Engineers should increase their mark-up on outside consultants

PSMJ Resources, business consultants to the architecture, engineering and construction sector in North America, have issued the “2008 A/E Fees & Pricing Survey.” Highlights from the survey’s conclusions include:
The percentage mark-up that architecture and engineering firms are charging for outside consultants and reimbursable expenses has not changed in a decade. As a result, PSMJ warns: “Firms that do not include a mark-up on outside consultants are willing to accept no compensation for these additional risks of managing and being responsible for the work of their consultants — a very poor risk-reward trade-off.”
On the subject of risk, PSMJ also found, “Firms continue to assume greater levels of risk with respect to the types of contracts being negotiated.” The survey showed that lump sum contracts is the most popular form of contract.
Another finding was that firms are billing clients at the same rate as last year for work by senior positions such as project engineers and project architects. Rates for work by people in mid-level positions have also barely increased.
Clients are not paying up promptly. The report says that 100% of the architecture/engineering/contractor firms surveyed are negotiating the ability to charge on overdue invoices. However, “unfortunately, the collection rate continues to be very small, less than 20%.”
Firms reported that three-quarters of their new business is the result of current and past clients.
See www.psmj.com/publication