Central Colleges

CE513

Charging for Civil Engineering Services

Purpose of the study

 To give us a better knowledge on what and how the charging been made in Civil
Engineering services.

Six methods on how to compute the charges for civil engineering services
 Salary cost times multiplier plus direct non-salary expense (“Reimbursable”)
 Hourly Billing Rates plus Reimbursable
 Per Diem
 Cost plus fixed fee (“CPFF”)
 Fixed Price.
 Percentage of Construction Cost (“Percentage”)

Salary cost times multiplier plus direct non-salary expense (“Reimbursable”)

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 civil
engineering services are based mainly on direct salaries.
The salary cost times multiplier method may be utilized as either a multiplier times the
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 the multiplier with the exception that it
applies a single multiplier to unburdened direct labor cost, i.e., direct salaries without employees’
benefits. The single multiplier includes cost associated with employees’ benefits, overhead, and a
margin for contingencies, risk, and profit.

The following factors are pertinent to the salary cost times multiplier:
1. Salary cost is defined as the “direct salaries plus the employee benefits”.
2. Multiplier which is applied to salary cost is a factor that compensates the Civil Engineer
for overhead plus a reasonable margin for contingencies, interest or invested capital
readiness to serve, and profit.
3. Direct Non-salary expense usually incurred in engineering engagements may include the
following:
 Living and traveling expenses
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CE513

 Identifiable communications expenses

 Expenses for services and equipment directly applicable to the project
 Identifiable drafting supplies, stenographic supplies, and reproduction work
 Expenses for unusual insurance and specialized health and safety programs

4. The Civil Engineers overhead which comprises a major portion of the compensation
generated by the multiplier on salary cost, includes the following indirect cost:
 Provision for office expenses
 Tax and insurance other than those included as salary cost
 Library and periodical expenses
 Executive, administrative, accounting, legal, stenographic, and clerical salaries and
expenses (Other than salaries included in salary costs and expenses)
 Business development expenses
 Provision for loss of productive time
 Cost of acquiring and maintaining computers, development of software, and training staff
when not billed as direct cost

5. Accounting Records

Hourly Billing Rate

The Hourly billing rate method of compensation is very similar to the salary cost times
multiplier method in that the hourly billing rate includes all direct personnel expense, overhead
and profit. Direct non-salary expenses are a separate item for reimbursement, usually with a
service charge.
Per Diem
The term ‘per diem’ normally refers to an eight-hour day. Direct personnel services are
frequently charged on a per diem basis

Cost plus fixed fee

Under a cost plus fixed fee agreement, the Civil Engineer is reimbursed for the actual
costs of all services and supplies related to the project, including:
 Salary costs
 Overhead
 Direct non-salary expenses
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CE513

 Fixed fee, an amount to compensate the Civil Engineer for contingencies, interest on
invested capital, readiness to serve, and profit.

Fixed Price
The fixed price can be calculated as the sum total of estimated engineering costs for
salaries, overhead and non-salary expenses, an allowance for contingencies, interest on invested
capital, readiness to serve, and a reasonable amount for profit.
Fixed price compensation for basic services on certain design-type projects can also be
computed as an appropriate percentage of estimated construction cost.

Percentage of Construction Cost

The Percentage of construction cost 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.

Reference: https://www.academia.edu/7380400/CHARGING_FOR_CIVIL_ENGINEERING_SERVICES

Charging of Civil Engineering Services

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CE513

Charges for Civil Engineering Services can be computed usually by one of these six methods:

 Salary cost times multiplier plus direct non-salary expense (“Reimbursable”)

 Hourly Billing Rates plus Reimbursable
 Per Diem
 Cost plus fixed fee (“CPFF”)
 Fixed Price.
 Percentage of Construction Cost (“Percentage”)

Salary cost times multiplier plus direct non-salary expense (“Reimbursable”)

- in this method, the charges for civil engineering services were mainly on direct salaries of the
laborers
-salary cost is defined as the direct salaries plus the employee’s benefits while the multiplier
which is applied to salary cost is a factor that compensates the civil engineer for overhead plus a
reasonable margin for contingencies, interest or invested capital readiness to serve, and profit
Hourly Billing Rates plus Reimbursable
- for this method, there is a similarities in salary cost times multiplier method in that the
hourly billing rate includes all direct personal expense, overhead and profit.

Per Diem
- the term “per diem” normally refers to an eight- hour day. The direct personnel services
are frequently charged on a per diem basis

Cost plus fixed fee (CPFF)

- under this method, the Civil engineer is reimbursed for the actual cost of all the services and
supplies related to the project; these includes the salary cost, overhead and direct non-salary
expenses

Fixed Price
- it can be calculated as the sum total of estimated engineering cost for salaries, overhead and
non-salary expenses, an allowance for contingencies, interest on invested capital, readiness
to serve, and a reasonable amount for profit.

Percentage of construction cost

- 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.