This section of the Guideline provides guidance on how to determine the fee for consulting engineering services, starting with this Clause 4.1 which provides general comments explaining the need for a careful appraisal of the project and the risks involved, and a description of various factors which may influence the determination of the fee.
Clause 4.2 explains the recommended method for calculating a fee based on a percentage of the cost of the works for normal services, and includes worked examples to show how the percentage fee calculation should be carried out.
Clause 4.3 describes the method for calculating fees for additional services which are not part of the normal services.
Clause 4.4 describes different methods for calculating time based fees.
Clause 4.5 provides guidance regarding the reimbursement of the consulting engineer for expenses and costs incurred by the consulting engineer when performing consulting engineering services.
The guideline fees described hereinafter are not prescriptive but are presented to assist a client and a consulting engineer to reach an equitable agreement on the fees for the services performed based on both quality and price.
The recommended method for the procurement of a consulting engineer is through a selection process based either on direct negotiation, or via a competitive bidding process where proven competence, qualifications, resources, experience, preference and developmental criteria are the primary selection factors and price is a secondary factor. During this process, the procuring organisation will receive offers with widely ranging scope and related costs or prices. The range of prices that will be received is largely a function of the definition and perception of the scope of work and related services that are required.
The cost of consulting engineering services only constitutes approximately 1 to 2% of the total life-cycle costs of the facility being designed. The client needs to be aware that professional fees that are too low can lead to:
| 1. | Consultants using inexperienced staff on projects, which compromises the quality of the output |
| 2. | Consultants not completing the project, resulting in time and cost delays for client |
| 3. | Consultants being forced to take short cuts in order to reduce expenditure, resulting in reduced project quality and costs |
| 4. | Significantly increased costs of the works and long-term operations and maintenance costs that will likely overshadow any savings made in the cost of the professional services. |
The guidelines described in this document for the determination of a fee are based on processes and values which have been in use for many years and which have proved to be fair to all parties. The fee should be arrived at by applying these guidelines and agreeing a fee as a simple percentage of the cost of the works, or as a lump sum, or time based. Expenses and costs are additional and apply to all three alternatives.
The client and the consulting engineer may use any other method for determining the fee, including pricing the services from first principles, either to allow for competitive pricing, or for any other reason. In such instances the client must carry out a proper risk assessment of the offer by the consulting engineer in order to determine its acceptability. The risk assessment should, as a minimum, include an analysis of the following:
| 1. | Comparison of the fee offered with a fee based on the guidelines described in this document. |
| 2. | Services offered as well as services excluded which may become additional services |
| 3. | Numbers, qualifications and experience of staff to be employed on the project |
| 5. | Firm’s experience with similar projects |
| 6. | Compliance with client preferencing and developmental criteria |
| 7. | Any other criteria which may impact on the consulting engineer’s ability to perform the services in the manner required by the client. |
While the guidelines support responsible competitive bidding where price and quality are the key determining factors, risk management should be the overriding consideration. The practice of procuring consulting engineering services on the basis of the magnitude of a financial discount on published fee tables, or fees determined by any other party, is not supported and is counter-productive to good engineering and life-cycle costs. The practice is contrary to all accepted best practice methods of competitive tendering, and, because discounts are typically determined on an arbitrary basis without any consideration of actual costs, fee discounting eventually results in declining standards of quality and service which are the cornerstones of the engineering profession. Reckless fee discounting has a significant negative impact on the industry and poses a serious threat to infrastructure development in the country.
