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Re: $FEES, Capitalism, etc.

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Your comments appeal to me both in a general nature as well as specifics. I
have little doubt that we can ably defend higher fees. Among ourselves,
that is. We are in a profession where the majority have a highly technical
background but, unfortunately, have not demonstrated that we are effective
in changing status quo. While we are famous for six different ways of
solving a simple technical problem, we cannot (or worse, will not) derive
methods for balancing the inequitable risk to reward ratio of our
profession.

To illustrate my point, not long ago there was a debate here on the list
serve about who we felt were qualified to provide structural engineering
services. While it got very heated about civil engineers doing structural
engineering, there was no argument (sp?) that extremely few architects were
qualified. In fact, all of my current architectural clients (most of whom
are very bright and successful) deny any capacity for structural
engineering. We are much more willing to debate whether we should have a
new seismic zone, consider 3Rw/8 for certain circumstances and ponder how
much retained earth participates in ground motion during a design level
earthquake than review a single line of the California Business and
Professions Code which allows architects to practice structural
engineering.

Further, it is the perception of the general public that architects do
structural engineering. It is not their fault. While they do not actively
promote this concept, they will not deny it either.

There has been little by the professional organizations I have paid dues to
in the way of any form of public awareness campaigns regarding the value of
the role of a good structural engineer on a construction project. In
defense of the current organization I am now paying dues to, The Structural
Engineer's Association of Southern California, they may argue that my dues
will not cover such a campaign. I for one would firmly support an increase
if I thought they were addressing the concerns of the PROFESSIONAL as well
as the profession.

My current SEAOC dues are $185 per year. A colleague of mine just renewed
his AIA dues for $750. At one time, we in California had a governor for
eight years with only one good idea. He was considered quite a space cadet,
but he once proposed that architects do not need to be licensed at all
since engineers were signing most if not all of the construction documents.
Of course, AIA got quite upset and the issue died (they have a slightly
better lobby than engineers).

I don't really have a problem with engineers not making as much as lawyers.
I would gladly take a pay cut for not being one ("my mother thinks I'm a
bartender in a whore house, don't tell her I'm an attorney"). The issues
lawyers deal with are much more on an individual, emotional level than
construction, and that's O.K. Same with M.D.s. I sure wouldn't want to
spend all day in a room with sick people.

However, it should be obvious to both lay and professional people alike
that we are providing services with such an unattractive risk to reward
ratio. It is just frustrating on my part that we are not willing to do
anything about it.

Regards,
Bill Allen

----------
> From: BVeit(--nospam--at)aol.com
> To: seaoc(--nospam--at)seaoc.org
> Subject: $FEES, Capitalism, etc.
> Date: Monday, August 25, 1997 5:22 PM
> 
> Here are two previous postings that I find interesting:
> 
> Jeff Smith: <<An architect friend of mine just got two proposals for a 
> $250,000 residential job. Both enginneers work primarily in this type of
> work. 
> One bid was $2,400 the other $6,000. (excluding construction phase) I do 
> not feel percentages are not [sic] applicable to small jobs and they
should 
> be bid on a case by case basis.>>
> 
> Bill Allen:  <<I believe this is where we are today. It is a competitive 
> market. If we have a small backlog, we write tight proposals. If we have 
> a large backlog, we write fat proposals. Someone out there tell me this
is
> not standard practice. I don't have a problem with this since I am a
> capitalist at heart (soul and mind for that matter). The only thing that
> bothers me is that 
> we have to go too low to get the work and I believe this is because the
> regulations permit just about anyone to do structural engineering 
> work.>>
> 
> I thank these two gentlemen for their input, and add my own 
> philosophical discourse on price:
> 
> Capitalism is too broad a topic for me to get into, but the part of 
> capitalism that is relevant to us is the part that states unequivocally
that 
> the price of something is what the market will bear.  (This is 
> incidentally why real estate appraisal is an absurd endeavor.)  Thus, the

