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AVOID COMPETING ON PRICE

AVOID COMPETING ON PRICE

Most clients chose their consulting engineers based on “friendship”. It is human nature to want to work with someone that you know and trust. In many cases you can avoid competing on price by becoming friends with your clients, especially if your spouses are also friends. However, recently engineer friends, have told me that many potential clients resist forming a friendship with their consultants. I had a few clients like that and some hired my firm for all of their projects. Most of these were facilities directors who, I believe, were trying to avoid the appearance of undue influence regarding my continued selection.

If you are in a market that seems to be unduly influenced by price, make a concerted effort to standout from your competitors. Concentrate on the methods recommended in my books including:

  • Keep up-to-date with the latest technology.
  • Gain credentials to build-up your resume and brochure.
  • Publish magazine articles, distribute reprints and gain a reputation as an expert.
  • Be the smartest-guy-in-the-room. Prepare white papers, memorize them and share them with your staff.
  • Prepare marketing materials and implement methods that will make your firm standout from your competitors.
  • Prepare an operations manual that emphasizes quality control and service to your clients.

 

Excerpted from The “Complete Guide” to CONSULTING ENGINEERING © 2015 John D. Gaskell. Used with permission of Professional Value Books, Inc. All rights reserved. Order at http://www.TheEngineersResource.com. Use coupon code “paperback” and save.

 

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Architects Fee Considerations

There are “Architects Fee Considerations” other than percentages, hourly costs and other costs.

Things to consider include:

  • What other work do you expect to have during the likely schedule of this project? (Dead-lines often creep.)
  • How much competition do you think that you have?
  • How good a client has this been or is expected to be?
  • Is this phase 1 of a multi-phase project?
  • The question usually boils down to “How hungry are you”?
  • If you are a “start-up” and the partners are doing most of the work, you can put in some extra un-compensated hours and cut the fee, (a little).
  • Don’t be concerned about overtime. 5-10 hours of overtime per week makes most employees happy. But, any more than that, makes them less productive. However, I believe that limited over-time actually improves your bottom line. To learn the reasons why “Click Here”.
  • Some projects are “losers”. Try to pass-up most of them.

Always calculate your estimated hours and other costs including profit and never take on a project that the Architects Fee doesn’t correlate well.

I have just shared with you some of the fee “secrets” that took me 35 years to perfect. Apply my advice and use your best judgment; your proposals will win you work.

To learn about FEE CALCULATIONS “Click Here“‘

To discover HIGHER PROFITS “Click Hear“.

To find out about the benefits of OVERTIME “Click Here“.

Excerpted from The “Complete Guide” to CONSULTING ENGINEERING © 2015 John D. Gaskell. Used with permission of Professional Value Books, Inc. All rights reserved. See DISCLAIMER and order at http://www.TheEngineersResource.com. Use discount code “paperback” and save.

 

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Higher Architects Profits

Hiring outside consulting engineers guarantees higher architects profits. Here is the proof.

Architects are normally paid a fee based on either a fixed dollar amount or a percentage of construction cost. Based on the project budget and the use of a current cost data book, it is easy to calculate the approximate construction cost of a consultant’s discipline.

Traditionally outside consulting engineers charge a fee that is less than the architect’s fee as it relates to the construction cost of the consulting engineers discipline. The difference is guaranteed higher architects profits.

Continue reading Higher Architects Profits

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Consulting Engineering Fee Proposal

FEE PROPOSAL LETTER

Prepare a fee proposal letter, using this included example as a guide. Don’t put your fee proposal letter in your operations manual. This is not something that you want to share.

This document needs to be revised to suit your practice and disciplines. I am not qualified to offer legal advice. Make sure that your legal counsel reviews and approves your final document. Most of my fee proposal letter is self-explanatory, but note the following:

The SCOPE OF PROJECT is unique for each assignment. Delete the example and insert the scope for your project.

The SCOPE OF ELECTRICAL and ASSUMPTIONS & EXCEPTIONS get heavily edited for each project.

For architects, I recommend dividing the FEE into four parts:

Drawings and Specifications                        75%

Bidding                                                                5%

Shop Drawing Review                                     10%

Site Observations/Meetings/Reports          10%

Even if your estimate of hours does not match these percentages, list the dollars for each phase in these percentages of the total, unless the Client insists on a different allocation.

I recommend printing the Contract Terms and Conditions on the back of the signature page. I usually included all of them. If a client called and objected to any of them, I would reluctantly say: “Since you are such an important client, cross that item off on both copies”. I am not sure that any of these items would hold-up in court; I never reviewed them with my legal counsel. But, I got very few objections to them.

FEE PROPOSAL

(On your letter head)

 

 

(Client address)

 

Attn.:________________

 

Regarding: (Insert name and location of project)

 

Dear: _________________

 

The following is our proposal for Electrical Engineering Services on the subject project:

 

SCOPE OF PROJECT: (Insert brief description) Example:

The project is to renovate a portion of an existing High School and to add a new Library.

Existing Building size: 40,000 sq. ft.

Portion to be renovated: 10,000 sq. ft.

Library Addition: 15,000 sq. ft.

