Fixed Fee versus Hourly Billing: Construction Documents Phase

Fixed Fee versus Hourly Billing

In structural engineering, fee structures are rarely one size fits all. While there are projects where hourly billing makes sense, more often than not we charge a fixed lump sum for the Construction Documents (CD) phase of a project. Each approach, fixed fee versus hourly, has its pros and cons, and different project phases naturally lend themselves to different billing methods. In many cases, the CD phase is well suited for a fixed fee, while the Construction Administration (CA) phase is better handled on an hourly basis. Since the CD phase comes first, let’s start there.

Why Fixed Fees Work Well for the CD Phase

The primary reason structural engineers use fixed fees during the CD phase is the relative clarity of project scope and deliverables. Construction has not started, and work is still on paper and computer screens rather than being actively built in the field. By the time an architect engages a structural engineer, the project has typically progressed beyond the conceptual stage. The architectural schematic phase is often complete, meaning the exterior shell, general massing, and programmed spaces, such as wall layouts, room uses, and sometimes even finishes, are largely established. While some adjustments may still occur, we usually have a solid understanding of the type of project we’re working on.

At this stage, we know whether the project is a small renovation, an addition, or a large new construction estate. That distinction alone has a significant impact on the level of engineering effort required.

Just as importantly, we typically know what deliverables will be expected. Some projects require multiple sets of drawings, such as intermittent progress sets for coordination, a permit set, a foundation-only construction set, and finally, a full construction set. Other projects may be simpler and only require one pass, a single permit set that ultimately serves as the construction set. When both the scope of work and the required deliverables are well defined, it becomes much easier for the engineer to establish an appropriate fixed fee.

How Fixed Fees Are Established

In most cases, a fixed fee is based on an internal estimate of the number of hours required to complete the work, multiplied by hourly rates. That number is then adjusted upward or downward based on project-specific factors such as complexity, coordination requirements, and perceived risk. In some cases, a rule of thumb may be used instead, most commonly a dollar per square foot average. This approach can vary widely depending on the nature of the project. For residential work, for example, fees might range anywhere from $1.50 to $6.00 per square foot. That is a large range in fee, but it exists for a reason. Is the structure a relatively simple box with a straightforward roof form and structural elements that stack cleanly from foundation to roof? Or is it a mostly glass building with long cantilevers, transfer beams, and unconventional load paths? Complexity drives effort and time, and time drives fees.

Efficiency Is Rewarded

We understand why a fixed fee is possible and the common methods used to establish one, but why choose a fixed fee instead of simply billing hourly? One often-overlooked benefit of a fixed fee is that it rewards efficiency. An experienced structural engineer who can produce clear, well-coordinated drawings efficiently benefits directly from the time saved. Importantly, the value delivered to the client remains the same, or even improves, while the engineer’s internal productivity increases.

Imagine two engineering firms charging the same hourly rate for engineers with identical titles and years of experience. Engineer #1 is a dedicated professional with strong fundamentals, efficient workflows, and a client-focused mindset. Engineer #2, by contrast, lacks these qualities. For the same project, Engineer #1 delivers higher quality work in a fraction of the time it takes Engineer #2. Under an hourly billing model, Engineer #2 would bill more hours and ultimately charge a higher fee, despite delivering lower quality work. That outcome hardly seems fair to the client. Fixed fee billing helps correct this imbalance because it financially rewards engineers who invest in better systems, cleaner detailing, and more thoughtful design approaches, while incentivizing efficiency and quality rather than time spent.

Why Clients Often Prefer Fixed Fees

Another major reason fixed fees are commonly used for the CD phase is client preference. For architects, builders, and homeowners, predictability is critical. A fixed fee allows them to understand their total design costs upfront and budget accordingly, without worrying about invoices fluctuating month to month. This transparency helps build trust and reduces anxiety during an already complex and often expensive process. From the client’s perspective, a fixed fee feels straightforward and fair because the scope is defined, the deliverables are known, and the cost is agreed upon in advance.

Conclusion

While fixed fees often make sense for the CD phase, the same is not always true for the Construction Administration (CA) phase. By separating these phases and using the billing structure best suited for each, both engineers and clients can benefit from clearer expectations, fair compensation, and smoother project execution. In short, fixed fees work well when scope and deliverables are defined and that’s exactly what the CD phase is designed to provide. In the next blog post, we’ll explore why hourly billing is often the more appropriate approach for the CA phase.