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2.6 Contracts and Fees for Design Services
The interests of owner, or client, and design professional are re?ected in the design contract, or agreement, which should be in writing. It should de?ne the duties and responsibilities of each party to the agreement. It should also describe the overall
project requirements.

Several standard agreements are available for contracting for design servicesfor example, those developed by the American Institute of Architects and those developed under the auspices of several engineering organizations. The latter standard agreements include documents issued by the Engineers Joint Contract Document Committee (EJCDC), formed by the National Society of Professional Engineers (NSPE), American Consulting Engineers Council (ACEC), and the American Society of Civil Engineers. Representatives of the Construction Speci?cations Institute (CSI) also participate in the development of these documentsand the CSI endorses them.

The basic methods for determining fees for design services are lump sum, cost plus ?xed fee, and percentage of construction. The last method is the least often used.

Lump Sum Fee A ?xed fee is arrived at by estimating the man-hours and expenses anticipated for rendering the service. When the scope of a project is speci?cally outlined, the consultant can evaluate anticipated costs for services by analyzing the demands of the project and drawing on experience and knowledge of the ?rms capabili- ties. The consultant can translate the project into man-hours required and compute the cost. To the cost of labor must be added overhead, any expenses beyond those normally included in the overhead factor, any unusual elements that might add to costs, and anticipated pro?t. Although the ?xed fee may be established by using accepted industry percentages as a yardstick, the contract is negotiated for a lump sum regardless of the projects eventual construction cost. Only if there is a change in the scope of services initially agreed on
will there be a possible change in the fee.

Avariation of this form of payment is the lump- sum fee plus expenses, which is used if there are extraordinary expenses, for instance, a more-thannormal amount of travel to a distant site, or if sub soil investigation and surveys are included in the consultants scope of work.

Cost Plus Fee The cost-plus type of contract is normally used when the scope of work cannot be readily de?ned. Then, the owner agrees to reimburse the consultant for costs plus a fee. The reimbursable costs consist of technical payroll and actual expenditures, such as travel, subsistence while away from home, long-distance telephone calls, and other costs incurred directly for the project. Normally, the fee is determined by a factor applied against payroll cost. The factor compen- sates the consultant for management, overhead, indirect costs, and fee. Principals, partners, or of?cers, if engaged in actual production work (technical, as differentiated from administrative), are reimbursed for their services
in the same manner as employees on the payroll.

Avariation of this payment method uses a time factor (hourly or daily) with wage rates to
reimburse a consultant for costs, overhead, and fee. For example, owner and consultant may agree on a rate of pay for a category of employee and multiply this rate by an overhead-and-fee factor. If a designers average rate were set at $15 per hour and the overhead factor at 150%, the payment provision in the contract would state that reimbur sement to the consultant for the designers time would be at $37.50 per hour ($15 ? 1.5 15). Rates also would be set for other categories of personnel to be employed on the project.

Additional cost-plus arrangements most commonly used by federal and other public agencies establish both a basis for identifying all allowable costs and for setting a ?xed fee at the time of contract negotiation. Although calculated as a percentage (frequently 10%) of estimated costs, this fee remains ?xed (a lump sum) for the contract unless there is a change in the scope of work. The ?xed fee covers pro?t and nonallowable costs. Allowable costs are reimbursed as incurred for the prosecution of the work. Such costs include direct labor, direct project costs, and overhead and in direct costs attributed to the labor base. Federal Procurement Regulations spell out in great detail categories of costs, both allowable and nonallowable. All such costs are subject to audit and veri?cation by government audit agencies. Contractors or consultants who contract with the federal government conduct yearly audits in which they verify and agree on the cost basis to be
utilized.

Such cost bases are traditionally labor costs (actual payroll costs) plus indirect costs (allowable overhead) and are translated into a percentage of the technical labor cost base. This percentage is reevaluated and recalculated periodically, normally consistent with the time of an audit or
?scal year.

Percentage of Construction Value This percentage may be used as a guide by parties in determining a fee. If a percentage fee is negotiated between the parties, it is of great importance to de?ne what amount will be used for the construction value. Will it be the estimated value or the actual construction value based on the contractors low bid? If the fee is to be based on the estimated value, will the preliminary or detailed estimate govern? If the fee is to be based on the low bid, the design contract must state that the contractors bid be bona ?de since contractors sometimes make mistakes and submit improper bids. Furthermore, the design contract should provide for a payment method if, for some reason, construction does not proceed and no bids are available to establish a construction value for feepayment purposes.

The percentage fee is now rarely used to establish the basis of a designers compensation.
Percentage values remain a viable yardstick for establishing or evaluating design costs. But, there- after, it is more advantageous to a designer and owner to translate the percentage value to a lump sum fee for contract purposes.

