The main goal of the project planning phase is to provide proposals and estimates to clients that are clear and comprehensive. We want our clients to be able to understand our proposals (and have a clear total) so that they have reliable figures when they do their own construction estimates, pro formas, etc. In the case of a home construction project, if you exceed your estimate in one area, it means cutting back on another, which can be devastating. In the case of a for-profit development, getting it wrong can mean losing money on a project.
“That’’ the antithesis of our goal. We want our clients to make money and have successful projects, and we thrive on repeat business. That means sometimes we have to give the hard truth of costs at the outset. We always attempt to provide a full and conservative picture. We have to caution clients to make sure they get “apples to apples” quotes; it’s easy to hire the “low cost” firm, only to find out there are hidden or unaccounted for fees down the road. I would rather lose a project than cut costs to put out an inferior product. Even more damaging, can be hiring the “cheapest” quote, only to find out the permitting and design timeline takes longer than anticipated which costs money in interest, or lost lease or rental income, or costs more to build. Engineering and design are typically only ~2% to 15% of overall project cost. This percentage is subject to the overall project cost, and project complexity. Low project cost (<$50,000), highly complex projects will typically have a high design fee percentage (10% to 15%) while low complexity high cost (>$10,000,000) projects will have a low design fee percentage (2% to 5%), depending on the exact services covered. Saving 5% in engineering fees seems grand, until you realize that 5% “savings” (let’s say was $10,000) costs you $50,0000 and three months of redesign in the value engineering stage.
Planning and Design Stages and Terms
Typically, projects are broken down into the following stages*:
Concept design, Planning and programming (10% design): Initial project planning, conceptual planning, and determination of overall project and design requirements. This stage seeks to determine, inexpensively, and typically using “paper” resources only, what the overall project design will be. This may entail building and site layouts seeking to determine general overall characteristics and scale so that per sq.ft. costs can be determined in a project cost analysis. The deliverables are generally not suitable for construction or permits, but only to aide in the development of further engineering and design. Our goal at this stage is to determine if the project is feasible, or, if its infeasible and to determine that with this minimum potential outlay of resources. If you need to examine 3 potential project sites to determine the best location for a potential project, a conceptual design analysis may provide the right mix of cost and timeliness.
Master Planning / Schematic Design (50%): This phase builds upon the conceptual design to further the design, so that key features and relationships take shape. This may entail the layout of roadways, parking areas, buildings, general utility placement and stormwater features in the case of civil design, or the layout of floor plans and elevations in the architectural design. Existing conditions analysis (surveys, soil evaluations, borings, structural assessments or environmental analysis) are performed and utilized in the design guidance. Again, at this stage, the deliverables are typically not suited for permitting, or final construction budgeting, but will allow for more pointed construction costs estimates to be prepared, and for in-kind changes to be accepted without major redesign effort and fees.
Construction Drawings (100%): This phase, is where the precise elements of a project are laid out and detailed. Using a building, for example, this is the point where floor plans are typically dimensioned, window and door schedules are finalized, detailed, dimensioned, cross sections and elevation (or 3D models) are provided, as well as final materials. Sub-assemblies or discipline services (Mechanical, Electrical and Plumbing (MEP), Structural designs, etc.) are typically provided. In terms of land development, all building layout specifications, elevations, and heights are detailed, as well as utility designs (including septic/sanitary, stormwater/drainage), roadway, paving and surfacing designs, as well as landscape designs are provided.
* In the case of subdivisions and land development, especially with respect to municipal permitting, these design phases are typically entitled Concept (10%), Master (50%), Preliminary (90%), and Final (100%). In this realm, State Permitting (RIDEM, RICRMC, DEP, DOT, etc.) is typically performed after the Master phase has been approved, and is required prior to filing of the Preliminary applications.
Post design services are typically required on all but the smallest of project, this phase is typically titled:
Construction Administration: This phase entails construction inspections and oversight, and aiding the contractor in building to spec. Typically, an inspection schedule is devised and the design professional or their staff will visit the site to inspect the build at key stages. Key elements of this phase include the use of:
Request for Information (RFI’s): in layperson’s terms, this is a question, for example, asking for the specification of a beam, or clarification on a dimension.
Sketch (SK): this typically denotes a change in design, perhaps due to gained efficiency, or to correct and error.
Submittal: this is a specification provided by the contractor, to the design professional. A typical case, is where the design calls for a “widget,” the contractor may submit specifications for a Jones brand widget. Upon receipt of the submittal, if acceptable, the design professional will stamp “approved” and return the submittal to the contractor for use.
Jargon aside, the core of this information is to demonstrate that, all engineering and design estimates are not created equal. A cost proposal for $10,000 that covers a conceptual design, is inferior to one for $11,000 that covers “all phases of design, and construction oversight.”
