Fees for Consulting Engineering Services

The word "fee" is generally assumed to be the money paid for services rendered. As the Consulting Engineer is a private business person in professional practice, the fee charged to clients must cover pertinent engineering business costs. These include the salaries of employees and their pensions, group insurance, medical, and other fringe benefits. In addition, the Consulting Engineer has operating expenses, such as office rent, furniture, telephone service, professional liability insurance, bank interest on borrowed funds to finance client billings until they are paid, municipal and professional licenses, accounting and legal fees, postage, software, insurance, repairs and maintenance.

The fee charged to a client is based on these costs as a function of the available working time in the year. This enables the Consulting Engineer to determine the fee per hour or per day (per diem) for each employee. Similarly, other time/dollar units are determined for groups or teams of engineering personnel for a particular project to be completed over a specific period of time.

Depending on the type of project, nature of the work, and the client/engineer working agreement for the conduct of the assignment, the following fee arrangements are commonly used:

  1. Per diem, plus out-of-pocket expenses
    (applies to all types of projects except project and construction management)
  2. Payroll cost multiplied by a factor, plus out-of-pocket expenses
    (applies to all types of projects except project and construction management)
  3. Payroll cost multiplied by an overhead factor, plus fee, plus out-of-pocket expenses
    (applies to all projects except surveys, exploration, and reports; advisory services; short assessment studies and preparation of terms of reference)
  4. Fixed fee (applies to surveys, exploration and reports; short assessment studies and preparation of terms of reference)
  5. Fixed fee plus out-of-pocket expenses (applies to surveys, exploration and reports; short assessment studies and preparation of terms of reference)
  6. Percentage of cost of construction project, plus out-of-pocket expenses
    (applies to preliminary and detailed engineering studies and preparation of plans and specifications; supervision of actual construction of work; project and construction management)
  7. A combination of these methods.

The client may also consider an hourly rate which includes payroll and overhead costs only and fix the profit margin by a lump sum or percentage of construction cost. This method creates an incentive for the Consulting Engineer to expedite work and it also permits an innovative working arrangement with the client's technical staff.

In general, per diem and lump sum fees are for short-term assignments. Other types of fee arrangements are for intermediate to long-term projects.