Other Types of Fees Some owners engage consultants on a retainer. However, this reimbursement method is not a substitute for payment of fees as previously described. An owner who has a continuing need for engineering advice and consultation may retain a professional engineer for a period of time, normally annually. The owner is free to call on the consultant for professional assistance on a continuing basis, such as attending periodic planning and development meetings. If, however, the service required becomes more than consultation and design of a project is called for, the retainer would not be suf?cient compensation; a separate fee would be negotiated.

2.7 Managing Project Design
Managing the design of a project is similar to managing a business, only on a smaller scale. The design project manager must be able to control the cost to perform the work, the time it takes to complete and the quality of the ?nished design. Critical to completion of the work in a professional manner is the development of a project management plan that de?nes the project and how it will be managed. The project management plan should include the scope of work, the hours by discipline that it will take to perform, the schedule and any milestone deliverables that are required, the budget allocated to perform each phase of the work, and a system for providing quality control. In order to properly prepare the plan, the project manager should review the contract that has been signed with the owner to see how the project has been de?ned and what services the owner required
to be provided in order to complete the project. Budgets should be allocated to perform all facets of the work as de?ned by the owner in the contract. In addition to preparing the scope of work, areas of concern should be noted (such as unique conditions that exist on the project that must get special design attention) and an approach to managing them.

It is also necessary to identify the project organization and relationships within the organiz-
ation. If subconsultants are to be used, their scope and costs should be included in the plan. The simplest way to do this is to draw a project organization chart, which de?nes responsibilities and reporting relationships.

The organization for a new design project generally is drawn from existing staff. Operating
procedures depend on the size of the project and managements philosophy.

A professional staff, to function effectively and ef?ciently, should be able to draw on standardized procedures and up-to-date referencematerials. The latter include design codes, standards, and design manuals.

A critical element in maintenance of design standards and design quality is the use of computers. Use of computers is changing the way projects are designed, how information is shared and ultimately how it is transmitted for quality assurance reviews and bidding. Computer programs have for years been used to simplify the drudgery of massive calculations used for design purposes. Programs exist to perform a wide diversity of calculations and designs from structural all the way to lighting. The CADD technician has replaced the manual draftsperson. Alternatively, engineers prepare design documents on the computer themselves. Recently, the internet has become a great source of information allowing engineers access to the latest codes and standards.

To allow engineers working at diverse locations to update drawings, companies have begun using web sites, which simpli?es and expedites the coordination process. Owners have begun to require the development of web sites so that they can view progress on the design of their projects. Finally, some owners are now requiring digital copies of their projects on compact discs rather than blueprints. These same owners are providing contractors with a digital copy of their project which allows them to make their own prints.

Value engineering (VE), or value analysis, may be incorporated as part of the design process. Value engineering is a formalized and organized procedure in which a separate design team reviews the design at various stages to assess proposed designs. The team makes recommendations, as appropriate, for revisions that will both improve the design, increase value or affect cost savings. Value engineering often is utilized by some owners before start of construction to identify possibilities for reducing costs.

The earlier value engineering occurs, the more effective it is in reducing costs. If value engineering is performed during the schematic phase, it is relatively simple for the engineer to make changes to the design documents. As the design is developed and coordinated, it becomes more and more dif?cult to implement value engineering changes as it may affect many different parts or systems already incorporated into the design.

2.8 Project Methods and Standards
For ef?cient operation, a ?rm should establish standard methods and systems. This does not mean that once a procedure is established it is in violate; it is subject to improvement and re?nement. But within reason, the standard procedures should be adhered to on all projects. Without standardization, the result would be more than wasting time: The ?rm would be unable to operate ef?ciently within available budgets.

A code number should be assigned to identify each project. A commonly used system identi?es the project by a series of numbers, including the year (calendar or ?scal) inwhich a project is started. This number should be used on all work, whether a ?nal drawing, rough calculation, or correspondence. All costs and charges pertaining to the project should also be identi?ed by this number.

A standard procedure for the performance of all work should be established. This includes a procedure for checking calculations and a system for preparation and approval of drawings, from drafters work to the ?nal authorized signature. Regardless of what internal procedure is established, the ultimate objective is the same: to operate economically and ef?ciently. After a design problem has been evaluated and analyzed and a method of solution established, a typical design procedure would be as indicated in Fig. 2.1. Because many speci?cations are similar to each other in outline and technical provisions, standardization of speci?cations can be most useful.

