{"id":13285,"date":"2021-09-08T10:57:50","date_gmt":"2021-09-08T00:57:50","guid":{"rendered":"https:\/\/totalsynergy.com\/?p=13285"},"modified":"2022-09-16T10:11:48","modified_gmt":"2022-09-16T00:11:48","slug":"how-to-write-an-accurate-fee-proposal-for-architects-engineers-and-aec-professionals","status":"publish","type":"post","link":"https:\/\/totalsynergy.com\/how-to-write-an-accurate-fee-proposal-for-architects-engineers-and-aec-professionals\/","title":{"rendered":"How to write an accurate fee proposal \u2013 for architects, engineers, and AEC professionals"},"content":{"rendered":"\n\n\n\n\n\n\n\t
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The fact is that your success hinges on you knowing your real costs. Not just labour charges for fee earners, and raw costs either. But how much it truly costs for you to complete a project.<\/a> In a July 2021 article on architecture.com<\/a>, financial consultant and former finance director at Grimshaw, Michael Holmes, said that \u201conly by understanding its real cost rates can practices put together a sensible fee bid\u201d.<\/p>\n

What that means for your practice, is that fee proposals need to go beyond a summary of the design brief and services required. The hours that billable staff members spend on administration, the cost of non-billable employee salaries, electricity in the office, insurances, and a multitude of other expenses must be worked into your overhead costs. Because your architecture, engineering, and built environment projects are your source of income, those overheads must be factored into every fee proposal your firm puts together. It\u2019s critical to your ability to achieve consistent success.<\/p>\n

So how do you put together a fee proposal that does that properly? We spoke with David Yeates (Synergy business and project management software consultant, with a decade\u2019s experience running a successful architecture practice) about the answer to that question. David says, \u201cFirst and foremost, the number one thing when writing a fee proposal, is that you’ve got to get your rates right.\u201d<\/p>\n

The cost of managing clients, and your portfolio<\/strong><\/p>\n

When beginning to write your fee proposal, it\u2019s important to understand who you\u2019re writing it for. Whether it\u2019s a mum-and-dad investor building a new home, a mid-tier developer, or a government contract, the nature of your client will necessitate varying amounts of management.<\/p>\n

Our small scale, residential client example will likely need educating as you go, with higher client touch or interaction, and higher overhead in management costs for you as a result. Costs you need to account for in your fee proposal. A mid-tier developer on other hand, will be well versed in the likely requirement of engineering inputs, phases, and stages, and require less of your time.<\/p>\n

\u201cThe other thing about those different types of fee proposals, is you would never take on a small scale, residential client as a portfolio<\/a> piece\u201d says David. It\u2019s common practice in the built environment design industry to take on a government project, for example, and offer them a price devoid of profit, to add that project to a portfolio of work \u2014 so you can move into a new market.\u201d<\/p>\n

If you\u2019re breaking even on a portfolio project like that, it\u2019s critical to know that you\u2019re making profit on your other projects to not send your business under. David says, \u201cIt doesn’t matter what kind of fee proposal you’re putting together, you need to make sure that it fits into your wider portfolio of projects, to make sure that you are actually covering all of your costs, even if you’re doing a loss-leader project.\u201d<\/p>\n

The overhead factor<\/strong><\/p>\n

It\u2019s clear that when you consider your overhead costs you need to account for everything outside of your project costs. Your rent, insurance, IT systems, and non-billable staff salaries, just to start. However, there are other costs that need to be considered here too. David says, \u201coverheads include the company director\u2019s car lease, the meals and other extras that senior staff get, and all the other hidden benefits that a lot of directors don’t want disclosed.\u201d<\/p>\n

For that reason, it\u2019s important to have the ability to calculate your overhead costs privately. Ideally using your own business management software system<\/a>, in-house, to come up with a figure. David says, \u201cSynergy is one of the only places I’ve ever seen that provides you with the tools to input those figures and reduce them to a single integer, which we call the ‘overhead factor’.\u201d<\/p>\n

Whether you\u2019re using Synergy software or not, you want to take the cost of all your business overheads and reduce that to a single number. In the built environment design industry that number typically ranges between 1.7 and 2.3.<\/p>\n

Practice directors will need to decide what number they\u2019re comfortable with based on their calculations. In Synergy, your System Administrator can adjust your financial controls to accommodate this. You then can have this flow through all your staff cost calculations and maintain a level of privacy in how you do this \u2014 with minimal people having access to how you’ve reached the multiplier you\u2019re using in your overhead factor.<\/p>\n

Staff cost rates<\/strong><\/p>\n

To begin addressing staff cost rate<\/a> calculations, David suggests we imagine that our overhead number was two. Next, we should imagine Janey, who has the following costs associated with her fictitious tenure:<\/p>\n