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Report 3 Charging of Engineering Services

There are several methods for determining charges for engineering services described in the document. The most commonly used method is salary cost times a multiplier, which is based on direct salaries plus benefits and applies a multiplier to account for overhead costs and profit. Other methods include hourly billing, per diem rates, cost plus fixed fee, and percentage of construction cost. The choice of method depends on factors like the complexity of the project and whether the scope of work is clearly defined.

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945 views4 pages

Report 3 Charging of Engineering Services

There are several methods for determining charges for engineering services described in the document. The most commonly used method is salary cost times a multiplier, which is based on direct salaries plus benefits and applies a multiplier to account for overhead costs and profit. Other methods include hourly billing, per diem rates, cost plus fixed fee, and percentage of construction cost. The choice of method depends on factors like the complexity of the project and whether the scope of work is clearly defined.

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CHARGING FOR ENGINEERING SERVICES

Salary cost times multiplies plus direct non-salary expense

- Frequently used method of determining charges for engineering services.


- Based on direct salaries
- Engineer and client should reach an agreement on salary ranges for classifications of services
applicable as well as time period over which the services are guaranteed.
- Compensation on the basis of the salary cost times an agreed multiplier.

2 versions of costs cost time multiplier plus direct non salary expenses

- Multiplier times salary cost - two multiplier version


- Multiplier times direct salary cost - single multiplier version

Direct salary times multiplier

- Applies a single multiplier to unburdened direct labor costs like risk, and profit.
- Usually called direct labor times multiplier

Multiplier times salary cost (two multiplier version)

- More easily accountable due to providing of two separate multiplier.


- One Multiplier is the basic one for definitive costs and the other multiplier is for project to
project basis

Factors affective salary cost times multiplier version

Salary cost

-Direct salaries plus employee’s benefits and direct labor cost salaries

 Partners
 Technical
 Professional
 Administrative
 Clerical staff

Employee Benefits

 Vacation leave
 Sick leave
 Maternity leave
 Holiday and incentive pay
 Contributions for social security
 Medical
 Worker’s compensation insurance retirement
Multiplier

 It compensates the Civil Engineer for overhead plus a reasonable margin for
contingencies, interest, supplies, and expenses applicable to the project.
 Average multiplier is between 2.5 to 3

Direct Non-salary Expenses

 Living and travelling expenses


 Identifiable drafting supplies
 Identifiable communication expenses
 Expenses for project equipment
 Expenses for unusual insurance and specialized health and safety programs and special
clothing for project with extraordinary risks i.e. Hazmat suits, Protective suits

Engineer’s overhead

 Taxes and insurance other than those included as salary


 Provisions for office expenses
 Library and periodical expenses
 Business development expenses
 Technological costs
 Provisions for loss of productive time of technical employees
 Executive, administrative, accounting, legal, clerical expenses

Accounting records

 Logbook where expenses are being logged or stated


 Record of appropriate Expenditures

HOURLY BILLING METHOD

• The same with salary cost times multiplier method.

• Includes all compensation.

• Non-Salary expenses are a separate item of reimbursement usually with service charge.

PER DIEM

 Particularly suited to expert witness or other legal-type services and to other short-term
engagements involving intermittent personal services
 Per diem can vary widely depending on employee classification, regional location, and period of
service.
Cost Plus Fixed Fee

The Civil Engineer is reimbursed for the actual costs of all services and supplies related to the project

• Salary Cost
• Overhead
• Direct non-salary expenses
• Fixed Fee

Cost Plus Fixed Fee Basis

• The client and the Civil Engineer define and agree upon the scope of service the Civil Engineer is
to perform
• The scope of services, cost estimate, and fixed fee should be incorporated into the client-
engineer agreement
• The fixed fee amount varies with the complexity and scope of the engineering services required.
• The list of reimbursable items should be complete and detailed.
• One advantage of this method is that it eliminates any suspicion that the costs have been
allowed to grow

Fixed Price

• It is frequently used when the the scope and complexity of the assignment are fully and clearly
defined.
• Calculated as the sum total of estimated engineering cost for salaries, overhead and non salary
expenses, allowance for contingencies, interest on invested capital, readiness to serve, and a
reasonable amount for profit
• The agreement should contain a clearly stated time period of the project
• Partial payments should be made to the C.E. at stated intervals

PERCENTAGE OF CONSTRUCTION COST

Construction Cost

• Estimated total cost of construction

• Expense incurred by a contractor for labor, material, equipment, financing, services, utilities,
etc., plus overheads and contractor's profit. Costs such as that of land, architectural design,
consultant and engineer's fee are not construction costs.
• Some fees are excluded

Percentage of construction cost

• The validity of the percentage-of-construction-cost method rests upon the assumption that
detailed design

• This method is valuable as a tool for general comparison with line-based fees for design 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:

• Feasibility studies – 3%

• Detailed engineering design – 6%

• Detailed architectural and engineering design – 8%

• Construction supervision – 10%

• The actual percentage for a particular project will depend on the factors mentioned, i.e. the
type, complexity, location and magnitude of construction cost.

Schedule of Minimum Basic Fees

• 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.

• 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.

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