| 4.1.4 | Influencing factors |
While the tables of fees contained in this guideline can be applied to many projects, the factors that influence the fees to be paid for consulting engineering services on a project are complex and depend on a number of contributing factors. The contributing factors that should be taken into account may include, among others, all or any of the following:
| 1. | Project complexity: Projects may range from relatively simple projects where the designs are based on well-established common practices to more complex projects where the works call for the application of new, unusual or untried techniques, designs, systems or applications. |
| 2. | Monetary value of the works: This may range from a situation where the value of the work is very high relative to the services being performed to a project where the value of the works is abnormally low relative to the services required from the consulting engineer. |
| 3. | Time duration: This may involve projects where the works are executed over appreciably shorter or longer periods than would normally be expected. |
| 4. | Level of responsibility, liability and risk: These may range from relatively low levels of responsibility and/or risks to projects with unusually high responsibilities and/or risks that are expected to be carried by the consulting engineer. |
| 5. | Level of expertise, qualifications, skills and experience: Some works do not require a high degree of expertise while other works may require more specialised expertise or substantial skills and experience that cost more to develop and retain. |
| 6. | Level of technology required and changes in technology that may influence the costs of the services provided. |
| 7. | Whether aspects related to labour intensive works need to be considered in the design. |
| 8. | Level of effort: Some projects do not call for substantial effort as the works can be designed without extensive investigations or field measurements while others may call for unusually high effort on the part of the consulting engineer because of, for example, research required or integration with existing works or repairs to existing infrastructure where the status quo needs to be investigated in considerable detail and these need to be accommodated within the design. |
| 9. | Potential value added: In some instances, the design, no matter how sophisticated will not add much value to the overall project while in other cases greater design optimisation can lead to considerable savings in capital, maintenance or operations costs, or add value to the final project. |
| 10. | Client requirements: Some clients have relatively few requirements and/or many standard details and the consulting engineer's designs are accepted at face value. Other clients require considerable details to be investigated during design development to satisfy their own, often complex, internal processes. |
| 11. | Project definition: In some projects, the design concept and scope are self-evident and requires little further investigation or analysis of options, while in other projects, the design development requires extensive analysis and testing of various options. |
Combinations of one or more of the above factors may result in a substantial adjustment of the fee that is required to fairly compensate the consulting engineer and this adjustment factor should be negotiated in good faith by both parties.
| 4.1.5 | Application of the fee guidelines |
| 1. | The client shall remunerate the consulting engineer, for the services performed, on the basis of clauses 4.2 to 4.5 or as stated in the Agreement. |
| 2. | The guideline professional fees described in this guideline apply in respect of the services set out in clause 3. |
| 3. | The client shall reimburse the consulting engineer for all expenses and costs incurred in terms of clause 4.5 in performing the services, irrespective of whether fees are charged in terms of clauses 4.2, 4.3 or 4.4, as well as for all costs incurred on behalf, and with the approval, of the client. |
| 4. | Agreement on any method of adjustment of, or special fees, should be reached at the time of the consulting engineer’s engagement or as soon after as circumstances warrant, such as is practically possible, but in all cases, prior to the consulting engineer performing services that may be affected. |
| 5. | The fee is determined on the information provided at the time of procurement, particularly in respect of the scope of work, scope of services, works budget and expected project duration. Any subsequent changes, including unforeseen changes to the project situation and engineering effort, and changes to the project costs, should be regarded as a trigger for an adjustment of the fee. |
| 6. | The fee may be expressed as a lump sum, in which case, the amount will be subject to adjustment where the final cost of the works varies by more than 15% from the value on which the fee is determined. |
| 7. | For certain project types the scope of work may include full services for some elements of the work and limited services for other elements. For example, in some situations the consulting engineer may be asked to provide advice, design review and construction monitoring related to elements designed and detailed by others. The fees for such limited services are subject to agreement between the client and consulting engineer and may be determined on the basis of time and cost or by reducing the normal full fee for such elements by applying a factor of between 0,10 and 1,00 depending on the work involved, the degree of responsibility, and related liabilities that could accrue. In the case of structural systems, some examples of limited services include advice related to non-load bearing brickwork, pre-cast slabs, timber or LGSF roof trusses, sheeting and cladding, glazing and facade systems, proprietary timber roof trusses, sundry steelworks subjected to loads such as balustrades, bulkhead supports, etc., and precast concrete decorations, lintels over openings and windows, Other situations involving limited services and reduced responsibility are explained in more detail in clauses 4.1.5.8 and 4.1.5.9 below. |
| 8. | Subject to 4.1.5.9 below, where the consulting engineer is appointed as the competent person in terms of the National Building Regulations and SANS 10400 on building projects, the consulting engineer is entitled to a full fee for all elements of the work where he/she is appointed as the competent person in terms of SANS 10400 and/or he/she assumes responsibility for and/or is required to certify and sign off the design, inspection, and/or completion, regardless of who actually designs and details elements of the work. Examples of this include piling, lateral support, load bearing brickwork, precast concrete supports, fire protection, artificial ventilation, storm-water disposal, non-water-borne sanitary disposal or drainage systems. |
