Professional Documents
Culture Documents
Section 4 Charging For Civil Engineering Services 4.1 General
Section 4 Charging For Civil Engineering Services 4.1 General
Section 4 Charging For Civil Engineering Services 4.1 General
4.1 GENERAL
Charges for engineering services are usually computed using one of six methods:
Combinations of methods of payment for different phases of the contract may be used.
The method or combination of methods used depends upon the nature, Scope, and
complexity of services required by the client. The first four methods are based upon the
Civil Engineers costs to perform services. They are particularly applicable to
assignments where the scope of services is not self-defined. The fixed price and
percentage of construction cost methods are based upon a specific deliverable and do
require that the project scope be well defined. The cost plus fixed fee method provides
more flexibility to accommodate both scope and fee changes than do either the fixed
price or percentage or construction cost methods.
The potential risks and problems faced by both the client and the Civil Engineer, when
the scope of services Is not well defined, should be recognized and discussed during
early negotiations. Often, initial estimates of maximum engineering costs for projects of
uncertain scope are requested by the client for budgeting purposes. Such budget
estimates should state that they do not constitute an agreed-upon maximum and that
they are to be revised as the scope of services becomes better defined.
When a reimbursement method such as salary cost times multiplier, hourly billing rate,
per diem, or cost plus fixed fee is chosen because of uncertainty of the scope of
services. It is logical to propose that an upper limit (maximum amount) for these
services be included in the agreement. The inconsistency of such a proposal is
proportional to the uncertainty of the scope. However, these methods are used with a
"not-to-exceed" amount. In this case, it is important for the client and the engineer to
agree beforehand on a method for adjusting the "'not to-exceed" amount when
adjustment is warranted. One reasonable approach to compensation for uncertain
assignments is to require the Civil Engineer to inform the client when engineering costs
are approaching 75 percent of a stated budget figure and to forecast the probable total
cost. This provision gives the client and the engineer an opportunity to examine
progress at that point and, if appropriate, to revise either the original budget or not-to-
exceed amount or the scope of remaining services.
The charge for engineering services using the fixed price or the percentage of
construction cost methods is based entirely on the scope of services. These methods
may be appropriate where the scope of services is well defined and the Civil Engineer's
costs are within his/her control. Certain types of investigations and designs are well
suited to these methods of determining charges. Determination of charges for services
such as resident project representation during construction, where the Civil Engineer's
costs may be affected significantly by the contractor’s performance can be
accomplished more equitably by one of the methods based on the actual cost of service.
Occasionally, a Civil Engineer has unique qualifications, and/or expertise that is not
readily available, and/or computer programs that materially decrease the time required
for project execution. In some instances, the Civil Engineer may demonstrate that
his/her proposal will make the project easier, faster, safer, or less expensive to achieve
the client’s objective.
Similarly, the client may wish the Civil Engineer to undertake a project characterized by
an accelerated schedule, non-routine services, and/or high risk activities under these
circumstances charges for engineering services may be based on value pricing, which
reflects a premium rate not tied directly to the Civil Engineer's cost, but based on the
Civil Engineers unique qualifications or the extenuating circumstances. One of the more
common value pricing tasks is providing expert witness services.
Compensation on the basis of the salary cost times an agreed multiplier is a frequently
used method of determining charges for engineering services. With this method,
charges for engineering services are based mainly on direct salaries. It is therefore
advisable that the Civil Engineer reach an agreement with the client on salary ranges for
each classification of service applicable, as well as on the time period over which they
can be guaranteed. This may help avoid future surprises, misunderstandings, and
disputes.
The salary cost times multiplier method may be utilized as either a multiplier times
salary cost (two multiplier version) or a multiplier times direct salary cost (single
multiplier version)
The direct salary times multiplier: or as it is frequently called the direct labor times
multiplier version is very similar to the salary cost times multiplier with the exception that
it applies a single multiplier to unburdened direct labor costs, i.e., direct salaries without
employee benefits. The single multiplier included costs associated with employee
benefits, overhead, and a margin for contingencies, risk, and profit. The direct salary
times multiplier version of this method is being utilized more frequently due to the
simplistic nature of utilizing a single multiplier. Of the two versions of this method the
salary cost times multiplier is the more easily accountable due to the basic premise of
providing two separate multipliers. One multiplier is based upon definitive costs. i.e.,
employee benefits end the other multiplier based upon costs which may vary from
project to project.
The percentage of construction cost method is seldom used raw. Because of increasing
complexity and large variation in tasks for projects, the percentage of construction cost
fee curves no longer have a direct correlation to the required engineering fees for
specific projects. Owners should either use experienced "in-house staff or retain
consultants to develop detailed program budgets for construction costs, right of way,
legal, administrative, engineering services and permits.This method may be used to
determine the compensation of the engineer for services
where the principal responsibility is the detailed design or construction supervision of
facilities to be constructed.
Construction Cost is defined as the estimated total cost of constructing the facility to be
covered by the proposed detailed design or construction supervision services, excluding
the fees and other costs of such services, the cost of land and right-of-way, and legal
and administrative expenses
Over the years, engineering experience has established some appropriate correlations
between engineering costs and construction costs for certain types of engineering
design, where design procedures and materials of construction are more or less
standardized. These correlations have resulted in various curves and schedules which
have been widely used.
The validity of the percentage-of-construction-cost method rests upon the assumption
that detailed design and construction supervision costs vary in proportion to the cost of
construction. When judiciously applied, and with due consideration of the ranges within
which engineering scope may vary, this method is valuable as a tool for general
comparison with line-based fees for design services. Its acceptance over many years
also affords a valuable guide for judging the reasonableness of proposal for consulting
services.
The percentage fee shall consider the type, complexity, location, and magnitude of
construction cost of the project and shall not exceed the following percentages of
estimated construction cost
a. Feasibility studies-three percent (3%);
b. Detailed engineering design-six percent (6%);
c. Detailed architectural and engineering design-eight percent (8%); and
d. Construction supervision-ten percent (10%)
These percentages include only those works normally undertaken in arriving at the
expected outputs and do not include special studies or investigations indicated under
Section 2.5 hereof, the outputs of which are ends by themselves.
It is further emphasized that the above percentages are only ceilings and it does not
necessarily mean that the said percentages shall always be adopted for each project.
The actual percentage or particular project will depend on the factors mentioned above,
i.e., the type, complexity, location and magnitude of construction cost. As a general rule,
projects within a higher range of construction cost will have lower percentages of fees
than those projects within a lower range of construction cost. The above limits
percentages shall be reduced to the extent that some of the activities undertaken by the
client.4.8 SCHEDULE OF MINIMUM BASIC FEES
Rates of compensation for Civil Engineers engaged in various capacities are given in
Annex B. The PICE shall regularly update the schedule of fees stipulated in the Annex.
Certain principles should however be observed as follows.
1. When doing work on foreign assisted projects, or in projects where international
consultants participate, the Civil Engineer performing similar or equivalent work,
should accept compensation that approximates the international standard rates
(see Section 6.1.1 of the NEDA Guidelines).
2. Civil Engineers regularly employed in the private sector shall have a minimum
compensation corresponding to 10% more than the minimum wage prevailing in
the region as basic monthly salary. Civil Engineers employed in the government
sector shall have a minimum basic monthly salary corresponding to appropriate
entry positions provided by the Civil Service Commission.
3. A Civil Engineer employed In the private sector who signs and seals the Civil
Engineering plans, specifications and other related documents of a certain
project for and in behalf of his employers shall be compensated with a minimum
of 10% of the professional fee for the project, over and above the basic monthly
salary.