> "intrinsic" worth of something is just one of many considerations in the 
> price calculus.
> 
> I feel that too many engineers fall back on the idea that they are only 
> "worth" a certain hourly rate.  These tend to argue that they calculate 
> the hours it will take and then "bill accordingly."  But my question is, 
> why isn't the hourly rate $225, as it is for my lawyer, instead of the 
> $80.00 I bill at?  I literally had an hour-long, three-way discussion
with 
> a client and her lawyer the other day that went unbilled from my end 
> (hate to hit them with those pesky overs) yet cost $200 from the 
> lawyer's end.  And I swear the lawyer said three words the whole time 
> while I summarized the problem and the solution.
> 
> So hourly or percentage is a false dichotomy in the sense that they still

> amount to a flat fee in the client's mind.  They are both capped by the 
> market.  The main reason I prefer percentages over hourly is that it's 
> easier to put a percentage into a context of overall cost: on a million 
> dollar project, ten thousand dollars is _only_ one percent of overall 
> cost.  We leverage much higher costs with the stroke of a pencil.  On an 
> hourly basis, ten thousand dollars is one hundred billable hours, and it 
> tends to stand alone.  It's ten thousand in a vacuum, that could be 
> shaved by putting price pressure on the engineer.
> 
> Now the interesting question is, why are they capped?  I tend to agree 
> that competition (esp. with non-structural civils, contractor-designers, 
> etc.) is one main reason our fees are low, but I do think there's another

> important factor we're missing.  For example, the legal profession is 
> bursting at the seams with too many lawyers, yet lawyers still earn an 
> average salary three times that of an engineer.  They are highly 
> competitive.  Yet Daniel Webster's aphorism still rings true.  When told 
> that there were too many lawyers already, he replied, "There's always 
> room at the top."
> 
> The difference seems to be this:  when you hire a lawyer, your rear end 
> is generally on the line.  That is, you are very directly, intimately 
> involved, and you want to win.  And you are generally competing 
> against another side.  Whether you are suing someone over a house 
> falling down or defending yourself against drug smuggling charges.  
> The fact that a defense is on the other side means you've got a totally 
> different dynamic.  Being "good" takes on new meaning.  E.g., good 
> basketball teams can have a poor shooting percentage against good 
> defenses.  The same goes for doctors -- you want the best possible 
> chance against the cancer, regardless of cost, and cancer bests even the 
> best doctors.
> 
> In many cases, people choose a better, more expensive lawyer because 
> they want to win.
> 
> But with engineering, there is no client recognition of "better" 
> engineering.  There is no "rear-on-the-line" urgency, and no uncapped 
> "win" mentality.  From the uninformed client's perspective, engineers 
> are all equal, all a commodity, almost like a material cost -- X gallons 
> of white paint, buy the cheapest paint that serves the purpose.  Yes, 
> there's deluxe paint and crappy paint, but it's still just paint.
> 
> Some have suggested a niche, or specialty.  And this works in small, 
> isolated outposts of engineering, e.g., computer chip-fab plant design is

> very stiff, dynamically isolated, etc., and therefore commands higher 
> design fees.  But I'd like to point out that if the average goes up, so 
> would the niche market.  So we really should worry about the little guy.
> 
> And I suggest that if we are to have these fees creep up, they will do so

> faster and more reliably from a percentage basis than from an hourly 
> basis.  This will help to tie fees to overall market project value, not 
> intrinsic engineer hourly worth.
> 
> I would really like solutions to this conundrum:  How do we keep fees 
> competitive, but increase them overall?  To get started, here's my idea: 
> tie engineering fees to cost savings.  Bid the cost of the constructed 
> project, including the design fees, but don't bid the engineering itself
per
> se.  This tends toward design-build I guess.  If I save two-hundred
thousand
> in 
> steel costs, doesn't it stand to reason I should get some percentage of 
> this, as with a lawyer's contingency fee?  Right now we're not directly 
> rewarded for this -- our reward seems to be that we get repeat clients.  
> (We get rewarded by getting to keep our minimum wage jobs....)
> 
> The best definition I ever heard for engineering is "do with one what 
> any idiot could do with two."
> 
> Let's get rewarded for it!
> 
> 
> 
> 
>