charges for engineering services are usually computed using one of 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”)
charges for engineering services are based
mainly on direct salaries.
Salary cost times multiplier plus direct non-salary expense (“Reimbursable”)
The salary cost times multiplier method may be utilized as either:
- a multiplier times salary cost (TWO MULTIPLIER
VERSION) - a multiplier times direct salary cost (SINGLE
MULTIPLIER VERSION)
Frequently called the “DIRECT LABOR TIMES MULTIPLIER” version
Multiplier Times Direct Salary Cost
(Single Multiplier Version)
It applies a single multiplier to unburdened direct labor costs (i.e., Direct salaries without employee `benefits)
Multiplier Times Direct Salary Cost
(Single Multiplier Version)
It includes costs associated with employee benefits, overhead and a margin for contingencies, risk and profit.
Multiplier Times Direct Salary Cost
(Single Multiplier Version)
It is more easily accountable due to the basic premise of providing two separate multipliers.
Multiplier Times Direct Salary Cost
(Single Multiplier Version)
factors that are pertinent to the salary
cost times multiplier version
- salary cost
- multiplier
- direct non-salary expenses
- the civil engineer’s OVERHEAD
- accounting records
defined as direct salaries plus employee benefits and includes salaries for partners or principals and for technical, professional, administrative and clerical staff directly.
salary cost
which is also 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.
multiplier
usually incurred in engineering engagements may include the following:
a) living and travelling expenses of principals and employee when away from the home office on business connected with the project.
b) identifiable communications expenses, such as long- distance telephone, facsimile, telegraph, shipping charges, and special postage charges.
c) expenses for services and equipment directly applicable to the project such as for specialized technical equipment, special legal and accounting services, special computer rental an programming services that are not applicable for inclusion in general overhead.
d) Identifiable drafting supplies, stenographic supplies and reproduction work as distinguished from such supplies and expenses applicable to several projects.
e) Expenses for unusual insurance and specialized health and safety programs and for special clothing for projects with extraordinary risk such as toxic and hazardous waste conditions.
direct non-salary expenses
comprises a major portion of the compensation generated by the multiplier on salary cost, includes the following indirect costs:
a) provisions for office expenses - light, heat, telephone depreciation, rental furniture, rent, drafting equipment and engineering instruments, transportation expenses, and office and drafting supplies not identifiable to a specific project.
b) taxes and insurance other than those included as salary cost.
c) library and periodical expenses
d) executive, administrative, accounting, legal, stenographic and clerical salaries and expenses plus salaries or imputed salaries of partners and principals.
e) business development expenses, including salaries of principals and employees so engaged.
f) provision for loss of productive time of technical employees between assignments, and for time of principals and employees on public services assignments.
g) costs of acquiring and maintaining computers, development of software, and training staff when not billed as a direct cost.
the civil engineer’s OVERHEAD
- detailed hourly time records must be maintained for principals, engineers and other employees who devote; time to the project.
- applicable payroll records, together with the receipts or other documents to substantiate chargeable expenditures, must be available for inspection audit b the client if required by contract
accounting records
- It is very similar to salary cost times multiplier method (Two- multiplier)
- it includes all direct personnel expense, overhead and profit.
hourly billing rate
- refers to an eight-hour day.
- when per diem services are furnished, the Civil Engineer should be compensated for all the time devoted to providing them, including travel and standby time.
per diem
The per diem charge should be based on:
- the complexity, risk, and important of the services
- the Civil Engineer’s professional standing, expertise, and breadth of experience
- The Civil Engineer is also reimbursed for travel and subsistence costs and for other out-ofpocket expenses incurred when away from the home office.
- rates can vary widely, depending on employee classification, regional location, and period of service.
per diem
the Civil Engineer is reimbursed for the actual costs of all services and supplies related to the project, including:
- salary costs
- overhead (The Civil Engineer should be prepared to support the basis for overhead charges.)
- direct non-salary expenses
- fixed-fee, an amount to compensate the Civil
Engineer for contingencies, interest on invested
capital, readiness to serve and profiy
cost plus fixed fee (CPPF)
this requires, as a pre-requisite to equitable negotiations, that the client and the Civil Engineer define and agree upon the scope of services the Civil Engineer is to perform.
cost plus fixed fee (CPPF)
this can also be used when the Civil Engineer is required to start providing service before the detailed scope of services can be determined. The following consideration apply:
- the general scale and intent of the project should be fairly well defined, even if the full scope is indetermiate.
- the types of service to be performed by the Civil Engineer should be agreed upon and fully set forth.
cost plus fixed fee (CPPF)
One advantage of this method is that it eliminates any suspicion that the costs have been allowed to grow, in order to increase the Civil Engineer’s fee.
cost plus fixed fee (CPPF)
- this method is frequently used for investigations and studies and for basic services on design type projects.
- this method for basic services on certain design-type projects can also be computed as an appropriate percentage of estimated construction costs
fixed price
A __________ agreement should contain a clearly stated time period during which the services will be performed and a provision for adjustment of compensation if the project is delayed for reasons beyond the Civil Engineer’s control.
fixed price
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
percentage of construction cost
