GUESS MY

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 Charging for Civil
Engineering Services
4.1 GENERAL

4.2 SALARY COST TIMES MULTIPLIER PLUS DIRECT

NON- SALARY EXPENSE
4.3
HOURLY BILLING RATE

4.4 PER DIEM

4.5 COST PLUS FIXED FEE

4.6 FIXED PRICE

4.7 PERCENTAGE OF CONSTRUCTION COST

4.8
SCHEDULE OF MINIMUM BASIC FEES
 4.1 GENERAL
Charges for engineering services are usually computed using six
methods:
-Salary cost times multiplier plus direct non-salary expense
(Reimbursable").
-Hourly billing rates plus reimbursable.
-Per diem
-Cost plus fixed fee ("CPFF)
-Fixed price
-Percentage of construction cost (Percentage)
 Combinations of methods of payment 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 first four methods are
based upon the Civil Engineers costs to perform services. They are particularly
applicable to assignments where the scope of services is not self defined. The fixed
price and percentage of construction cost methods are based upon a specific
deliverable and do require that the project scope be well defined. The cost plus
fixed fee method provides more flexibility to accommodate both scope and fee
changes than do either the fixed price or percentage or construction cost methods.
 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.
 The charge for 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. Certain types of investigations and designs are well
suited to these methods of determining charges.
 4.2 Salary Cost Times Multiplier
Plus Direct Non Salary Expenses

Compensation on the basis of the salary cost times an agreed multiplier is a

frequently used method of determining charges for engineering services. 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:

a) Salary cost is defined as the “direct salaries plus the employee benefits”.

b) 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.
c) 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
d) 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 1

e) Accounting Records
 4.3 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 (as defined under the salary cost
times multiplier section) are a separate item for reimbursement,
usually with a service charge.
 4.4 PER DIEM
The term per diem normally refers to an eight-hour day. Direct personal
services are frequently charged on a per diem basis. This basis is particularly suited to
expert witness or other legal type services and to other short-term engagements
involving intermittent personal services.

Where per diem services are furnished, the civil engineer should be
compensated for all of the time devoted to providing them, including travel and standby
time. The per diem charge should be based on the complexity, risk, and importance of
the services and on the civil engineer’s professional standing, expertise, and breadth of
experience. The civil engineer is also reimbursed for travel and subsistence costs and for
other out-of-pocket expenses incurred when away from the home office.
 For engagements in which the civil engineer is to appear as an expert, a per diem
charge is considered to be earned for each day of such appearance, even though the civil
engineer is not called to testify or, if called, may finish testifying in only a part of the day.
On occasion the urgency of the engagement requires the civil engineer’s time
regularly for periods. Longer than the normal eight-hour day. In such cases an understanding
should be reached with the client, and the per diem rate increased accordingly.
Per diem rates can vary widely, depending on employee classification, regional
location and period of service. Rates for consultation in connection with litigation and
appearances before commissions and courts are normally higher than the standard rates.
 4.5 COST PLUS FIXED FEE

Under a cost-plus fixed fee agreement, the Civil Engineer is reimbursed for the actual
costs of all services and supplies related project, including:
 Salary costs, as previously defined
 Overhead, as previously defined (The Civil Engineer should be prepared to support
the basis for overhead charges)
 Direct non-salary expenses, as previously defined
 Fixed fee, an amount to compensate the Civil Engineer for contingencies, interest on
invested capital, readiness to serve, and profit
 The cost plus fixed fee basis requires, as a prerequisite to equitable
negotiations, that the client and the Civil Engineer defined and agree upon the scope of
services the Civil Engineer is to perform. Such definition of the scope of service is
essential to enable the Civil Engineer to estimate costs and propose an equitable fixed
fee amount. The scope of services, cost estimate, and fixed tee should be incorporated
into the client-engineer agreement.
The cost-plus fixed fee method can also be used when the Civil Engineer is required to start
providing service before the detailed scope of services can be determined. In such cases, the
following considerations apply:
1. The general scale and intent of the project should be fairly well defined, even if the full
scope is Indeterminate: for example, the number, size, and character of buildings or other
facilities, the type of utilities, and other such essential information should be available.
2. The types of service to be performed by the Civil Engineer should be agreed upon and
fully set forth. The agreements should also provide for appropriate adjustments in the fixed
fee, in the event that the physical scope of the project, time of completion, or level of effort
and services required are materially changed over those contemplated during the
negotiations.
 The fixed fee amount varies with the complexity and scope of the engineering
services required. It is frequently calculated as a percentage of the salary costs, overhead,
and direct non-salary expenses.
Agreements for cost-based methods should provide for reimbursement of all costs
to be incurred directly or indirectly in connection with the project, including but not limited
to those foreseen when the agreement is negotiated. The list of reimbursable items should be
as complete and detailed as possible. One advantage of the cost plus fixed fee method is that
it eliminates any suspicion that the costs have been allowed to grow in order to increase the
Civil Engineer's fee, which by definition id a fixed amount. Because the entire fixed fee
amount is due the Civil Engineer, whether or not the estimated project costs have been
reached the Civil Engineer has an incentive to complete the service promptly.
 4.6 FIXED PRICE

