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unjustifiably high overhead costs. In practice, reductions in personnel of Government staffs during slack periods seldom occurs; payrolls, pensions, and other overhead costs continue long after the programs have been completed.

Consulting Engineers Council believes that the private practitioner has demonstrated his ability to save the taxpayer money on public projects by efficient design, by expeditious services, and by reasonable fees.

To the end that the facts regarding engineering costs are determined and made public, the council recommends to the Congress of the United States that all public agencies utilizing engineering services for design and supervision of public improvements be required to establish accounting procedures which will truly evaluate the entire costs of the services, including direct and indirect costs such as pay and other allowances for personal services and leave, contributions for retirement and disability, rent, supplies, materials, transportation, warehousing, utilities, depreciation, interest on Government investment, and all other costs reasonably chargeable to the operation.

Consulting Engineers Council urges that true costs to the taxpayer be secured, evaluated, and made public. At that time Consulting Engineers Council will welcome a qualified and unbiased comparison of public and private engineering costs. The council is confident that the results will justify private enterprise.

Adopted April 8, 1960, Board of Directors, Consulting Engineers Council.

APPENDIX B. CONSULTING ENGINEERS AND PRIVATE ENTERPRISE

A statement by Consulting Engineers Council President Hueston M. Smith,

issued November 22, 1960, for broadcast by the Engineering-News Report Network, Pittsburgh, Pa.

Consulting engineers represent an important segment of private enterprise in this country. They are the only engineers who furnish unbiased professional services to members of the general public. As engineers in private practice, they have a responsibility to provide the engineering services necessary for consultation, planning, design, and supervision of construction on a multitude of projects. These projects may be done for industry, for private enterprise, and for government at the Federal, State, and municipal levels of activity.

Members of Consulting Engineers Council believe that engineers in private practice should be used on all government work other than in those areas of activity where the use of consulting engineers would be impractical. Therefore, consulting engineers should be commissioned to do the maximum amount of engineering work for the Federal, State, and municipal levels of government consistent with the most economical cost to the taxpayer.

Government engineering should be maintained with a staff adequate for a normal workload. Such a staff would handle basic planning, approving, and supervising of projects designed by consulting engineers and built by independent contractors.

Most government programs create work above and beyond what should be considered a normal workload. On that account, it would be eminently proper to assign the overflow work to engineers in private practice who comprise a substantial reservoir from which competent consulting engineers can be selected for such assignment.

Consulting engineers have no conflicting business interests. They do no manufacturing, sell no equipment or materials, and engage in no construction work. Therefore, they serve a client's needs exclusively. Projects designed by engineers in private practice are tailored to fit an owner's particular requirement. When completed, such projects must provide a client with a profitmaking installation.

Engineers in private practice gain broad experience from handling a great variety of projects. Consequently, that broad experience is available to those using consulting engineer services. Since the principal motive for a consulting engineer's existence is to serve his client, he must be effective to survive.

A consulting engineer is a businessman. He is an important factor in the tax base created by private enterprise in this country. He must make a profit if he is to succeed in good health. Therefore, he must charge adequate fees for his services. Consulting engineering services are not a commodity.

There are no bargains in engineering any more than there are in law or in medicine.

Charges for engineering services, ordinarily called fees, should not be confused with the costs of engineering. Sometimes, equipment fabricators and erectors offer to make detailed designs of their own portions of a project in order to get business. In such cases, it should be evident that charges for engineering are not eliminated. Such charges are merely transferred to construction costs. Therefore, clients should be alert for any arrangement which calls for so-called free engineering. Adequate engineering is never "free."

Present-day growth in science dictates a need for more consulting engineers. They will be required to design industrial plants, civil engineering works, Government installations, and a host of commercial and institutional projects. Engineers in private practice, like men in law and medicine, comprise an essential part of the American community.

APPENDIX C. AMERICAN INSTITUTE OF CONSULTING ENGINEERS : CONSULTING

ENGINEERING SERVICES BY PRIVATE FIRMS VERSUS PUBLIC AGENCIES

RESOLUTION

Whereas some governmental officials have issued statements in recent months advocating the performance of public works engineering services by the permanent staffs of Government agencies, rather than by private consulting engineering firms, on the claim of purported economies ; and

Whereas such claims are contrary to the established experience of those few governmental agencies that have kept detailed and complete cost records of engineering work they have elected to have performed by their own staffs, rather than by private consulting engineering firms; and

Whereas the accounting procedures of most governmental agencies do not fully reflect true and complete engineering costs, including appropriate allowances for fixed charges, overhead, indirect expense, and standby nonproductive time; and

Whereas any such statements by governmental agencies that fail to take into account all elements of comparable costs, as between the performance of equal engineering services by governmental employees, or by private consulting engineering firms, may tend to reflect upon the economy and efficiency of services offered by such private firms, and thus upon the integrity of the engineering profession as a whole; Now, therefore, be it

Resolved, That the American Institute of Consulting Engineers regrets the implication that either the American public or the members of the engineering profession—whether publicly or privately employed—will derive economic bene fit by the invariable performance of public works engineering by governmental staff employees. The American Institute of Consulting Engineers further suggests that responsible governmental officials exercise care to avoid making unsupported statements as to the relative cost of engineering service by private firms versus public agencies; and urges that governmental agencies establish systems of accounting that will afford a fully reliable basis for examining and comparing the costs of engineering work as performed under the two systems, to the end that engineering which can be done to the better overall advantage of the public by permanently employed staffs of Government may so be done; and that engineering which can be done to the better public interest through private enterprise may so be done.

