333333

Charges for engineering services are usually computed
using one of six methods.

1. Salary cost times multiplier plus direct non-salary
expense (“Reimbursable”).
2. Hourly billing rates plus reimbursables
3. Per diem
4. Cost plus fixed fee (“CPFF”)
5. Fixed price
6. Percentage of construction cost (“Percentage”)
Combinations of methods for
different phases of the contract may
be used. The method or
combination of methods used
depends upon the nature, scope, and
complexity of services required by
the client.
The potential risks and problems faced by
both the client and the civil engineer, when the
scope of services is not well defined, should be
recognized and discussed during early
negotiations. Often initial estimates of
maximum engineering costs for projects of
uncertain scope are requested by the client for
budgeting purposes. Such budget estimates
should state that they do not constitute an
agreed-upon maximum and that they are to be
revised as the scope of services becomes better
defined.
When a reimbursement method such as
salary cost times multiplier, hourly billing
rate, per diem, or cost plus fixed fee is chosen
because of uncertainty of the scope of
services. It is logical to propose that an upper
limit(maximum amount) for these services be
included in the agreement. The inconsistency
of such a proposal is proportional to the
uncertainty of the scope. However, these
methods are used with a “not-to-exceed”
amount .
The charge of engineering
services using the fixed price or the
percentage of construction cost
methods is based entirely on the
scope of services. These methods
may be appropriate where the scope
of services is well defined and the
Civil Engineer’s costs are within
his/her control.
SALARY COST TIMES MULTIPLIER PLUS
DIRECT NON-SALARY EXPENSE
Compensation on the basis of the salary
cost times an agreed multiplier is a frequently
used method of determining charges for
engineering services. With this method, charges
for engineering services are based mainly on
direct salaries.
The salary cost times multiplier method may
be utilized as either a multiplier times salary cost
(two multiplier version) or a multiplier times direct
salary cost (single multiplier version)
The direct salary times multiplier or as it is
frequently called the direct labor times multiplier
version is very similar to the salary cost times the
multiplier with the exception that it applies a single
multiplier to unburdened direct labor cost, i.e.,
direct salaries without employees benefits. The
single multiplier includes cost associated with
employees benefits, overhead, and a margin for
contingencies, risk, and profit.
The following factors are pertinent to the salary cost times multiplier:
1.Salary cost is defined as the “direct salaries plus the employee benefits”.
2.Multiplier which is applied to salary cost is a factor that compensates
the Civil Engineer for overhead plus a reasonable margin for
contingencies, interest or invested capital readiness to serve, and profit.
3.Direct Non-salary expense usually incurred in engineering
engagements may include the following:
 Living and traveling expenses
 Identifiable communications expenses
 Expenses for services and equipment directly applicable to the project
 Identifiable drafting supplies, stenographic supplies, and reproduction
work
 Expenses for unusual insurance and specialized health and safety
programs
4. The Civil Engineers overhead which comprises a major
portion of the compensation generated by the multiplier on salary
cost, includes the following indirect cost:
 Provision for office expenses
 Tax and insurance other than those included as salary cost
 Library and periodical expenses
 Executive, administrative, accounting, legal, stenographic, and
clerical salaries and expenses (Other than salaries included in
salary costs and expenses)
 Business development expenses
 Provision for loss of productive time
 Cost of acquiring and maintaining computers, development of
software, and training staff when not billed as direct cost
5. Accounting records
Hourly Billing Rate
The Hourly billing rate method of
compensation is very similar to the
salary cost times multiplier method in
that the hourly billing rate includes all
direct personnel expense, overhead and
profit. Direct non-salary expenses are a
separate item for reimbursement,
usually with a service charge.
Per Diem
The term ‘per diem’ normally refers to an
eight-hour day. Direct personnel services are
frequently charged on a per diem basis .
The per diem charge should be based on
the complexity, risk and important of the
services and on the Civil Engineers
professional standing, expertise and breadth
of experience. The Civil Engineer is also
reimbursed for travel and subsistence cost
and for other out of pocket expenses incurred
when away from the home office.

333333

Uploaded by

Copyright:

Available Formats

333333

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

333333

Uploaded by

Copyright:

Available Formats

Charges for engineering services are usually computed

using one of six methods.

You might also like