Tomorrow's Engineer: Why Are We A Commodity? 10

Engineering will always tend to be a commodity:

1. Someone with no physical or scientific constraints dreams up an idea: a product, building, etc... (artist, free thinker, consumer, or even necessity: )

2. Then someone with a some idea of physical or scientific constraints evaluates the idea on conditions of "Is this idea in the least possible?" This person might refine and ballpark-cost the idea as well. (architect, designer, conceptualist: )

3. Then someone with a great amount of physical and scientific, and practical knowledge is left to "make it happen", probably first scrutinizing the cost of the venture. This stage is where most "engineers" find themselves operating within, and this is why we are considered the party poopers. We are the first to nix an idea that initally had some degree of validity after surmounting the obstacle of Stage 2. At this stage, people find out the hard reality of how much things cost.*

Generally, the more intelligent or more experienced the engineer, the more complex and detailed (costly?) the quotation is. This is because the more intelligent and experienced the engineer is, the more he realizes what exactly can go wrong and compensates accordingly.

4. The knowledge gained in Phase 3 stunts optimism sufficently to warrant re-evaluation of the entire project. Should enough motivation, need, and funding still remain to continue forward, the "Bid Submission" process begins. The problem now is that the burden falls back onto the engineers to "make it happen". This phase is what creates the "commoditization" of engineering; your services are required only if you meet the criteria of being the lowest bidder. The agonizing aspect of all this is that the winning engineer probably lacks the qualities of the engineer listed in the last part of Phase 3, resulting in a forced lower "going-rate" for engineering sevices. Other factors to consider are the enevitablity sub-optimal designs and construction, and rewards for cutting corners and rushed work.

Until engineering can be considered a non-negotiable cost, commoditization will always occur. Sometimes, Doctors and Lawyers seem to have it pretty good...




* Engineers, being cold and indifferent to emotion |-I, often are ruthless with critcism of the idea and suggest (for the sake of practicality) design changes that save money but detract from the overall "ambience" or "look" of the project.

From my previous experience, I suggest this case in point: A free-floating, load bearing, butt plated, ribbon-glass facade with no "visual impedance" by steel structural members IS "pretty", but cannot be engineered, nor built without spending WAY more than the client is willing to pay.

I agree with Rhodie (pretty much).

In the past few weeks there has been alot of threads on the respect of engineers, often against lawyers and doctors.

There are many lawyers where the majority of their work involves property transfers and deeds, wills and estates, traffic tickets, etc. This too can be and is shopped for by the consumer. All lawyers are not in the 30th floor corner office, there are many in a small office or part of the house. Many of their services are commodities, just like ours. They tend to stick to their pricing guns much better than we do but for many things one can shop for a lawyer.

I'm not sticking up for lawyers. There are more enough ambulance chasers and ones that want to get rid of Oreo cookies.

What I'm trying to say is the grass is brown (or green depending on your disposition at the moment) on either or both sides of the fence if you want to look at it that way.

Now for some thoughts more in-line with the thread......

No matter what, you tend to get what you pay for. Often we do not do a good job showing the value we bring to the project. We need to have some numbers (read dollars) that our fee can save. Give them an ROI type scenario. Use past projects as examples where doing this task with a fee of x saved y amount of dollars (construction, operation, or maintenance) or cut the schedule allowing the client to use the end product quicker and start their pay back earlier. If we can't do it, then we are a commodity (because we are not bring a distinguishable value over someone else), no different than buying gas from Exxon or Shell. Don't give them all the details so they try to shop the service.

Hit them where it counts, in THEIR wallet. Give them data (cost savings) why you are better than the rest and that you are not a commodity. It will take work on our part to gather those numbers and prove the case. However, it will pay off in the long run and people will come to you for help in minimizing their TOTAL cost, not just the engineering fee. It may be somewhat idealistic sounding, but the value minded client will be persuaded. If we are not willing to do it then we get what we deserve.

We are becoming a commodity for 2 reasons:

a) Too many of us do the same thing. Unless you have a technological advantage over your competitors, you cannot command a price premium. If the client sees what you do as being the same as what 100 other people do, he will pick the cheapest.

b) The mantra "Cheapest Is Best" has become the new corporate religion. Because it is essentially a "religion" its difficult for us to back up the argument "You Get What You Pay For", as this ends up being 2 philosophies against each other. In other words, its emotion rather than logic at work.

I think that we will all see the outcome of the commoditization of engineering. A generation from now you will see things crumbling down around us. Studies will be done and the source of the problems will be identified, namely the procurement method of "cheapest is best".

Wow!

