At its essence, getting the work can be distilled down to reaching an agreement with a client concerning the services they need you to provide for them. Sounds simple right? Perhaps it was simple several generations ago. Back then, you personally knew the client, you reached a verbal agreement defining the services you would provide, you shook hands, you did the work and you sent a bill when the work was completed, with a full expectation that you would get paid.
Sorry to disappoint, but that isn’t reality any longer. Almost all work performed today is won based on a formal written proposal and often an in-person interview.
What projects should you pursue?
Chasing potential projects and doing all the work required takes a lot of time. All the effort you expend on projects that you don’t win is wasted time better spent on something else. Every firm has its own procedures for deciding which projects to pursue, often called the “go-no go” decision. It can be a formal process with a numerical scoring system or for smaller firms an informal thought process. But regardless, you need to assess:
- Have you worked for this client before?
- Do you have the technical skills and staffing required?
- Who is the competition and what experience and staffing do they have relative to your own?
- How much do you know about the client and their reputation for working fairly with consultants?
- Is the scope of work easily definable?
- Is the project funded?
- Is there a reasonable chance of making a fair profit?
- Is the project located in a place you can easily service with regard to site visits?
After honestly answering these questions, you can decide what projects to pursue.
Do you have experience writing proposals?
The answer depends on where you have worked before. Some firms involve even their youngest engineers in the proposal development process while at other firms, project work is assigned to the engineers based on work won entirely by others.
As a refresher, the basic parts of a written proposal are:
- A definition of the project and the estimated construction cost.
- The basic scope of services to be performed, including assumptions about issues not well defined in the information you have been provided.
- The project deliverables by project phase.
- The project schedule.
- The fee requested in each phase for the basic scope of services.
- How you will bill: fixed fee by phase, hourly with no limit, hourly to a maximum fee, etc.
- Hourly rates for projects performed on an hourly basis.
- A list of possible additional or extra services you may need to perform in addition to the basic work scope.
- A list of services that are excluded from your scope of services.
- Terms and conditions applicable to the proposal.
Do you have experience developing appropriate fees?
Based on your own prior work experience, you ought to have a reasonable idea of what technical work needs to be performed and how long it takes to perform these engineering tasks. If something new is facing you, you will need to ask a colleague or two.
What you may not appreciate or fully understand is the effort involved in other aspects of the project – drafting and developing typical details, interaction and coordination with the client and other consultants including weekly conference calls, preparing written specifications, collecting documents (drawings, calcs and specs), preparing submittals, preparing invoices and chasing unpaid accounts receivable, addressing plan review comments from the AHJ, processing shop drawings, creating RFIs, and making structural observation site visits during construction.
Start by writing these tasks on paper if the job is small, or preparing a spreadsheet if the job is large, and assigning estimated hours and costs to each activity. You will find out once you have done this a few times that the more items you list, the greater the required fee will grow. Not developing a detailed list doesn’t mean the work will not be required, it just means you will be performing the work for free if you happen to win the job.
When you are finished with your estimate, compare your fee with reasonable industry benchmarks for the work which are usually based on a percentage of the estimated construction cost. Depending on the market and market participants (your competition), this percentage could range from ½% to 1% or more. If you don’t know, ask a colleague or two for advice. If your task-based fee differs greatly from the industry percentage, this is a warning sign. Two possible explanations are: 1) you were either too optimistic or too conservative in your estimates or 2) your competition is far more experienced with this type of project than you are. This isn’t to say that you can’t do the work, it just means that you won’t get the job because your fee is too high, or you can expect to do a lot of work for free if your fee is too low.
Do you need your own contract terms and conditions?
The answer is yes. A critical part of any proposal is the contract terms and conditions. The purpose of the terms and conditions is to state your understanding of the business relationship you expect to have with your client. Rather than argue later about what each of you expected to happen, you define as much as possible up front. All of the good engineering work you perform will be wasted if you have a bad contract and take on risks and possible costs you weren’t aware of and can’t afford.
