Methods for Calculating Cost of Engineering Consultant Services

here are several methods by which calculation of engineering consultant services cost can be carried out in construction. It is possible to employ various charging approach at different phase of the consultant services.
The application of each method or combination of methods is dependent on nature, scope and complexity of the required engineering services. In this article, these charging consulting services are discussed.
cost-of-consulting-services
Following are the topics discussed for calculating cost of engineering services or consulting services in construction:
  • What are the factors that affect the engineering service cost?
  • Methods for charging engineering services

What are the Factors that affect the Engineering Service Cost in Construction?

There are various factors that control the cost of engineering services required for a specific project. These factors are outlined below:
  • The conditions at project site.
  • Degree of danger that may be encountered and exposure possibility.
  • System of project delivery namely: design-bid-build, design-build, design-build-operate-maintain.
  • Type of developer or contractor or client owner.
  • The owner skill and experience in similar projects and the process of decision making.
  • Submittal and review numbers required by the owner and regulatory commissions.
  • The number of meetings held for communities based on the owner requirements.
  • Types of schedule namely: conventional, delayed or accelerated.
  • Project complexity and number of involved specialties and subcontractors.
  • Finally, other contract restrictions.

Methods for Charging Engineering Consultant Services

There are five different methods which are used for charging engineering consultant services:

  • Salary cost times multiplier, plus direct non-salary expense (multiplier)
  • Hourly billing rate plus reimbursable expenses and a “not to exceed” amount for specified services (hourly)
  • Per diem (fixed charge per day)
  • Cost plus fixed fee
  • Lump sum or fixed price

Salary Cost Times Multiplier Plus Direct Non-Salary Expense (multiplier)

It is dependent on the cost of consultants who carry out the service and it is specifically suitable tasks in which the extent or range of the engineering services is not clearly outlined.
Disregard of the charging method utilized, it is more convenient to outline the project scope adequately because it will lead to achieve satisfactory result and the end of the service and reduced possible disputes between the owner and engineering consultants.
There are specific project conditions for which multiplier method for charging consultant services is suitable. For example, if the scope of project is not outlined properly, the extend of the project is defined adequately, or substantially complex project.

Hourly Billing Rate Plus Reimbursable Expenses and a “Not to Exceed” Amount for Specified Services (Hourly)

Similar to the multiplier approach, hourly billing rate plus reimbursable is based on the consultant cost that performs the service. It can be used for cases where the extent of the project is not certain.
Moreover, the consultant and the owner should agree on specifying the expected range of the project and the methods for adjusting not to exceed amount. In the case the cost closes to not to exceed amount, then the owner should be informed and provide modified cost estimate for the completion of project.
This approach may be specified and employed in the case where the project range is not defined properly, simplified accounting, considerably short project assignment, the extent of the project is defined adequately and on-site construction management services

Per Diem (Fixed Charge Per Day)

The per diem term is referred to an eight hour per day. The cost of consultants who conduct the engineering service is the base for the per diem approach as it is the case in the previous two methods.
It is convenient to choose for charging engineering consultation services if the project scope is not outlined properly and in the case where it is outlined adequately, very short assignment and on-site construction management services.

Cost Plus Fixed Fee

Similar to the per diem, hourly and multiplier method, cost plus fixed fee is dependent on the cost of consultants.
It can be used whether the extent of the project is outlined properly or not, very complex project and suitable for on-site construction management services.

Lump Sum or Fixed Price

Unlike other four methods discussed above, lump sum or fixed price approach is based on completion of the project and the extent or range of the project need to be defined adequately. So, the scope of the project should be accepted and agreed upon by both consultants and project owner.
This method is recommended to be employed if the scope of the project is defined adequately, simplified accounting, crucially complex jobs and very short tasks. However, it should be ruled out if the extent and the range of the project is not described and outlined sufficiently.
Finally, it is discussed that the selection of aforementioned methods for charging engineering consultant services is based on the certain project conditions. Those conditions and suitability of each method are summarized in the following table.
Table-1: factor that control the selection of consultant service charging method
Condition of the projectMultiplierHourlyPer diemCost plus fixed feeLump sum
The scope is not outlined properlyA1AAANA2
The extend of the project is defined adequatelyAAAAA
Simplified accountingNAAANAA
Considerably short taskNAAANAA
Substantially complex taskANANAAA
On site construction management servicesNAAAANA
1The method of charging engineering services is applicable for that specific condition
2The method of charging engineering services is not applicable for that specific condition

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