TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES

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CE 512 (CE Laws, Ethics, and Contracts)

CE52S1

Assignment # 2

Submitted by:
MACA, ALVIN DAVE A.
 CE Laws Assignment # 2

Read Section 4 and 5 PICE MOPP

Question

Answer the following question

1.) Enumerate, describe and differentiate methods of charging for civil engineer.

2.) Explain what are the component of the told project cost.

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INTRODUCTION

The first four methods are based upon C.E Costs to perform services

 For uncertain assignments is to require CE to inform client when engineering costs are
approaching 75% for a stated budget figure and to forecast the probable total cost.
 The client may wish the CE 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 reflect a premium rate not tied
directly to the CE cost, but based on the CE unique qualifications or the extenuating
circumstance.

Charges for engineering services are usually computed using one of six methods.

 Salary cost times multiplier plus direct non-salary expenses ("Reimbursable")

 Hourly billing rates plus reimbursable.
 Per diem
 Cost plus fixed fee("CPFF")
 Fixed price.
 Percentage of construction cost (“Percentage")
 SALARY COSTS TIME MULTIPLIER PLUS DIRECT NON SALARY EXPENSE
Method of determining charges for engineering services, with this method, charges for engineering
services are based mainly on direct salaries. 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 multiplier times direct salary cost (Single multiplier version)

The direct salary times multiplier: or as it is frequently called the Direct labor time multiplier version is
very similar to salary cost times multiplier with the exception that is applies a single multiplier to
unburdened direct labor costs i.e.., direct salaries without employee benefits.

The single multiplier includes costs associated with employee benefits, overhead and margin for
contingencies risk and profit.

The direct salary time 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 time multiplier is the more easily accountable due to
the basic premise of providing two separate multipliers. One multiplier is based upon definitive cost. i.e.
employee benefits and the other multiplier based upon costs which may vary from project to project.

1.) Salary cost - is defined as " direct salaries plus employee benefits " and includes salaries for
partners or principals and for technical, professional, administrative and clerical staff directly chargeable
to the project: sick leave, vacation, holiday and incentive pay.

2.) Multiplier which is applied to salary cost is a factor that compensates the CE for overhead. plus, a
reasonable margin for contingencies, interest or invested readiness to serve and profit. The size of the
multiplier will vary with the type of services, the nature of experience of the CE firm and geographic
area in which its office is located. The average multiplier should be between 2.5 and 3.0 times the
average salary cost. However, a higher multiplier is usually applicable for services requiring
recommendations based on extensive experience and special knowledge or for services involving expert
testimony in legal proceedings.

3.) Direct non-salary expenses usually incurred in engineering engagements may include the
following:

 Living and traveling expenses.

 Identifiable communication expenses, such as long distance telephone, facsimile, shipping etc.
 Services and equipment directly applicable to the project.
 Identifiable drafting supplies, stenographic supplies and reproduction work.
 Unusual insurance and specialized health and safety programs.
4.) Overhead which comprises a major portion of the compensation generated by multiplier on salary
cost, includes the following direct costs.

 Provisions for office expenses-light, heat, telephone depreciation, rental furniture, rent, drafting
equipment and engineering instrument, transportation expenses not identifiable to specific
project.
 Taxes and insurance other than those included as salary cost.
 Library and periodical expenses
 Executive, administrative, accounting, legal, stenographic, and clerical salaries and expenses
 Business development expenses
 Provision for loss of productive time of technical employees between assignment
 Cost of acquiring and maintaining computers, development of software

5.) Accounting records. CE who performs services under a salary cost times multiplier agreement or
other cost-based agreement. Applicable payroll records with receipts or other documents to
substantiate chargeable expenditures must be available for inspection audit by the client.

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 include all direct personnel expenses, overhead and profit. CE
firms may elect to utilize this method of compensation on project where the scope of services is not well
defined or to simplify accounting and record keeping.

PER DIEM
The term per diem normally refers to an eight-hour day. Direct personal services of the type described
in Section 2. Particular suited to expert witness or other legal-type services or short-term engagements
involving intermittent personal services. CE should be compensated for all of the time devoted to
providing them, including travel and standby time.

The Charge should be based on the complexity, risk and important of the services. CE is also reimbursed
for travel and subsistence costs and for other out-of-pocket expenses incurred when away from the
home office. Rates can vary widely, depending on employee classification, regional location, and period
of services.
 COST PLUS FIXED FEE
Ce is reimbursed for the actual costs of all services and supplies related to the project including:

 Salary costs
 Overhead
 Direct non-salary expenses
 Fixed fee, an amount to compensate the CE for contingencies, interest on invested capital,
readiness to serve and profit.

The cost plus fixed fee basis requires, as a prerequisite to equitable negotiations that the Client and EG
must agree upon the scope of services the CE perform.

The cost plus fixed fee method can also be used when CE is required to start providing services before
the detailed scope of services can be determined. In such cases the following considerations apply.

 General scale and intent of the project should be fairly well defined, even if the full scope is
indeterminate.
 Type of services to be performed by CE should be agreed upon and fully set forth. The agreements
should also provide for appropriate adjustments. In the event that the physical scope of the
project, time of completion or level of effort and services required are materially changed.

The fixed fee amount varies with the complexity and scope of engineering services required. It is
frequently calculated as a percentage of salary costs, overhead, and direct non-salary expenses.

FIXED PRICE
The fixed price method of compensation is frequently used for investigations and studies and for basic
services on design type project where the scope and complexity of the assignment are clearly and fully
defined. 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. For certain design-type projects can also be computed as an
appropriate percentage of estimated construction cost.

A fixed price agreement should contain a clearly stated time period during which the services will be
performed and a provision for adjustment of compensation if project is delayed for reasons beyond CE
control.

For design services, there should be a provision for changes required after approval of the preliminary
design, with a clear understanding as to where the final approval authority lies.
 PERCENTAGE OF CONSTRUCTION COST
This method may be used to determine the compensation of the engineer for services where the
principal responsibility is 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.

TOTAL PROJECT COST

Probable total cost is a major concern of the client throughout the planning design, and construction
phases of a project. The probable total capital cost, often used to establish budgets for a typical project.

PROFESSIONAL ENGINEERING COSTS

A Civil Engineer if often engaged to make a study and render a planning report on contemplated project
such as cost for field, traffic surveys, planning analyses, geotechnical explorations and analyses, to direct
engineering costs.

CONSTRUCTION COST
Construction Cost is 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, right of way and legal administrative expenses of the agency. The estimated
construction cost must be approved by the client first.

LEGAL, LAND, ADMINISTRATION, STAFFING AND FINANCIAL COSTS

These costs, which include audits, the cost of issuing bonds, land coast, and interest for borrowed money
during construction are part of probable total project cost.

CONTINGENCY ALLOWANCE
To provide for intangible costs, contingencies should routinely be added to the basic cost estimate. It is
common practice to add 20% or more to the estimated probable total project cost at the completion of
the study end report phase, total project cost at the completion of the end report reducing this to 10%
or for final design for 5% when the construction bids become known.