You will need to develop your own terms and conditions, or hire an attorney experienced in the construction industry to draft them for you. If you try to write your own, examples are available that have been prepared by entities such as the AIA, EJCDC, ACEC, etc. Or you can ask a trusted colleague for advice or possibly a copy of theirs as a start for you. Once you are finished, have an attorney review and edit. Most good insurance companies will review your terms and conditions and offer advice with regard to what might be missing, what might not be required, wording, and whether your document is consistent with the insurance you buy from them.
If you develop your own terms and conditions, they need to be comprehensive, protect your interests, and be legally enforceable in the jurisdiction where you do business (this is where the attorney is required). Your client needs to agree to your proposed terms and conditions, so presenting an overly long or unfair list of items may paint you as being an overly litigious person and scare them off. It is best to focus on what is likely to come up in your relationship and to be reasonable.
Do you have experience reviewing client-proposed contract contracts?
You may find that your client, particularly government entities, will propose their own terms and conditions for you to agree to. Or your client, say an architect, is asking you to agree to the terms and conditions they negotiated with their client (called a pass-through). Just because you are a fair person, that doesn’t mean everyone else is, and others may try to use their market dominance to push as much risk, liability, obligations, etc. on you as possible.
Sometimes others will negotiate with you and sometimes not. Small changes to wording or striking out clauses that just don’t apply to work in the A/E industry, can have a significant impact. If you are not experienced with reviewing contracts, you ought to consider having an attorney review it for you, until you gain enough experience to be confident in your own abilities. Your insurance company can also coach you on where to look for unfair or uninsurable items. Shifting risk to you via an indemnification clause (asking you to pay for the errors, omissions and negligence of others, paying third-party claims against the project or by requiring you to perform your services at a level that exceeds the standard of care in your area) is the most important item to be aware of.
In the end, it is a business decision. Is the potential gain from the project worth the risks you are taking on? Only you can decide.
Doing the Work
Are you going to work from home?
During COVID-19, most of us worked from home. But for the long term, you really need a reasonable amount of space for a desk, drawings, books, etc. Everything can’t be accomplished on a computer. When it comes to taxes, you can claim an expense for the cost of the home office. I have never done this, but you might want to consider it. At some point, you may want to rent a small office, but can you afford this contractual obligations and fixed cost?
What work can you accept with limited or no staff?
Be honest with yourself as to the projects you are capable of performing. You will be doing all the work yourself, but all your time can’t be dedicated to just one project. And there is no one to delegate to. If you can’t properly serve the client and the project, are you setting yourself up for an E&O claim down the road, despite the project revenue you will earn?
Do you know your own limitations technically and business-wise?
Because you are working to establish your firm, you will be tempted to accept projects that are on the edge of your capabilities. You will need to consider whether it is best to be a bit conservative and decline an opportunity than to get yourself involved in a project that requires more than you can provide.
How will you prepare drawings? Is an outsourced vendor an option?
You may be a wiz at AutoCAD and/or Revit but you are likely to not have done all of what I will call “drafting” at your old firm. If you did, and you can work at a speed that justifies your hourly rate, great. If not, you will need to hire someone to draft for you, whether locally, across the country, or internationally. Do you have drafting standards? Do you care?
Do you have a collection of typical details that are AutoCAD/Revit ready?
You are going to need these. Plan on having them drafted into separate files so you can assemble sheets as you need them.
Conclusion
After starting your own firm, getting the work is the core of your business, followed closely by doing the work. Your overall success will largely depend on chasing projects you have experience with. Proposals must have clear and well-defined scopes of work, appropriate fees and fair contract terms and conditions. When starting out on your own, you might be tempted to accept a lower fee than you want, or agree to increased scope items or to sign an agreement with contract terms stacked in favor of the client and not you. Extra work for less money is something you can survive and learn from. You may not survive by signing a bad contract that voids all or part of your insurance coverage, so be extra careful. ■
About the Author
John Dal Pino, SE, is a Principal with Claremont Engineers Inc., Oakland, California and the Chair of the STRUCTURE Editorial Board.
