Design Engineering Pricing Structure

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mull982

Senior Member
This may come as a loaded question but I've recently doing some design engineering (licensed PE) and was looking to get some feedback on how others doing similar work usually arrive at their cost for design engineering related to development of construction drawings. I'm not looking for anyone to share personal pricing strategies or proprietary information but rather just wanted to start a conversation to get some general feedback. As I venture into this new area I'm just trying to get a feel for what the market bears for typical designs in order to stay competitive.

What is the general pricing approach when approaching a new design for a commercial or industrial setting? Is it based on the number of drawing that need to be created ("X" amount per One-Line, "X" amount per site plan) or is it more approached from the building size? For example a typical electrical room in an industrial facility costs "X" amount and consist of a certain amount of drawings, with a quantity multiplier used for multiple buildings or structures.

Appreciate any feedback or general comments.
 

mayanees

Senior Member
Location
Westminster, MD
Occupation
Electrical Engineer and Master Electrician
been there

been there

I started in industry in 1982, and bought my first SKM package in 1992. At that time I started doing side-work offering Power Studies (Fault and Coordination then, but now add arc flash) and general industrial/commercial electrical design. I targeted my pricing at 2/3 of what a real engineering firm would charge, with my main interest being to build up clientele. If I didn't have a target price for a job I would use $80/hour for my anticipated time and that got me pretty much everything I was asked to bid. Much of that work included Pump Stations and parking lot lighting designs since the local municipality required footcandle presentations on everything (AGI32 software).
Twenty-five years later I'm with a consulting firm that lets us to do side jobs as long as they're not in conflict with our business, and once you've got the sidejob bug I don't think it ever goes away. I now price more competitively and use $125/hr as my multiplier for pricing, and still get pretty much every Power Study that comes my way.
The biggest problem I have is being able to take vacations where I can relax without thinking about making a buck on an open project!
Good luck.

(I used to carry $3000/year professional liability insurance, until a friend of mine was sued along with 5 other folks. In the end, the only one who was dropped from the lawsuit was the guy who didn't have insurance! I also think that I cover my tracks well enough that I don't have paranoia about missing something)
 

mull982

Senior Member
We try to the average of three methods.
1. number of drawings expected
2. % of estimated construction
3. actual man-hours take off of scope items

Interesting approach. A Few follow up questions:

1. I assume you estimate the number of drawings you need, and assign a dollar amount or number of hours to each one?

2. Is this % of estimated construction based off the actual project construction cost? Does this include just the estimated contractor installation cost, or does this include equipment costs as well? What is a typical percentage that's used? I recall seeing once that engineering/design usually represents 10% of total electrical project cost?

3. I'm curious what you are referring to here when you refer to "man-hours" take off? What are you doing the takeoff of for the design cost? Just going through the scope and assigning man-hours to certain elements of the scope?

Thanks for the feedback.
 

ron

Senior Member
Interesting approach. A Few follow up questions:

1. I assume you estimate the number of drawings you need, and assign a dollar amount or number of hours to each one?

2. Is this % of estimated construction based off the actual project construction cost? Does this include just the estimated contractor installation cost, or does this include equipment costs as well? What is a typical percentage that's used? I recall seeing once that engineering/design usually represents 10% of total electrical project cost?

3. I'm curious what you are referring to here when you refer to "man-hours" take off? What are you doing the takeoff of for the design cost? Just going through the scope and assigning man-hours to certain elements of the scope?

Thanks for the feedback.

1. Yes, depending on the drawing type, it gets assigned a certain dollar value.

2. Based on my high level construction cost generally, or if the client tells me their budget,

3. I list out each task of the project I can predict, then guess at how many hours per task, then total it up. This is usually the highest estimate, because it is hard to consider the simultaneous action that occurs when at a design meeting and able to pickup site survey information without a separate trip.
 

gadfly56

Senior Member
Location
New Jersey
Occupation
Professional Engineer, Fire & Life Safety
I started in industry in 1982, and bought my first SKM package in 1992. At that time I started doing side-work offering Power Studies (Fault and Coordination then, but now add arc flash) and general industrial/commercial electrical design. I targeted my pricing at 2/3 of what a real engineering firm would charge, with my main interest being to build up clientele. If I didn't have a target price for a job I would use $80/hour for my anticipated time and that got me pretty much everything I was asked to bid. Much of that work included Pump Stations and parking lot lighting designs since the local municipality required footcandle presentations on everything (AGI32 software).
Twenty-five years later I'm with a consulting firm that lets us to do side jobs as long as they're not in conflict with our business, and once you've got the sidejob bug I don't think it ever goes away. I now price more competitively and use $125/hr as my multiplier for pricing, and still get pretty much every Power Study that comes my way.
The biggest problem I have is being able to take vacations where I can relax without thinking about making a buck on an open project!
Good luck.

(I used to carry $3000/year professional liability insurance, until a friend of mine was sued along with 5 other folks. In the end, the only one who was dropped from the lawsuit was the guy who didn't have insurance! I also think that I cover my tracks well enough that I don't have paranoia about missing something)

You've been lucky. I wouldn't hang my shingle without it, and depending on the state you live in you may have to carry a minimum level of E&O (Errors and Omissions) insurance. I'd also look to carry completed jobs insurance for 5 - 10 years in case something came up really late in the game.

Your friend was equally lucky. Depending on personalities, a vindictive plaintiff could have had him endlessly replying to interrogatories and chewing up otherwise productive time. He'd also need to consult his own lawyer at $x hundred per hour for each response. The goal isn't to get money, it's to break the defendant financially.
 

gadfly56

Senior Member
Location
New Jersey
Occupation
Professional Engineer, Fire & Life Safety
Since you're not making money on installing the work you do, don't cheap out. It isn't just the dollar value of your time, but also the risk you take when someone uses your work to build something. You don't want to collect $500 for a project where your goof could lead to a $50,000 cost to your client. The money you collect also has to cover your risk exposure.
 

mull982

Senior Member
2. Based on my high level construction cost generally, or if the client tells me their budget,.
What is the rule of thumb for design cost in relation to construction cost? I think I heard 10% once. So if the electrical construction cost including equipment is $100k then design cost should be around $10k?

3. I list out each task of the project I can predict, then guess at how many hours per task, then total it up. This is usually the highest estimate, because it is hard to consider the simultaneous action that occurs when at a design meeting and able to pickup site survey information without a separate trip.

I guess this accounts for other things in addition to drawings needed such as site visits, etc...?
 

ron

Senior Member
What is the rule of thumb for design cost in relation to construction cost? I think I heard 10% once. So if the electrical construction cost including equipment is $100k then design cost should be around $10k?

I guess this accounts for other things in addition to drawings needed such as site visits, etc...?

Depends of the type of construction materials. If there will be expensive equipment that doesn't require a huge amount of design, like (10) 3MW generators, I don't count that as much, so overall might be closer to 4-6%. If there is a lot of coordination and detailed details needed, then closer to 6-8%. If we are doing extensive feild visits during design and construction, then it might be 10%

Yes, lots of miscellaneous items
 
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