SECTION 2
FEE BASIS OPTIONS

2.0 INTRODUCTION

The cost of professional geological or geophysical services is normally a small percentage of the potential total costs of a successful project. Care should be taken to select the best qualified Consultant on a fee basis that satisfactorily compensates for the services required.

There are three concepts upon which fees for geological or geophysical services are commonly based:

1. Time Basis

2. Fixed Fee Basis

3. Combination of Time Basis and Fixed Fee Basis

Each fee basis has distinct applications and frequently, combinations of the concepts are applied to different stages of a project. From time to time bonuses or perhaps costs plus an agreed fee can be used to reward a Consultant for innovativeness or timely completion of a project. Special applications of the concepts may be required to accommodate the unique needs of a complex or major project.

In negotiating a Consultant fee for a specific project, a preliminary step should be to establish the categories of service required which properly address the needs of the Client. When the categories of service have been established, the appropriate basis of fee for each category should be determined. Projects which require a broad scope of professional services commonly use the Combination of Time Basis and Fixed Fee Basis.

 

2.1 TIME BASIS

This fee basis is particularly applicable in circumstances where the scope of the assignment is not well defined. A Time Basis fee is also appropriate where the Consultant does not have control over the time required for project completion and the disbursements required for specific stages of a project.

Time Basis fees should be used for:

1. Consultative and Advisory Services;

2. Geological or Geophysical Services on Comprehensive Projects,

3. Special Services, as described in Section 3.

Fees on a Time Basis are determined by multiplying the number of time units each member of the Consultant's staff expends on the project by their respective unit time billing rates and adding the disbursements marked up by an appropriate disbursement factor.

Hence, the Total Cost of Professional Services using the Time Basis is:

TOTAL COST OF PROFESSIONAL SERVICES = CONSULTANT FEE +DISBURSEMENTS

Where:

CONSULTANT FEE = UNIT TIME BILLING RATE TIME EXPENDED

And:

DISBURSEMENTS = DISBURSEMENTS FACTOR

Note: See Appendix A for explanatory details.

 

2.2 FIXED FEE BASIS

This fee basis is applicable only to projects or components of projects where the scope of the work can be clearly defined and where service, if applicable, will be completed over a known schedule. The Fixed Fee for such assignments should be negotiated following preparation of a comprehensive estimate of the professional time and overhead costs. The key assumptions made in developing the estimate must be identified and agreed to in the negotiation process.

An agreement, which describes in detail the services to be provided and all categories of costs to be included in the Fixed Fee, is essential. The agreement should cover schedule, time limits, inflation and other identifiable items that influence costs. Changes in the scope of the work after the Fixed Fee has been established should be compensated for on a Time Basis or by a negotiated Fixed Fee adjustment for each change.

Hence, the Total Cost of Professional Services using a Fixed Fee Basis is:

TOTAL COST OF PROFESSIONAL SERVICES = CONSULTANT FEE +DISBURSEMENTS

Where:

CONSULTANT FEE = NEGOTIATED FIXED FEE

And:

DISBURSEMENTS = DISBURSEMENTS FACTOR

Note: See Appendix A for explanatory details.

 

2.3 COMBINATION TIME BASIS AND FIXED FEE BASIS

Projects frequently require several Categories of Services; some can be accurately quantified at the commencement of the project and others vary with schedule and conditions that cannot be predicted. In these circumstances, the services that can be accurately described and quantified can be appropriately covered by a Fixed Fee and those that are unpredictable should be on a Time Basis.

This fee basis will usually be most appropriate for geological or geophysical services on comprehensive projects.

 

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