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How Engineers get Paid REMUNERATION FOR SERVICES Consulting Engineers perform services on a professional fee basis. The term "fee" represents the total charges for engineering services, including all project expenses incurred by the Consulting Engineer. Most engineering projects result in construction and have long-term operational ramifications. Accordingly, the cost of engineering services is typically a small percentage of the full (life-cycle) cost of a project. The most cost-effective solution to a Client's needs will not usually result from minimum or lowest cost engineering services. This Section outlines two primary methods for determining a consulting Engineer's fee. These methods are: 1. Agreed Fixed Fee For those projects where a clearly defined scope of services is agreed to by a client and a Consulting Engineer, fees can reasonably be established as an Agreed Fixed Fee. In these cases, both the Client and the Consulting Engineer should be clear in their written agreement as to the scope of work and the extent and level of service to be provided. 2. Time and Expenses On the other hand, time-based fee methods are based on the premise that Consulting Engineers are reimbursed for their costs to deliver services plus a reasonable profit for their business. Clients should be aware that these time-based fee methods provide an opportunity to overcome the many uncertainties that often exist at the start of a project. The critical concern here is that, unless the full scope of services can be established, it is nearly impossible to accurately estimate the cost of engineering services in advance of the start of a project. Significant financial limitations at the start of a project can restrict the Consulting Engineer from exploring options which may have an overall net benefit to the project. Similarly, the amount of time required to observe and inspect construction is largely in the control of the Contractor, not the consulting Engineer. Accordingly, the type of quantity of services required may, and in many cases should, vary. Therefore, time-based fee methods are more appropriate.
Historical data indicates that the initial capital cost of a project is approximately 10 - 15% of the total lifetime cost, with operations and maintenance comprising the remaining costs. Within the initial capital cost is the cost of engineering. Typically, the cost of Design Services and Services During Construction represents 6 - 18% of the construction cost of the project, with the low percentage applying to large straight forward conventional projects and the higher percentage applying to small technically complex projects. Therefore, the engineering investment represents approximately 1 to 2% of the total lifetime cost of the Project. |