| 9. | Under certain circumstances the consulting engineer is appointed as the competent person in terms of the National Building Regulations and SANS 10400 to assume responsibility for an overall system of a building, but certain elements of the structure are designed, inspected and certified by another competent person who assumes responsibility for the design and construction inspection of such elements. Examples of these elements may include structural, fire protection, artificial ventilation, storm-water disposal or non-water-borne sanitary disposal, fire installations or drainage installation systems. In all such instances the consulting engineer appointed as the competent person in terms of the National Building Regulations and SANS 10400 has to ensure overall functionality and compatibility of these elements with the primary structure as part of his duties. The consulting engineer may also have to coordinate obtaining separate design certificates for these elements to ensure that the responsibility for the elemental designs will rest with other professionals. The consulting engineer who is appointed as the competent person responsible for the overall system is entitled to the full fee for all elements which are designed, inspected and signed off by him/her and a factor of 0,33 of the full fee should be applied to the elements which are designed, inspected and signed off by other competent persons. |
| 10. | Where the normal services relate to more than one of the disciplines of consulting engineering contemplated in clauses 4.2.2 to 4.2.8, namely civil, structural, mechanical, or electrical engineering services, a separate fee for services in each discipline should be calculated in accordance with the relevant clause. |
| 11. | Where at the instance of, and with the consent of the client, the works are undertaken on separate non-contiguous sites, continuity is interrupted or the works are unusually fragmented or constructed as separately documented phases or sections, the fee for normal services is: |
| (a) | the sum of the fees calculated separately for each site, contract, phase or section as if they were separate works; or |
| (b) | a fee agreed to between the client and the consulting engineer and which fee lies between the fee calculated on the total cost of the works and the sum of the fees contemplated in clause (a) above. |
| 12. | Although financial administration services are normally part of normal services as described in Clause 3.2, there are instances where these services are excluded and are provided by others, such as quantity surveyors, in which case a factor of 0,85 should be applied to the basic fee. In such instances, where the consulting engineer is required to assist, then such assistance can be treated as an additional service and the remuneration to the consulting engineer should be time based plus expenses and costs. |
| 13. | Where the scope of the work involves alterations to existing facilities with extensive reuse of existing facilities, installations and/or structures, detailed condition assessments and surveys may be required to facilitate good integration of new work with existing work and the percentage fee should be increased by applying a factor of up to 1,25 to the basic fee for that portion of the works. The additional fee for alteration work must be applied judiciously and fairly by both parties and must only apply to the altered portion of the works. Where an existing installation, structure or building is simply abandoned and/or demolished and replaced by a new installation, structure or building the adjustment factor should not apply and the remuneration to the consulting engineer should be time based plus expenses and costs for any additional services such as site surveys and inspections related to the existing installation, structure or building. |
| 14. | Tables 2A to 8A in Clause 4.2 below include a factor to be applied in the case of (Stages 1 to 4) where designs for a complete unit (such as a complete building or a bridge) can be duplicated and applied to a different project or site without alteration to the drawings and/or specification. The duplication factor is not applicable where a number of identical components form part of a complete unit. If alteration is required to the drawings and/or specifications for different complete units then the duplication factor must be adjusted by written agreement between the client and consulting engineer. No duplication factor is applicable where different drawings and/or specification are required for each unit. No duplication factor is applicable to the construction stages of the services (Stages 5 and 6) where the consulting engineer is appointed for Stages 5 and/or 6 of the services. |
| 15. | The fees for specialist engineering services and studies, including feasibility studies, are calculated separately from the fees for normal services, additional services and expenses and costs, and are normally calculated on a time and cost basis or as a lump sum. |
| 4.1.6 | Timing of fee claims |
Unless otherwise agreed between the consulting engineer and the client, the fees may be claimed monthly or after each stage of services or based on an agreed cash flow schedule
| 1. | Percentage fees are determined on the basis of the cost of the works prevailing at the time when the fee is calculated for preparation of the fee claim. Note that it is expected that where the consulting engineer is responsible for financial administration services as described in 3.2.1 the consulting engineer must regularly review, update and submit cost estimates for the works at each stage of the normal services. |
| 2. | Unless otherwise agreed in writing, fees are normally claimed monthly and must be based on deliverables completed in terms of 3.2 and delivered to the client, and pro-rata to the completed services. |
| 3. | The fees for Stage 5 are normally claimed monthly based pro-rata on the amounts certified to construction contractor(s). |
| 4. | The fees for Stage 6 may only be claimed after completion of the Stage 6 services, including issue of the final construction account. |
| 5. | Where fees are claimed after completion of the stages the fee due shall be a portion of the total fee based on completion of the stages as set out in 4.2.10. |
| 6. | Time based fees calculated in accordance with 4.4 are based on the rates applicable when the services are performed and may be claimed monthly |
| 7. | Expenses and costs as set out in 4.1.5.3 and 4.5 may be claimed monthly. |
