Fixed Fee versus Hourly Billing: Construction Administration Phase

Fixed Fee versus Hourly Billing

Have you ever wondered why structural engineers often charge a fixed fee for the Construction Documents (CD) phase, but switch to hourly billing, typically on a time and materials basis, for the Construction Administration (CA) phase? Before diving into the nuances, the first consideration is whether CA services are required at all. Many municipalities, including some highly populated towns in MetroWest Boston, do not require a structural affidavit for single-family residential projects. In jurisdictions where a structural affidavit from the engineer of record is not mandated, homeowners have the option to proceed with or without CA services.

As a personal note, I generally prefer to provide CA services whenever possible, not for the sake of charging an additional fee, but because I believe CA services offer significant value to the homeowner. They also increase the likelihood that the project will be built as intended and that the as-built conditions will reflect a higher level of quality and coordination.

Services Provided during the CA Phase

Assuming CA services are pursued, let’s discuss what these could entail. Typical services provided during the CA phase may include the following:

• Pre-construction review, or “page turn”, with the architect and general contractor (GC).

• Shop drawing review for general conformance to the structural design concepts and general compliance with the information provided on the structural construction documents.

• Periodic site visits during construction to confirm proper interpretation and execution of the structural design concepts. Field reports or memos could be provided as necessary.

• Final structural observation and written affidavit upon completion of the structural scope.

Why Billing Hourly Works Well for the CA Phase

The primary reason CA services are often billed hourly is their highly variable nature. The overall CA effort can fluctuate significantly based on several factors, including:  (1) conditions discovered in the field, (2) requests from the client, architect, owner, or general contractor for additional oversight, (3) the volume and complexity of shop drawing reviews, and (4) the experience level and familiarity of the general contractor with similar work.

1.  Field Conditions

CA services vary based on considerations and conditions discovered in the field. For example, a relatively simple new construction home may involve few unknowns during construction. By contrast, a full-gut renovation of a house originally built in the 1700s presents a very different scenario, where existing structural conditions are not fully understood until finishes are removed. Ideally, structural design would not begin until the building structure has been fully exposed. In practice, however, building departments typically require structural framing plans in order to issue a permit and allow construction to begin.

2.  Client Requests

CA services vary based on client requests. Recall how some clients forgo CA services altogether if allowed. The opposite can be true as well. For instance, a client might decide mid-construction that walls should be oriented differently, or that a flat ceiling in the primary bedroom would look better as a cathedral ceiling. Other clients may have had a poor experience with a previous builder and prefer extra oversight from a design professional for peace of mind.

3.  Shop Drawing Review

CA services vary based on the amount of shop drawing review. Some contractors take full responsibility for shop drawings and do not share them with the architect or engineer at all. Others may submit only select items, such as structural steel shop drawings. In some cases, contractors choose to use panelized wall systems, which adds another layer of shop drawing review for the engineer. The quality of shop drawings can also vary significantly. At times, submittals are well prepared and require minimal review, with most sheets marked “no exceptions taken.” In other cases, the drawings are poorly coordinated and demand extensive back-and-forth and detailed comments. Occasionally, a contractor may work with a fabricator that lacks the capacity to produce formal shop drawings altogether, increasing the risk that as-built conditions will require additional review, or even corrective work once the steel is fully installed.

4.  Performance of the General Contractor

Fourth, CA services vary based on the experience and comfort level of the GC. This can manifest in several ways. An experienced GC, particularly one who has previously worked with the same architect and / or engineer, often generates fewer Requests for Information (RFIs). Their familiarity with the drawings and typical detailing tends to reduce the need for clarification. By contrast, frequent check-ins from a less experienced GC can add time to CA services through additional phone calls, emails, and explanations of items that other builders may not require. The opposite scenario, and what I consider the worst case, can also occur:  a GC who rarely checks in at all. In these situations, the engineer may be called out for what should be a routine site visit, only to discover significant deviations from the construction documents. While some deviations may be acceptable, each still requires time to review and verify.

Conclusion

The choice between fixed fee and hourly billing comes down to predictability versus variability. The CD phase is well suited for a fixed fee because the scope and deliverables are clearly defined. This allows engineers to plan efficiently and provides homeowners with transparency and cost certainty. The CA phase, on the other hand, is inherently variable. Field conditions, client requests, shop drawing quality, and the experience of the GC can all significantly affect the level of effort required. Hourly billing ensures that both the engineer and the homeowner are treated fairly, while allowing the engineer to adapt to the realities of construction and respond to unforeseen challenges.

Ultimately, both billing approaches serve the same goal: delivering a structurally sound, well-built project while protecting the homeowner’s investment. Fixed fees reward efficiency and clear planning during design, while hourly billing ensures flexibility and responsiveness during construction. By understanding the reasoning behind each approach, clients can make informed decisions about the level of oversight and professional support they want throughout their project.