COST PLUS FIXED FEE Fixed fee
- an amount to compensate the Civil Engineer for contingencies, interest on invested capital, readiness to serve, and profit.
The cost plus fixed fee basis requires that the client and the Civil Engineer define and agree upon the scope of services the Civil Engineer is to perform. The scope of services, cost estimate, and fixed fee should be incorporated into the client-engineer agreement.
The cost plus fixed fee method can also be used when the civil engineer is required to start providing service before the detailed scope of services can be determined. In such cases the following considerations apply:
1. The general scale and intent of the project should be fairly well defined, even e ven if the full scope is indeterminate. 2. The type of service service to be performed by the Civil Engineer should be agreed upon and fully set forth. The agreements should also provide for appropriate adjustments in the fixed fee, in the event that the physical scope of the project, time of completion, or level of effort and services required are materially changed over those contemplated during the negotiations.
The fixed fee amount is frequently calculated as a percentage of the salary cost, overhead, and direct non salary expenses.
One advantage of the cost plus fixed fee method is that it eliminates any suspicion that the costs have been allowed to grow in order to increase the Civil Engineer’s fee, which by definition is a fixed amount.
FIXED PRICE
– frequently used for investigations and studies and for basic services on design type projects where the scope and complexity of the assignment are clearly and fully defined. Fixed Price Method
The fixed price amount can be calculated as the sum total of estimated engineering costs for salaries as the sum total of estimated engineering costs for salaries, overhead and non salary expense, an allowance for contingencies, interest on invested capital, readiness to serve, and a reasonable amount for profit.
A fixed price agreement should contain a clearly stated time period during which the services will be performed and a provision for adjustment of compensation if the project is delayed for reasons beyond the Civil Engineer’s control.
Partial payments should be made to the Civil Engineer at stated intervals usually once a month during the performance of the services. PERCENTAGE OF CONSTUCTION COST
The percentage of construction cost method is seldom used raw. This method may be used to determine the compensation of the engineer for services where the principal responsibility is the detailed design or construction supervision of facilities to be constructed.
– the estimated total cost of constructing the facility to be covered by the proposal detailed design or construction supervision services, excluding the fees and other costs of such services, the cost of land and right of way, and legal and administrative expenses. Construction Cost
The validity of the percentage of construction cost method rests upon the assumption that detailed design and construction supervision costs vary in proportion to the cost of construction.
The percentage fee shall consider the type, complexity, location, and magnitude of construction cost of the project and shall not exceed the ff percentage of estimated construction cost: 1. Feasibility studies ---------------------------------------------- three percent (3%) 2. Detailed engineering design---------------------------------- six percent (6%)
3. Detailed architectural and engineering design------------- eight percent (8%) 4. Construction supervision-------------------------------------- ten percent (10%)
It is further emphasized that the above percentages are only ceilings and it does not necessarily mean that the said percentages shall always be adopted for each project.
As a general rule projects within a higher range of construction cost will have lower percentages of fees than those projects within a lower range of construction cost
SCHEDULE OF MINIMUM BASIC FEES
Certain principles to be observed in the rates of compensation for Civil Engineers: 1. When doing work on foreign assisted projects or in projects where international consultants participate, the Civil Engineer performing similar or equivalent work, should accept compensation that approximates the international standard rates. 2. Civil Engineers regularly employed in the private sector shall have a minimum compensation corresponding to 10% more than the minimum wage prevailing in the region as basic monthly salary. Civil Engineers employed in the government sector shall have a minimum basic monthly salary corresponding to appropriate entry positions provided by the Civil Service Commission. 3. A Civil Engineer employed in the private sector who signs and seals the Civil Engineering plans, specifications, and other related documents of a certain project for and in behalf of his employers shall be compensated with a minimum of 10% of the professional fee for the project, over and above the basic monthly salary.
