Consulting Fees - cey

1 Consulting fees in perspective The Financial Requirements of a CEBC - APEGBC Business Fee Guidelines for Engineering Services Investment The Fee Guidelines provide a good overview of the basis for and methods of remuneration for Consulting engineering services, as well as background into what is involved in Services providing those services. The purpose of Consulting Skills Clients this article is to explain the many costs Company incurred in providing a quality service to the client. fees The Creativity and Return to Business of Professional Investors Engineering Engineers design a wide range of infrastructure to meet the needs of society Margins and Multipliers (buildings, roads, railways, airports, water supply, sanitation, telecommunications, etc). To sustain the financial requirements of business, the mark- Some engineers work directly for ups' on products are commonly expressed as margins as the government departments and private sector product passes from manufacturer to customer, while those business, while others work as independent for services are termed multipliers.

2 While hourly rates and consultants that provide their services to lump sums are often quoted for professional services, they both government and private sector business. ultimately depend on the total costs of providing the service While all engineers have a proud professional as outlined herein. interest in their work, consultants also assume business risks and financial Few people understand what degree of margins and obligations. multipliers are needed to sustain and develop a product or a service. For example, with a typical consumer product Risks in Consulting passing through the manufacturer-wholesaler-retailer- customer chain, the customer usually pays three to eight times Engineering the cost of manufacture, often without realizing it. If a fair margin is not in place, the product will simply not be Examples include: available, except in a bankruptcy or second-hand sale.

3 Cyclical nature of spending The multipliers of a professional service business present a Domestic and foreign competition similar transition from manufacturer' (the engineer in this Government policy changes case) to customer' (the client) for delivery of a finished Changing technology project. A typical breakdown of costs behind such a multiplier Direct and indirect liability is presented in this Commentary. The results are revealing - without a reasonable multiplier there is no business Changing contractual arrangements opportunity nor a mechanism to deliver a quality service. Fee pressures The table below explains why the hourly rate charged for a Consulting engineer is significantly greater than the hourly salary. The difference relates to the costs of doing business, and it will vary from one firm to another with time, specialty, and employees.

4 The numbers are fairly typical, but could vary by 20% or more. The employee is assumed to be paid $35/hour for hours/week (ie the monthly salary is 35 x x 52 12 = $5, ). Description of Services Cost to Employer Copies of the following publications Basic hourly salary $ are available from CEBC. Direct benefits (Canada Pension Plan, UIC, Insurance, WCB, pension plan, $ - Fee Guidelines for Engineering group benefit plan, etc) = 16 - 20% Services CEBC Directory of Member Firms $ - and their Fields of Practice Vacation + statutory holidays 10% - $ - Awards for Engineering Excellence 12%. Magazine (A) Payroll Cost $ - Consulting Engineering Industry Profile Time not chargeable (sick time, Guide to Selecting a Consulting conferences, education, marketing, Engineer overhead, proposals, travel, $ - Requests for Proposals administration, committees, etc) = 25 - 30% of (A) Are You as Indemnified as You Think You Are?

5 $ - Value Engineering Design-Build in the Public Sector Non-technical and overhead staff (secretarial, business, bookkeeping etc). $ - Geotechnical Engineering Transportation Engineering $ - Electrical Engineering Overhead expenses (rent, general insurance, legal/accounting, travel Consulting Engineers of Yukon (non-reimbursable), phone, fax, c/o 6 - 151 Industrial Road, Whitehorse, supplies, printing, utilities, office $ - Yukon Y1A 2V3. equipment depreciation and repairs, phone: (867) 668-3068 fax: (867) 668- dues, computers, rentals, bank charges, 4349. etc) E-Mail: Website: $ - Professional Liability Insurance $ - January 1997. $ - Return on Investment, 10% $ - (B) Charge Out Rate $ - Payroll Multiplier (B) (A). - (refer to Fee Guidelines).