Wise consulting engineers always calculate engineering fees in two ways:
First, they estimate the hours that will be required and the associated costs, based on their billing rates.
Second, they estimate the expected fee based on a percentage of the construction cost of the work of their disciplines.
However, they often overlook other issues that should be considered when determining an engineering fee, such as:
What other work do you expect to have during the likely schedule of this project? (And, remember that dead-lines usually creep.)
If you are likely to be swamped – quote high.
If you expect to be idle – quote low
How much competition do you think that you have?
Maintain a reputation to distinguish your firm ahead of others.
How good a client is this?
Always give loyal clients who are easy to work with a break.
Is this phase 1 of a multi-phase project?
The first phase of a multi-phase project is a good time to be constrained.
How hungry are you?
If times are tough, a small profit is better than a loss.
Are you a “Start-Up”?
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.
Will the project require overtime?
Most firms are concerned about paying hourly employees “over-time”. I never was. 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. Your employee’s hourly billing rate should be 2.5 to 3 times what you actually pay, in order to cover benefits, taxes, overhead and profit. If you pay an employee $60/hour, his billing rate is about $175. That rate covers all the items listed, based on a 40 hour work week. If he works overtime, you pay him $60 x 1.5 = $90 plus a little extra in payroll taxes and electricity and heat. But the cost to you, for that extra hour, is a lot less than $175.
Some projects are “losers”. Try to pass-up most of them.
If you can’t, at least, break-even with a realistic estimate of the hours required, your time is better spent seeking other work.
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 and your proposals will win you work.
There are many factors, which are often overlooked when consulting engineers quote fees. 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 or at http://www.TheEngineersResource.com. Use discount code “paperback” and save.