Price Competition for Engineering Services

an Editorial by Milo S. Ketchum, Editor
Structural Engineering Practice - Volume 1, Number 3, 1982

Since the Supreme Court decisions on the restraint of trade by professionals, and the enforcement of new rules by the Feds, price competition for engineering services has raised it ugly head. Now that we have it, how do we handle it? I am not thinking so much of outright bidding but the practice of having to submit proposals on many jobs and the decision to select the engineer based mostly on price.

In our office, we still have regular architectural clients that give us most or all of their work, but many of them ask us to make proposals, including a statement of fees, for projects. This puts an extra burden on management, we must have a marketing coordinator, must estimate costs carefully (if that is possible), and must tighten up our control of design and drafting. Philosophically it is very difficult for our office to do less design or cut down on our drafting standards, although everyone agrees that we are not 100 percent efficient. It may be a good thing, in the long run, for structural firms to have this pressure to increase their efficiency. The risk is that the quality and services may not be as good.

What small amount in dollars, a client may appear to save in fees through competitive bidding, will most certainly be lost in the cost of construction. If the client is the owner, for example a developer, then he should understand this. You cannot buy services off the shelf. if the client is an architect, then his fees may also be subject to price competition. However, if the cost of the structure is high, then the architect may have to sacrifice what are important (to him) aesthetic details.

Much of the cost of construction is saved in the preliminary design and this portion of the work is the most difficult to estimate. This is the area where the experience and ability of the engineer is most important. if services are reduced then:

  • Far fewer ideas are presented to the architect to select the basic structural system in a manner that will result in the lowest cost and the best aesthetics. The same system will be used time after time because all the details have been developed and can be taken out of a drawer.

  • Little effort is expended to develop cost saving construction details or to work with contractors or suppliers to reduce costs. What may appear to the engineer to be low in cost, may actually be more expensive when subject to the scrutiny of the contractor.

  • Less time is spent in fine tuning design and details to save money for the owner.

  • The engineer will be reluctant to spend the 'time in the field to supervise construction properly. This creates time delays and may increase construction costs.

A good engineer with enough money (time) to do a first class job on a project can save his total fee may times over.

Price competition, (or bidding to use the ugly word), might not be so bad if every firm could bid on the same services. Usually they are not well defined, and depend on the generosity of the engineer. Would a set of specifications or standards prepared by a professional organization such as the ACEC help? I think it should be studied and considered. Here are some points that might be included:

  • It is understood that prices quoted shall not be the only basis for selection of the engineer. The experience, capacity, availability, and past relations with the firm should also be considered and properly evaluated.

  • If a price is given for services, then the engineer is entitled to know what the fees quoted by other firms, and for the basis of selection for the firm chosen. When an engineering firm spends a considerable amount of time and money for the preparation of a statement of qualifications, then it deserves some feedback in evaluating its price proposal. This is standard practice for the construction industry.

  • Standard methods for quotation of fees should be delineated, for example by lump sum, by square feet, or by a percentage of the cost of the structure or the building. The method should be selected by the owner or by the architect before the statement of qualifications is requested.

  • Of course, the extent of services and the portion of the fees applicable to each part of these services should be indicated by the architect. A standard contract can be referenced.

  • The preliminary design should be a separate part of the proposal and preferably be based on an hourly rate.

Such a document would have to be discussed thoroughly before it could be introduced as a standard. Structural engineers, in the past have appeared to be the least cooperative of any professional group. Maybe the introduction of price competition will pull them together.

Milo S. Ketchum

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