SECTION 4

4.1 General
Charging for engineering services are
usually computed by 1 of 6 methods

1. Salary cost times multiplier plus direct plus

direct non-salary expense (Reimbursable )
2. Hourly billing rates plus reimbursable
3. Per diem
4. Cost plus fixed fee (CPFF)
5. Fixed price
6. Percentage of construction cost (“Percentage”)
4.2 Salary cost times multiplier plus
direct plus direct non-salary expense
 Compensation on the basis of the salary cost times an
agreed multiplier is a frequently used method of
determining charges for engineering services.
 May be utilized as either a multiplier times salary cost
or a multiplier times direct salary cost
 The direct salary times multiplier is very similar to the
salary cost times multiplier with the exception that it
applies a single multiplier to unburdened direct labor
cost, i.e., direct salaries without employee benefits
The following factor are pertinent to
the salary cost times multiplier version
of this method:
 1. Salary cost

 2. Multiplier
 The average multiplier should be between 2.5 and 3
times the average salary cost.
 3. Direct non-salary expenses usually incurred in engineering
engagements may include the ff:
 A. Living and traveling expenses of principals and employees
when away from the home office on business connected with the
project.
 B. Identifiable, communications, expenses, such as long-distance
telephone, facsimile, telegraph, shipping charges, and special
postage charges
 C. Expenses for services and equipment directly applicable to the
project such as for specialized technical equipment, special legal
and accounting services, special computer rental and
programming services, computer run time and file storage,
CADD charges, sub consultants and subcontractors commercial
printing and binding and similar services that are not applicable
for inclusion in general overhead.
 D. Identifiable drafting supplies, stenographic supplies
and reproduction work (blueprinting, photocopying
and printing ) as distinguished from such supplies and
expenses applicable to several projects
 E. Expenses for unusual insurance and specialized
health and safety programs and for special clothing for
projects with extraordinary risks such as toxic and
hazardous waste conditions.
 4. Civil Engineers overhead –which comprises a major
portion of compensation generated by the multiplier on
salary cost includes the ff. indirect costs:
 A. Provisions for office expenses
 B. Taxes and insurance other than those included as salary
cost
 C. Library and periodical expenses and other costs of
keeping abreast of advances in engineering, such as
attendance at technical and professional meetings and
continuing education courses.
 D. Executive, administrative, accounting legal,
stenographic, and clerical salaries and expenses (other
than identifiable salaries included in salary costs and
expenses) plus salaries or imputed salaries of partners and
principals to the extent that they perform general executive
and administrative services as distinguished from technical
or advisory services directly applicable to particular projets
 E. Business development expenses, including salaries
of principals and employees so engaged
 F. Provision for loss of productive time of technical
employees between assignments, and for time of
principals and employee on public service assignments
 G. Costs of acquiring and maintaining computers,
development of software and training staff when not
billed as a direct cost
4.3 Hourly billing rates plus
reimbursable
 Is very similar to the salary cost times multiplier
method in that the hourly billing rate includes all
direct personnel expense, overhead and profit
 Are used on projects where the scope of service is not
well defined or to simplify-accounting and record
keeping.
4.4 Per diem

 Per diem normally refers to an eight-hour day

 Is particularly suited to expert witness or other type
legal-type services and to other short-term
engagements involving intermittent personal services
 Per diem rates can vary widely, depending on
employee classification, regional location and period
of service.
 Rates for consultation in connection with litigation
and appearances before commissions and courts are
normally higher than the standard rates
4.5 Cost plus fixed fee
 Under a cost plus fixed fee agreement, the CE is
reimbursed for the actual cost of all services and
supplies related to the project, including:
 Salary costs
 Overhead
 Direct non-salary expenses
 Fixed fee
 The CPFF requires, as a prerequisite to equitable
negotiations, that the client and the CE define an agree
upon the scope of services the CE is to perform.
 Can also be used when the CE is requited to start providing
service before the detailed scope of services can be
determined. In such cases, the ff. considerations apply:
 1. The general scale and intent of the project should be
fairly well defined, even if the full scope is indeterminate
 2. The type of service to be performed by the CE should be
agree upon and fully set forth.
4.6 Fixed price
 Is frequently used for investigations and studies and
for basic services on design type projects
4.7 Percentage of construction cost
 Construction cost is defined as the estimated total cost of
constructing the facility to be covered by the proposed
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
 Is seldom used raw because of increasing complexity and
large variation in task for projects
 May be used to determined the compensation of the
engineer for services where the principal responsibility is
the detailed design or construction supervision of facilities
to be constructed
 The validity of the percentage-of construction cost
method rest upon the assumption that detailed design
and construction supervision costs vary in proportion
to the cost of construction.
The percentage for shall consider the type, complexity
location, and magnitude of construction cost of the
project and shall not exceed the ff. percentages of
estimated construction cost:
 Feasibility studies- 3 percent
 Detailed engineering design- six percent
 Detailed architectural and engineering design- 8 percent
 Construction and supervision-10 percent
4.8 Schedule of Minimum Basic
Fees
 Certain principles should be observes as follows.
1. When doing work on foreign assisted projects on in
projects where international consultants participate, the
CE performing similar or equivalent work, should accept
compensation that approximates the international
standard rates.
2. CEs 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. CEs employed in the government sector
shall have a minimum basic monthly salary
corresponding to appropriate entry positions provided by
the Civil service Commision
 3. A CE 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 percent of the professional fee for the
project, over and above the basic monthly salary.
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