Business
ASHRAE and CESA President
Olu Soluade .
THE CONSULTING ENGINEER FEE-DISCOUNT DILEMMA
By Eamonn Ryan
Why do consulting engineers feel compelled to discount their professional fees to win work ? This article explores the repercussions for the entire profession .
On the one hand it is a symptom of the free enterprise system and engineers can bid as they like to win tenders . But on the other hand , nobody asks a doctor or lawyer or any other specialist to discount their professional prices , or even get three quotes to have their teeth work done .
Changing this mindset is imperative if the engineering profession , which is responsible for developing the infrastructure that creates the nation ’ s wealth and prosperity , is to thrive or even survive .
Speaking to the media in early February , ASHRAE and CESA president Olu Soluade reiterated a point often made by Consulting Engineers SA ( CESA ) that consulting engineering services are sold as commodities instead of professional services . Some consulting engineers lament the fact that they are forced to discount their prices prescribed for their professional services in the Government Gazette — because their colleagues do — which is ultimately to the detriment of the entire profession . The root of the problem lies in the decline in government spending on infrastructure , which began its severe downward spiral in the 1980s and resulted in limited opportunities for local consulting engineers . To survive , many companies had to resort to drastic measures , such as undercutting their fees , something which was endorsed in 2013 , when ECSA took a decision to
© Eamonn Ryan | RACA Journal amend the format of determining fees by adopting a format that provided for negotiated fees .
The gazetted fees are calculated based on the actual overheads of a consulting engineering practice and other pertinent issues it has to contend with , such as risk , human resources training and development , as well as research and development .
Using this information , realistic fee scales are presented to the Engineering Council of South Africa ( Ecsa ), which is a statutory body that approves and gazettes fees . While discounting fees may have been a prerequisite for public sector work in the past , consulting engineers ’ private sector clients have now become accustomed to them discounting their fees .
As a result , though some firms may be busy they only cover their overheads and realise little , if any , profit . This restricts their ability to perform functions such as training and developing their staff or offering new innovations to their clients . Worse , pointed out one consulting engineer , their work may be uninsurable if there is ever a liability claim . In some instances , it has resulted in the standard of workmanship dropping , having an impact on professional indemnity insurance .
It also damages the profession ’ s ability to sell itself as the career of choice .
As mentioned in the CESA Presidential article on page 15 , Soluade took issue with the current supply chain processes of government , mentioning they simply no longer are fit for purpose . He emphasised that for the good of the country we must ensure the principle of ‘ value for money ’ takes precedence over ‘ cheapest price ’. Business has been involved in discussions relating to the compilation of the new Public Procurement Bill that is presently under draft and due to be presented to parliament in the near future . The aim is to ensure that capital goods tenders such as the procurement of infrastructure are treated in a different manner , one which recognises its long-term nature and need for ongoing maintenance , unlike once-off purchases of general goods and services .
Moving away from a least cost approach would thereafter address the issue of quality consulting . Local infrastructure
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RACA Journal I April 2023 www . refrigerationandaircon . co . za