The fixed price method of compensation is frequently used for investigations

and studies and for basic services on design type projects where the scope and
complexity of the assignment am clearly and fully defined. The fixed price amount can
be calculated as the SUM total of estimated engineering costs for salaries overhead and
non salary expenses, an allowance for contingencies Interest on invested capital,
readiness to serve, and a reasonable amount for profit. Fixed price compensation for
basic services of pertain design-type projects can also be computed as an appropriate
percentage of estimated construction costs this method and its limitations are discussed
in the following section. Results using the percentage method and the direct calculation
method are frequently used to check each other.
 A fixed price agreement should contain a clearly stated time period
during which the services will be performed and a provision for adjustment of
compensation if f the project is project delayed for reasons Beyond the Civil
Engineer's control For design services, there should be a provision for changes
required after approval of the preliminary design, with a clear understanding as to
where the final approval authority lies.
Partial payments should be made to the Civil Engineer at stated intervals
usually once a month during the performance of the services. These payments are
usually based on the Civil Engineer's statement of percent completion to date.
 4.7 PERCENTAGE
OF CONSTRUCTION COST

-The percentage of construction cost method is seldom used raw.

- This method may be used to determined the compensation of the engineer for services
where the principal responsibility is the detailed design or construction supervision of
facilities to be constructed.
- Construction Cost is defined as the estimated total cost of constructing the facility to
be covered by the proposed detailed design or construction supervision services,
excluding the fees and other costs of such services, the cost of land and right of way, and
legal and administrative expenses.
- The percentage fee shall consider the type, complexity, location, and magnitude
of construction cost of the project and shall not exceed the following percentages
of estimated construction cost:
●A. Feasibility studies- three percent (3%)
●B. Detailed engineering design- six percent (6%)
●C. Detailed architectural and engineering design-eight percent (8%); and
●D. Construction supervision-ten percent (10%)

- These percentage include only those works normally undertaken in arriving at

the expected outputs and do not include special studies or investigation indicated
under section 2.5 hereof, the outputs of which are ends by themselves
 4.8 SCHEDULE OF MINIMUM
BASIC FEES

Rates of compensation for Civil Engineers engaged in various capacities are given in Annex
B. The PICE shall regularly update the schedule of fees stipulated in the Annex. Certain
principles should however be observed as follows.
1. When doing work on foreign assisted projects, or in projects where international
consultants participate, the Civil Engineer performing similar or equivalent work, should
accept compensation that approximates the international standard rates .
2. Civil Engineers regularly employed in the private sector shall have a minimum
compensation corresponding to 10% more than the minimum wage prevailing in the region as
basic monthly salary. Civil Engineers employed in the government sector shall have a
minimum basic monthly salary corresponding to appropriate entry positions provided by the
Civil Service Commission.
3. A Civil Engineer employed in the private sector who signs and
seals the Civil Engineering plans, specifications and other related
documents of a certain project for and in behalf of his employers
shall be compensated with a minimum of 10% of the professional
fee for the project, over and above the basic monthly salary.