Link Overview:

Section 1
Categories of Service...

Section 2
Fee Basis Options...

Section 3
Special Services and Conditions...

Section 4
Disbursements...

Appendix A
Costs of Engineering...

Appendix B
Example Hourly Rate Calculations...

Appendix C
Categories of Service 3 and 4...

 

 
Appendix A
Costs of Engineering

 

Engineering consulting fees are commonly expressed as a function of the Consultant's operating costs. This Appendix describes the three components of cost that comprise the Consultant's hourly billing rates; direct costs, overhead costs and profit.

Following is a summary of the cost details to supplement the information included in Section 2 Fee Basis Options.

1. DIRECT COSTS

This category of cost represent payroll costs and disbursements incurred by staff while engaged on the assignment.

(a) Payroll Costs

This cost is typically expressed as an hourly rate based on a 37 hour work week using the following formula:

Hourly Payroll Cost = Annual Salary + Fringe Benefits
  1950 Hours (52 37)

in which fringe benefits are typically 20% to 30% of salary to cover the employer's share of:

UIC charges

Workers' Compensation levies

Medical and Hospitalization insurance

Life, Dental and other insurance premiums

Statutory holiday provisions

Sick leave provisions

Vacation pay

Canada Pension and Company Pension

Note: It is intended that the actual cost of fringe benefits and the actual annual working hours be used to calculate the hourly payroll cost. Annual working hours are defined as the regular working hours per week multiplied by 52.

b) Disbursements

These costs are those incurred by staff engaged on the assignment and chargeable directly to the project.

 

2. OVERHEAD COSTS

This category of cost relates to the general operations and maintenance of a business and include:

a) Physical Plant

office rental and operating costs

furnishings

usual engineering tools and equipment (excluding specialized computer equipment such as CAD and electronic survey equipment which are covered by negotiated rates)

switchboard, telephones, telex, etc.

b) Operating Costs

financing

business and professional licenses

professional and general liability insurance

stationery and office supplies

technical library and periodicals

staff recruitment and training

audit and legal fees

bad debts

administrative salaries

accountants and clerks

receptionists

librarians

non-chargeable time by professional and technical staff in updating procedures, attending technical seminars and other activities which are not chargeable to projects

Overhead costs vary according to the size of operation, location of office and the nature of services provided. They vary also with the efficiency of the Consultant's organization, but are typically approximately equal to the direct payroll costs.

 

3. PROFIT

The balance after direct costs and overhead costs are deducted from total revenue represents the before tax profit. The level of profit should reflect the Consultant's management skills, efficiency and exposure to risk. In the long term, appropriate profit levels are a essential pre-requisite to proper Client/Consultant relations and the achievement of accepted standards of professional service.

 


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