industry. Not sure if there will come a time when there are not enough engineers that we could actually demand a decent fee.