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November 2016      

 

Engineering fees should not be “regulated” by clients

 
 

ACEC supports the right of each consulting engineering firm practicing in a free market to independently establish billing rates and fees in order to successfully execute the project; to earn a reasonable return on investment; to earn a reasonable return on risk; and to be fairly and reasonably remunerated for the value provided to the client. The ACEC board of Directors formally adopted this position as a result in response to some clients that prescribe maximum billing rates that can be charged by consulting engineering firms. In some cases, clients even attempt to “regulate” the payroll multipliers used by consultants.

Billing rates and fees set by engineering firms consider numerous factors including, but not limited to: salary and payroll costs; overhead costs; supply and demand; pursuit costs and probability of success; project-specific costs and risks, client-specific costs and risks; return on investment and profitability. Also, market forces and the cost of doing business varies significantly from firm to firm, region to region, from discipline to discipline, from client to client and from project to project. Consequently, prescribing, capping or otherwise regulating billing rates or fees by purchasers of consulting engineering services is contrary to the principle of a free market.

ACEC also supports the right of each consulting engineering firm practicing in a free market to independently establish payroll multipliers. ACEC believes that: (1) payroll multipliers are proprietary and commercially sensitive information; and (2) payroll multipliers reveal the salary of employees, thus violating the employees’ privacy. ACEC received a legal opinion confirming that disclosing payroll multipliers to public agencies violated federal privacy legislation, the Personal Information Protection and Electronic Documents Act (PIPEDA).  The legal opinion further stated that prescribing or capping allowable payroll multipliers effectively caused employee salaries to be revealed.