Before I read the replies to this submittal I didn't realize I should be depressed. I didn't know I was being "commoditized". Since when doesn't any profession or industry have to compete in this society? In 7 years I have only lost one job because I gave a higher price than the other guy. Maybe I've been lucky, but I don't think that is it. It comes down to the same business principles that every other profession uses - ability to sell with a resume that shows you know what you're doing. I do hear stories from other firms that they see everything as cut throat and low balling (particularly land development for civils) but I think the educated clients know that a good Engineer can make the difference in so many things (quicker project approvals; cost savings at construction; coming up with better ideas to make the project better and MORE PROFITABLE).

Anyway, look at the history and progression of our profession - 1) we have been and always will be needed; 2) we have been and always will be at the top of the professional ladder (with doctors and lawyers), and; 3) we will have and always will be able to make a very good living.

Doug

My rates are about 170% of the norm in my market. When someone says "You cost too much I'm going to look around" I give them the names and phone numbers of what I consider to be the best of my competitors. Often I get the next job the company wants to do because: being a 1-man company working out of my home, I am pretty selective on the jobs I accept and never miss a deadline; being pretty experieced in my field, they don't pay for much learning curve; and being by myself, I never charge for 3 people to do a 1 person job. I certainly don't see myself as a commodity, but I've had clients say that the total engineering costs on my projects are much less than they see with lower-hourly-rate firms, and the results are sometimes special.

The thing I don't do is negotiate hourly rates. My rate is my rate. If someone wants a fixed-cost job, I estimate the time it should take, add a 50% contingency, and double the result. I don't do many fixed rate jobs, but I rarely lose money on them.

David Simpson, PE
MuleShoe Engineering
Please see FAQ731-376 for tips on how to make the best use of Eng-Tips Fora.

The Plural of "anecdote" is not "data"

As a civil/structural engineer I believe that part of the "problem" we have in getting past the 'find the least expensive engineer' is that it is not possible (in a cost effective manner to ourselves) to show that we would do a better job - without doing the design up front and having it constructed. Our clients cannot go into a store and compare a designed building, sewer, water line or what ever we routinely design/engineer and compare it with our competition's. When buying manufactured goods usually there is more than one product on the market that you can compare the specifications with where it sits on the shelf and then one can also compare the final price of the many products. Purchasers of engineering services (as well as services of doctors or lawers) need to start somewhere and in many cases they begin by assuming that we are all equally qualified and capable to do what they ask - why else would we submit for the job or advertise in specific categories. Somewhat like buying a truckload of lumber from the local building supply store - who has the best deal?

With so many engineers in the marketplace the majority of which do similar services it does come down to price in way too many cases. (Lets hear it for our engineering societies and colleges for keeping the numbers high; more students = more engineers = mpre income: its good for the bottom line.) Also since most people outside of engineering do not know or understand what we do they do not understand the value that competent/capable engineers (that charge higher fees) can do for their bottom line.

This is the challage and unless one finds a way of "selling" theirselves or their firm they are always going to have difficulty in the marketplace.

Professional engineering services that fee bid or price proposals based on what others charge are selling themselves and their profession short. In order to maintain appropriate fee levels for individual firms and industry wide, client education needs to be an ongoing effort. Also, Engineers who feel forced to lower fees to win contracts and are therefore feeling "commodified" need to re-evaluate their role. Here's why.

Engineering does not occur in a vacume. It occurs within a project and the project in turn occurs within it's own environment or climate as established by the project sponsers (requirements and objectives)and other factors (budgets,regulations etc). The reality is that these factors are dynamic and hard to predict and therefore require active management. Because of this, each project is unique even if the "engineering" itself is fairly routine. So if you view "engineering" from this broader perspective the role of an engineering consulting firm broadens as well. Marketing and pricing strategies should not be designed to simply sell engineering. They should be geared more toward selling a firms expert ability to apply technical knowledge and professional judgement toward meeting the clients project objectives. I am suggesting that in general, this latter service is harder to "commodify" than "selling engineering".

Ever wonder how many projects meet their intended physical, and financial objectives? Do you think that clients might value a service that greatly raises the odds of meeting their project goals instead of simply providing "engineering"?

Engineers are professionals. They are not technicians. They should therefore step up and provide this higher level service. They need to take their place at the executive table and provide leadership on their projects. This approach will keep professional engineering in it's proper role of providing professional judgement and not just technical answers. From this approach, I believe that appropriate compensation is more likely follow.

Steven DiGrazia PE, PMP
Grace Consulting Services

Greetings,
For several years, I've been working toward completing an undergraduate degree in Chemical Engineering. I've had some financial setbacks, but I'm only a few credits and a few thousand dollars shy of graduation. Any tips on how I can make myself more of a commodity?

Thank you kindly.

Broaden your skills so you can get involved at a higher level of projects than the purely technical. Think skill diversification. Develop basic business skills-especially communication. If you can effectively comunicate technical topics to non-technical managers with charisma you will get noticed. Checl out the Project Management Institute (PMI) website and locate industry specific project management information.