We are very careful with our proposals and contracts to outline exactly what phases of design are inclusive, and what phases are not inclusive. We want to be very forthright so that the client can account for the exclusions, and create a budget contingency. In most cases, NEI will include subcontractor’s estimates in our cost proposals, in cases where we know it is going to be a required element. While we do maintain more than a few areas of specialization, we typically consider ourselves “general practitioners,” for development projects, and often prefer to bring in a specialist when the needs arise. We have a diverse group of subcontractors that we have developed over the years, this is a particular strength of ours. When we use subcontractors, it is rarely as simple as a pass-through service. Typically, we have developed practices and procedures with these professionals that enable us to use them as if they were part of our office; we are able to maintain standards, quality, and timelines. We strongly believe that, we are adding value. Often if the client contracts the sub-contractor directly, things get lost in translation; and when something gets missed, it can throw the entire project out of alignment. By maintaining strong quality control procedures, we can minimize the chance of costly error or oversights. Our quality control checklists are baked into our contracts, and visible to the clients, so that the minutia of what is included in a project or task is available to the client, prime, and subcontractor. This transparency aids quality control, as each entity is fully aware of what they are responsible for. In many ways, we can be considered as “engineering subcontractors” when we can bring a diverse group of talented professionals together to create a robust team, that is often not available to smaller projects. Clients are able to hire a firm that is available to oversee the “big picture,” and have specialists available to manage the fine points.
In many cases, we may even use subcontractors to prepare designs for services that we also do in house; this allows for flexibility, and speed, in cases where our own staff may be unavailable for a specific project or task – clients can access a larger group of professionals without having to go to multiple firms. In addition, we are able to bid or estimate sub-tasks quickly and efficiently. Since we have multiple suitable professionals for many tasks, we can internally bid projects to allow for maximal efficiency of tasks under contract. This also helps to maintain proper project planning.
How we bill clients, is a major part of what we do. My experience with many firms, is they prefer fixed pricing, e.g., we will design your development for $10,000. The goal is to be competitive, sure, but to have your profit baked into the fee. Sometimes, you lose a little bit of money on a bad bid, sometimes you hit it out of the park and make a ton of profit. There are a few problems with that approach: a. It’s a bit of a black box. Clients don’t have any idea of how much time or resources are actually being expended b. It is not balanced; it creates a system of winners and losers. Client A “won”; he scored a ton of services on a complex project for not a lot of money. Client “B” lost, he overpaid for an easy job.
c. It’s a race to the bottom, in the sense that it’s not quality-centric, it’s cost centric. In many areas, that’s fine, but in engineering, our costs are usually a small fraction of the project. Smart design can pay for itself in multiples. That, and errors can be catastrophic if the design falls apart during the project. d. It incentivizes omission. If your goal is to just get the low bid, you can omit a key or critical cost, and attempt to push it on an unsophisticated buyer later on. This happens all the time. We’re incentivized to provide bids up to permit completion, but not for construction. Then the construction administration, staking, conformance or oversight elements that we know are going to be required have to be added in later. Not a problem for sophisticated clients, who knew and accounted for this, but for most, these charges can be a ‘surprise’ at the tail end, which often causes them to try to ‘cut’ corners, or worse, risks creating a situation where the client loses money or accepts a lack of oversight and risks an inferior project.
A Better Model Here is how we prefer to proceed; we always strive to provide real / legitimate project cost estimates, that factor a projects timeline, scope and complexity. We will create a detailed project costs analysis for you, and share those results with you, so that you can see where our time is going to be allocated. We will break this analysis up by task. We have almost 100 designated sub-tasks, with a long history and detailed tracking so that we can analyze what similar projects cost in a similar location. We will solicit subcontractors, for tasks that we perform, and those we don’t, so we can create a full scope cost proposal that specifies exactly what is being provided, and exactly what is not. For larger or more complex projects, we will typically include a recommended budget for a factor of safety in our estimates. We include this, not so that we can over-bill you, but to ensure that the job can be completed without risk of going over-budget.
As the project proceeds, we will bill (at hourly rates) against our initial project cost estimate, at 30 day intervals. You will receive tracked, cumulative totals for each denoted sub-task (e.g. a cost for a limited content boundary survey, or the cost for a proposed site plan, RIDEM permit application, etc.) You’ll be able to see where we are under-budget (in terms of time), or any areas where we exceeded our design estimate. Any cost (e.g. time) that is not incurred, is not billed. This rewards good decision-making in behalf of our client(s), if you picked the right site, the right program, the right team, etc. and made the entire job go smoothly, you should be rewarded for it.
Our entire process, from initial cost estimates, to project billing is open book. Our goal is to create a repeatable, conservative process that maximizes trust between ourselves and you (the client), so that the entire project planning process can be repeated, expeditiously.
While we generally prefer to bill for each hour of time we spend on a project, there are cases where we may waive fees. These include:
Cases we have exceeded our own estimate(s)
Cases we have made an error (either in “communication”, e.g. displayed a superseded version of a structure, used the wrong inputs for design, etc.)
Cases we have spent time responding to state/muni/peer reviews, due to an oversight or omission. Typically, we include this time in out estimates. In most cases, the review times are “baked in” to our fees. In rare cases, where their design must proceed at a rush timeline, or very aggressive design practices are dictated by the client, review fees will be billable outside of contract rates.
Beware of low-cost quotes, the adage that “cheap” can be expensive can often ring true when it comes to project planning and design. Our aim, is not to be cheap, but sustainable. We want to make money, and we want our clients to make money too (at least, in the case of for-profit ventures. We do offer reduced rates for most non-profit entities. NEI generally attempts to provide $10,000 per year, or more, in donations or services to area non-profits). We have a diverse team of in-house staff, and specialized sub-consultants that are able to provide comprehensive engineering and design services. We promote an “open book” approach, and commit to helping clients understand a project’s design (and ultimate construction costs) so that smart decisions can be made. We are happy to spend time (at no-charge) for project pre-planning and proposals, and incentive conceptual design services by refunding ~50% of the concept design fees in the full scope design.
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