Project Management Guide promotes best practices
January 1, 1999
By Canadian Consulting Engineer
In their Engineering Services Management: Guide and Glossary, the Association of Consulting Engineers of Quebec and the Association of Consulting Engineers of Canada have produced a document which is ...
In their Engineering Services Management: Guide and Glossary, the Association of Consulting Engineers of Quebec and the Association of Consulting Engineers of Canada have produced a document which is proving to be as much use to clients as it is to professional service providers. In this edition of Canadian Consulting Engineer magazine, we highlight the impact of project management on remuneration as discussed in the Guide.
A method of remunerating the engineer for both technical and project management services that appeals to both owners and consulting engineers consists of combining an hourly rate with fixed fees (cost plus fixed fees) and adding an incentive bonus to a pre-authorized budget drawn up gradually as the project progresses. The hourly rate needs only to cover the cost of salaries, i.e. the wages actually paid to the personnel assigned to the project, and pre-authorized expenses plus benefits and some overhead such as office space, furnishings and equipment. The fixed fees can be negotiated at each stage based on the scope of the predefined services approved by the owner. Moreover, since the budget should have a contingency reserve, the size of which depends on the precision of the estimate, when the project is completed the unspent reserve could be shared by the owner and consulting engineer. This sharing would provide the latter with a powerful incentive to keep the engineering services within budget. In the event of cost overruns, the excess could also be split between owner and consulting engineer (as a penalty). The risk sharing enhances the consulting engineer’s accountability and seals the partnership between engineer and owner.
Clients with limited personnel to supervise engineering activities might prefer to negotiate a lump sum. The amount is determined by the consulting engineer based on the same estimate as before, but includes the contingency reserve which can be considered an insurance premium which the owner agrees to pay to ensure that the fees budget will not be exceeded. In such a case, it is important for the owner to determine precisely what services are to be provided (including the extent to which his employees are to become involved with the consulting engineer) at each stage of the project, and to see that a solid scope-management system is put in place.
The Guide, which is available by contacting the National Office of ACEC, provides similar descriptive advice to both owners and consultants on all aspects of project management. To order one or more copies, contact ACEC at 1-800-565-0569 or e-mail: email@example.com