Fees often define a design firm’s ability to win work and execute a project profitably. With competitive pressures now higher than ever, setting these fees has been a difficult task for most architectural, engineering, planning and environmental consulting firms.
Just over half of firms in the industry update their billing rates yearly, according to ZweigWhite’s recently released 2013 Fee & Billing Survey. Over the past three years, these rates have seen meager median increases of just 3%. Firms still felt some pressure to reduce or discount fees for various reasons, with 52% reporting discounting project fees over the past year. Of those firms that discounted project fees over the past year, the majority (63%) reduced the final price.
In the A/E/P and environmental consulting industry, staff members’ time is often charged by the hour under “time and materials” contracts. Even with lump-sum or fixed-price contract jobs, firms may measure profit or loss by charging time against the project at billing rates.
Most firms in the design industry determine their fees for projects by using hourly billing rates (67%), or a formula that calculates cost plus profit (58%). Pricing at what the market will bear was a surprisingly unpopular approach; only 17% of respondents use it.
The survey found a wide range of billing rates across all design disciplines and positions. The median billing rate for project managers ranged across the industry from $125/hour to $160/hour, and was highest at full service engineering or E/A firms and lowest at single-discipline engineering firms.