SCOPE OF ELECTRICAL: ( Include only those that apply and add new, if needed)

 

  • Services (electric, telephone, fire alarm, and cable)
  • Power Distribution (panels, feeders and branch circuits)
  • Interior Lighting
  • Exterior Lighting (perimeter, walkways, driveways, landscape, façade, parking)
  • Emergency Battery Lighting
  • Emergency/Standby Generator and associated equipment and distribution
  • Exit Signs (led type with emergency back-up)
  • Telephone/Data distribution system (raceway and/or cable)
  • Telephone/Data system equipment
  • Security Alarm Systems
  • Lightning Protection System
  • Cable TV Raceway and/or Cable Distribution System
  • Fire Alarm System (addressable with master box)
  • Fire Detection System
  • Carbon-Monoxide detection system
  • Nurse Call System
  • Intercom System

 

ASSUMPTIONS & EXCEPTIONS: ( Include only those that apply and add new, if needed)

 

  • All existing electrical systems will be removed.  There is no need for us to draw a demolition plan. However, we will visit the site to observe existing conditions.
  • Design review meetings will be held in Rhode Island.
  • If construction is phased over a number of years, bidding and construction phase fees would obviously increase.
  • This project will be designed as a single project with a single bid phase and a single construction phase with one electrical contractor.
  • We will verify the adequacy of the existing services (power, telephone, fire alarm, cable TV…etc.). However, the fee quoted assumes that they can remain in place and are adequate in size.
  • We have assumed that adequate sources of (power, telephone, data, fire alarm, cable TV…etc.) are available in the immediate vicinity of the project and will be identified for us.
  • Our work does not include upgrades of other areas of the facility.
  • AutoCAD base drawings will be furnished to us.
  • Construction phase services (review of shop drawings, meetings / site observations, etc.) are not part of this proposal.  However, we will be available at our standard hourly billing rates.
  • Written electrical load data is to be provided to us on all equipment.
  • Cuts of equipment and a complete schedule of electrical requirements will be provided to us.
  • Electrical load data (connected and demand) for the building will be available to us.
  • Only one electrical service is required to the building.
  • Removal of existing utilities is not part of our work.
  • A dimensioned electrical stub‑up plan for equipment is not required.
  • Lighting will be laid out and selected by you.
  • You will provide layout of lighting, receptacles and communications outlets.
  • Your Lighting Consultant will produce a separate set of drawings and specifications for interior and exterior lighting and controls.
  • Existing fire alarm system is expandable for the needs of this project.
  • Our presence is not required at committee meetings, variance hearings, pre-bid meeting or pre-construction meeting.
  • The fee assumes that an electrical transformer vault (or modification to an existing vault) will not be required.
  • Computer room has no special requirements such as power conditioning or a UPS system.
  • An existing building evaluation study and report is not required.
  • Detailed cost estimating is not required.
  • A detailed outline specification is not required.
  • Fieldwork to be scheduled in advance at mutually agreed times. A knowledgeable person will be assigned to accompany us while at the facility and to provide access to all necessary areas.
  • You will assist us in estimating proposed and future loads.
  • Review and coordination with the local electric utility company, telephone company, superintendent of fire alarms, building officials and agencies is not part of our work.
  • We have included __ site visit/observations/meetings during construction plus a punch list, (Total of __ visits).  Add $______ for each additional visit.
  • We have assumed that the following is not part of our work: design of pole bases and testing of soil conditions.
  • Meetings to review our report are not included.  Add $____ each.
  • Re-design services are not included.
  • Specifications will go on the drawings.
  • We will provide “technical” specifications.  Our work does not include “front end” (General Conditions, Bid Forms, etc.).
  • We have not included the cost of outside consultants: (Architect, Structural Engineer, Geotechnical Engineer, etc.).
  • The enclosed “disclaimer” will be attached to the report and is hereby made a part of this agreement.  It is understood that this is a study and not a design.  Drawings and specifications are not included.
  • This proposal does not include involvement with alternative or renewable energy sources such as co-generation, fuel cells, wind or solar.
  • We cannot enter confined spaces (manholes, etc.) and cannot enter spaces containing wiring or equipment over 600 volts (vaults, etc.).  Also, we cannot examine exposed live parts.  If information regarding the above is needed, an electrician may be required.  The cost of an electrician is not included in this proposal.
  • LEED design and accreditation services are not included.

 

FEE:

We propose the following fee:

 

Drawings and specifications………………………………………………………$

Bidding Phase…………………………………………………………………………….$

Shop Drawing Review, Questions, etc.   …………………………………..$

Site Observations/Meetings during construction and

Including written reports                  ………………………………………….. $______________

 

TOTAL   …………………………………………………………………………..$

Reimbursable:  Printing, postage, travel, parking, lodging, and equipment rental will be billed at cost.  Mileage will be billed at $0.__/mile.

Our usual conditions are attached, which you should read carefully.  If our proposal is satisfactory to you, please sign and return it to our office.

