Building owners and developers commonly compensate their professional engineering consultants based on a percentage of construction value. Most conventional fee structures use construction cost as a basis for final fees after a project's scope and magnitude have been established.
Clients pay for engineering services in several ways: hourly rates, cost-plus fee, fixed lump sum and percentage of construction cost. Except for hourly rates, traditional fee structures use a percentage of construction cost to establish a final engineering fee.
Percentage of construction fees can only be calculated when a project's scope and cost become well-defined. Until then, hourly rate and cost-plus compensation methods more appropriately apply.
To calculate a percentage fee, one multiplies a project's construction cost by an acceptable percentage. Construction cost equals the cost of all materials, equipment and labour required to build a facility or develop a site. It excludes all professional design fees, including engineering.
Many state and federal agencies publish fee schedules and calculators to provide percentage guidance. Recommended percentages consider the effort that different project types, sizes and complexities will require. For example, engineering a complicated school renovation commands a higher percentage than engineering a new school.