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RE: Catch-22 Software Cost

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Option 1:

Do the job by hand, buy the software, and run the software to check your hand analysis.

Option 2:

Offer the client a schedule acceleration for an increase in the hourly fee.

Option 3:

Inform your client that you have determined that a particular tool would reduce the time and total funds required to complete his or her job, but it will require a capital outlay of ($X). Would they agree to a modification of the contract to include a new fixed fee-plus-hourly.

Options two and three depend on whether you can reasonably bill a significant capital cost to the client, how flexible your client is, and how fast they want the job done. It also depends on whether your original contract included an estimate of the cost to complete.

You might also do a hybrid approach, and include your training time and "first time through" hand checks in this clients bill. You anticipate saving the client money overall, and you'll save time, so it may be worth it.

I don't include a specific fee for software in my rate. My rate is based, in part, on the costs required to run my (one man, start-up) office. I also do not charge local mileage to my clients when I drive to and from their sites. My logic is that whether I'm sitting at a $3000 computer with $10000 in software, or I'm driving a $15,000 vehicle, I'm using about the same amount of capital to provide a service, and its a cost of doing business. Last I hear (about 2 years ago), I was billing about 20% more per hour than some competition in the next town. I have no lack of work. I haven't raised my rates since then, so I don't know where I stand right now of course. I'm moving into a more convenient office (both for me and for most of my clients), and the new (higher) lease will be reflected in my 2005 rates.

New tools allow me to secure more work. If I had to do some of this stuff by hand, I wouldn't be cost-effective, or I would be required to bill a lower rate in order to get jobs.

If necessary, realize that you're going to eat a couple grand on this project, and revise your rates for this kind of work on the next bid. I've thrown away fee before to get a job I thought was great, and I've worked for "free" on a job in order to offset the cost of an analysis program. Then again, I'm not looking at laying out cash for a piece of software I can't totally recoup in a job or two.




At 09:18 AM 12/10/2004 -0600, you wrote:
Rich,

If you only plan on performing the work one time, I would not shell out the
money unless you can use the software on other projects.  I have run into
the same problems in the past when designing sheet pile walls.  I may do 5
within a short time frame and then not do another for 5 years.  I can't
justify the cost.

        What ever you do DON'T LOSE MONEY if you can help it.

bks

> -----Original Message-----
> From: Rich Lewis [mailto:sea(--nospam--at)lewisengineering.com]
> Sent: Friday, December 10, 2004 7:37 AM
> To: seaint(--nospam--at)seaint.org
> Subject: Catch-22 Software Cost
>
>
> I would like to know if anyone charges for the use of software in their
> design.
>
> Let me explain a particular situation.  I am a small, one-man firm, that
> is getting established.  I am working on the design of a special
> foundation.  The project is an hourly fee plus expenses.  I don't have a
> choice on that right now.  I could do this design with the limited
> software I have and by hand calculations, but it would be much more
> efficient if I bought some special foundation software and designed it
> with that.  The dilemma is that since this is an hourly fee the software
> that helps me be more productive actually reduces my fee.  On top of
> that I still have to put out for the software.  That's what I think is
> the Catch-22.  If I become more productive by making a capital
> investment then I reduce my fee, hence making my capital improvement
> harder to pay for.
>
> Now you could say that I still have the software to use on future
> projects.  That's true, but future projects are again cut short fee wise
> due to the increased productivity.  That means I need a lot more
> projects to recoup the cost.  That also assumes I will have the kind of
> projects that will need this software.
>
> I was thinking about charging a "use" fee on the software to help recoup
> some of the cost.  Is this commonly done by others?
>
> If you are tempted to change this thread into an argument of "for or
> against" hourly fees I ask that you start another thread because I would
> like this one to address the issue of capital improvements and recouping
> costs and not get sidetracked.
>
> Thanks.
>
>
> -------------
> Richard Lewis
> Lewis Engineering
>
>
>
>
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