 

Sincerely,

( Your company name here)

Your Name Here, Credentials

Your Position Here

 

Accepted by:_____________________________________Date:_______

 

Printed Name/Title

CONTRACT TERMS AND CONDITIONS

 

1)  Late charges are assessed at 1.5% per month from date of invoice or 18% per year.  All collection costs, including attorney’s fees and any court fees are to be paid by client.  2)  If the invoice is not paid in thirty (30) days the consultant may terminate the contract without waiving any claim or right against the client and without any liability whatsoever to the consultant.  3)  Obligations of the client to pay the consultant are not contingent on client obtaining any approvals, acceptances, permits or reimbursements from any parties, individuals, organizations or agencies.  4)  All charges are computed portal to portal from (Insert City and State). 5)  If consultant is ordered to stop work after agreement to this proposal, he will be paid his standard hourly billing rates, up to the limit of the quoted fee.  6)  All consultants’ documents:  original drawings, estimates, specifications, field notes, reports and data are the sole and exclusive property of the consultant as instruments of service.  All consultants’ documents are copyrighted.  All rights reserved.  7) The client (and subsidiaries of the client) agree not to attempt to hire (or discuss employment with) any employees (or former employees) of (Insert Company Name) until one year has passed, since their employment by (Insert Company Name).  8)  Any controversy or claim out of or relating to this contract, or the breach thereof, shall be settled by arbitration in accordance with (Insert your State). Arbitration Association Rules and Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The client understands and agrees that (Insert Company Name) may file a mechanic’s lien upon the land/improvements in the event of nonpayment by client. 9) Estimates of Construction Cost, if any, represent our best judgment as design professionals familiar with the construction industry.  However, it is recognized, that neither the Engineer nor the Owner has control over the cost of labor, materials or equipment; over the Contractor’s methods of determining bid prices; or over competitive bidding, market or negotiating conditions.  Accordingly, we cannot and do not warrant or represent that bids or negotiated prices will not vary from the estimate.

CONCLUSION

There are many forms for quoting consulting engineering  fees. I recommend using a letter because it seem less like a contract. Discover the step-by-step procedures for quoting fees, as explained in detail in Jack’s new book.

Excerpted from The “Complete Guide” to CONSULTING ENGINEERING © 2015 John D. Gaskell. Used with permission of Professional Value Books, Inc. All rights reserved. Order at http://www.TheEngineersResource.com. Use discount code “paperback” and save.

 

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An engineering firm’s first year income

In starting a consulting engineering practice, one of the most important things to do is to estimate your first year income or  “cash inflows”; Income received on a cash basis.

CLIENTS

First, make a list of your proposed clients. If you need to expand your list consider seeking referrals from: your contact list; consultants of a different specialty; land surveyors; and contractors in your specialty. Other potential clients are found in: the yellow pages, on the internet; and in newspapers.

Try to meet with potential clients privately at their office or over lunch at a quiet restaurant. Later, prepare a spread sheet to be included, as one of your supplemental materials, in your Business Plan.

Tell your potential clients that you are making a projection required by your bank. This will help to get their cooperation, but more importantly, their commitment. But, a word of caution here; don’t say anything to anyone to imply that you’re uncertain about being in your own private practice; you are just complying with your banks usual/periodic request. Above all, make it very clear that this discussion is “CONFIDENTIAL” and that you have not yet given notice at your present place of employment and it is very important that they keep this information “private”. This would also be a good time to ask for referrals; anyone else who might want to engage your services.

FEE PROJECTIONS

At the same time, make a list of anticipated projects from each client over your first 12 months in business; include estimated fees and start dates. This verbally commits the client to specific projects for you. This is FANTASTIC marketing strategy, disguised as information needed by your bank.  Actually, the answers to most of these questions will be unknown, but record what you can. Complete a spread sheet of this data using “unknown” for names of some projects, but estimating fees for each and, (based on start dates), the amount of revenue anticipated each month. Monthly cash inflow is difficult to predict. I have been told that the average is between 110 and 120 days.

I always billed monthly, based on my estimate of the % complete of the project phase on which we were currently working. However, some Clients only bill when a phase is complete or “when they get around to it”. I recommend calling the “slow-billers” a few days before the end of the month to verify the correct % and to pressure them to actually bill their client that month.

Create a spread sheet similar to Figure 4-6 FIRST YEAR CASH INFLOW. (NOTE: All spreadsheets can be downloaded from my website: TheEngineersResource.com, at no cost.) You will, most likely, need a “Crystal Ball” for these projections, but try to be realistic because your go/no go/wait decision will be based, to a great extent, on this information. After you have made a “go” decision, re-do your projections with a more optimistic view, before submitting your Business Plan for financing.

EXAMPLE

I filled out the cash inflow information in (blank) Figure 4-5, thus creating Figure 4-6. The result is a “hypothetical” first year cash inflow projection for fees to be received. Allow 2-4 months after billing to actually receive this income. Again, resist the temptation to proportion these estimates to your situation.

Figure 4-5

 

 

 

 

 Figure 4-6

 

“Excerpted from The Complete Guide to CONSULTING ENGINEERING © 2015 John D. Gaskell. Used with permission of Professional Value Books, Inc. All rights reserved. Order from http://www.TheEngineersResource.com.” Use discount code “paperback” and save.