This does not necessarilymean that the ?rmshould prepare canned speci?cations for use interchangeably on all projects. Each project has different requirements, but the various sections of the speci?cations should be prepared in a consistent manner on all projects. For instance, in a concrete speci?cation, a typical section might contain the following major paragraphs: scope of work, related work (cross-referenced to other speci?cation sections), obecný, materiál (cement, sand, aggregates, and so on), reinforcing steel, formwork, concrete strength and mixing, and concrete placement. Each paragraph has to be tailored to ?t the requirements of a projectpier, bridge, or building. Many of the provisions, however, may be essentially the same in many instances, for example, the provisions for the quality of material in one geographic area.

For simpli?cation, the ?rm may adopt standard speci?cations prepared by technical societies for an item, such as structural concrete. These speci?cations require the designer to insert requirements for a speci?c project but eliminate the necessity of writing anew for each project sections that are substantially the same for all projects.

Fig. 2.1 Typical design procedure.

2.9 Project Quality Control
The quality of a ?rms product should be of continuing concern to all members of the ?rm.
Achievement of quality requires sound engineering practices, especially compliance with codes, standards, and legal regulations.

Quality control (QC) is a continuing process that can be part of a quality-assurance (QA) program. Whether or not formal programs are instituted for the purpose, good engineering practice requires procedures to be established to check product quality. These should comprise reviews at various stages of design development to evaluate the quality of the work.

Interim reviews often are required as part of a designers scope of services. Designers generally submit the work formally to the owner at various stages of completion, such as at completion of preliminary plans (30%), design plans and details (75%), a ?nal bid plans (100%). A ?rm may utilize separate review teams to check work performed by others before issuance and use of design drawings and speci?cations for construction.

Designers should assure that products comply with applicable codes and standards. This requires familiarity with the latest statutory requirements and awareness of the latest regulations issued by the various agencies that have jurisdiction. This is especially signi?cant for any work that has potential environmental impact, even though environmental impact statements may have been completed under prior contracts.

To assist in maintenance of quality in construction, engineering societies have promulgated
programs such as total-quality management (TQM), which addresses and reviews a ?rms practices. The objective of TQMis to promote qualitywithin a design organization and of its products. TQM is implemented internally through ongoing training of all members of the organization to continuously seek quality in the ?rms work practices and product and thus to achieve desired quality of results.

Many engineering ?rms and owners are becoming ISO 9000 certi?ed. ISO 9000 is a quality
assurance system developed a little more than a decade ago that establishes international standards for producing a high quality project. This is formal recognition that a ?rm has developed and maintained a Total Quality Management system to perform its design work. In order to maintain ISO 9000 certi?cation, a ?rm must be regularly audited to demonstrate that it has complied with the standards. Major elements of the system include the preparation and use of a quality assurance manual, active senior management involvement, and implementation of a non-conformance documentation system.

Peer Review n This is a procedure employed by a ?rm for a speci?c project wherein the ?rm contracts with an outside group, the peer, to review policies and practice for the purpose of achieving the highest level of quality in design of the project.

A peer review is conducted by designers with the same expertise as those who
prepared the design and who have no relationship with the designers and are totally independent. Peers can be individuals from other departments of the ?rm or other organizations. The designer of record, however, is not replaced by the peers. The review
should result in a report of the ?ndings of the peers. It should not be considered a
criticism of the designers or theirwork. A peer review, unlike other design reviews, does not have a speci?c objective other than quality, such as cutting construction or
life-cycle costs, value engineering, or a construct- ability review performed as part of construction management.

2.10 Scheduling Design
Without proper scheduling, a ?rm may ?nd that its operation is as inef?cient as if no standard procedures were used. To accomplish a design, the ?rm is essentially scheduling workforce needs. This task becomes more important with the number of projects to be handled at the same time. A properly run ?rm should be able to schedule its
work so as not to take on more than it can adequately handle with a stable size of staff.

For scheduling total workload, individual project scheduling is essential. The simplest
and most common device for this purpose is the bar chart, a graphic representation of workforce (represented by bars) plotted against time. By studying such a chart, one
can quickly determine job start and completion dates and when and for what workforce needs will be greatest.

Scheduling devices such as the critical-path method (CPM) and program evaluation and
review technique (PERT) have a de?nite place in programming design-workforce requirements. Al though the design project for which a complete CPM or PERT study
would be employed is unusual, modi?cation or limited use of these programming
devices is warranted in many cases.

A complete computer CPM program, including scheduling costs as well as time and evaluating the economics of crash programs, would be used only on the most complex projects. Because more thorough planning is required, use of the basic CPM and PERT activity diagram can often result in a better scheduled project than if a bar chart were
used. With the use of a bar chart, the start or completion of activities represented by a
bar can be extended a week or more without affecting the basic schedule. A CPM or
PERT diagram does not permit this since the diagramming of the activities interrelates
them all and the change in time in one activity can affect all.
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