I, the undersigned, secretary of the American Institute of Consulting Engineers, a professional society duly organized and existing under the laws of the State of New York, and having its principal place of business in the city of New York, hereby certify that the above is a true copy of a resolution adopted by the council of the institute of the said professional society, in accordance with the bylaws, at, and recorded in the minutes of a meeting of the council of said society duly held on May 4, 1960, and not subsequently rescinded or modified.

In witness whereof, I have hereunto subscribed my name and affixed the seal of the said professional society this 4th day of May 1960.

AMERICAN INSTITUTE OF CONSULTING ENGINEERS,

By T. T. McCROSKY, Secretary. (SEAL)

RICHARD H. Tatlow III, President.

APPENDIX D. CALIFORNIA DIVISION OF HIGHWAYS The following figures were abstracted from the 12th annual report of the division of highways, dated January 1959. Excluded from the figures are all administrative expense, “Highway planning" and "Planning survey.”

The total expenditure for the latter two items for the fiscal year ending June 30, 1958, was: Highway planning--

$1, 178,000 Planning survey-

1, 161, 099 An examination of the report indicates that “Preliminary engineering" includes:

1. Preliminary route location and reconnaissance survey.
2. Final route survey.

3. Preparation of construction plans. “Construction engineering" includes construction supervision and material testing.

Years

Volume of construction

Preliminary engineering Construction engineering

Total

engineerPercent of

Percent of ing percent Cost construc

Cost construc- of contion

tion struction volume

volume

1952-53 1953-54. 1954-55. 1955-56 1956 57 1957-58

$94, 130, 979
110, 025, 902
132, 210, 121
144, 124, 391
195, 115, 702
213, 083, 114

$11, 648, 494
14, 735, 724
17, 200, 386
19, 737, 032
25, 168, 692
29, 158, 262

12. 37
13. 39
13. 01
13. 69
12. 90
13. 68

$9, 385, 309 11, 306, 251 12, 382, 526 15, 227, 790 18, 757, 035 21, 894, 487

9. 97 10.82

9. 37 10. 57

9. 61 10. 27

22. 34 24. 21 22. 38 24. 26 22. 51 23. 95

Total.

888, 690, 210

117, 648, 589

13. 20

89, 553, 398

10.07

23. 27

NOTE.-California mokes practically no use of consultants on the highway program,

APPENDIX E. SOME TOLL HIGHWAYS The following information taken at random from official reports of toll highway agencies is illustrative of engineering costs on highway work where services are performed to a large extent by private consultants. The engineering costs for these projects include "Preliminary engineering" and "Construction engineering" within the meanings accepted in highway work. Also included are the costs of the supervisory engineering staffs of the respective authorities.

Source, Texas Turnpike Authority: Financial statements of contruction and operation, month of December and calendar year 1959 : Construction cost.

$33, 136, 929. 80 Engineering cost-

$3, 044, 984. 02 Engineering cost, percent of construction cost---

8. 43 Source, the Illinois State Toll Highway Commission : 15th quarterly progress report, Sept. 30, 1959: Construction cost.

$289, 810, 370.00 Engineering cost.

$26, 131, 015. 00 Engineering cost, percent of construction cost--

9. 02 Source, West Virginia Turnpike Commission : Statement of construction costs, as of Feb, 29, 1960 : Construction cost.

$95, 042, 623. 65 Engineering cost..

$8, 301, 767. 56 Engineering cost, percent of construction cost..

8. 96 Source, Indiana Toll Road Commission : 1959 annual report : Construction cost.

$167, 219.375. 83 Engineering cost

$16, 871, 334. 61 Engineering cost, percent of construction cost

10. 09

Source, New York State Thruway Authority: 10th annual report and letter, dated Apr. 4, 1960: Construction cost-

$799, 663, 799.00 Engineering cost-

$76, 894, 371.00 Engineering cost, percent of construction cost--

9. 62 Source, Richmond-Petersburg Turnpike Authority: 15th progress report: Construction cost--

$49, 130, 282. 56 Engineering cost

$3,536, 904. 28 Engineering cost, percent of construction cost-----

7. 20 Source, Florida State Turnpike Authority: Sunshine State Parkway, Miami to Fort Pierce section, final engineering report, dated July 1, 1958: Construction cost.

$42, 903, 786.00 Engineering cost-

$3, 368, 636.00 Engineering cost, percent of construction cost--

7. 85 NOTE.--The above project is particularly noteworthy in that the entire project, 108 miles in length, was completed and opened to traffic in 19 months after proceeds from the bond issue were received. The short-time duration resulted in savings to the turnpike authority in excess of the total cost of engineering by virtue of savings in bond interest.

ANALYSIS OF REPLIES RECEIVED FROM MEMBERS OF THE CONSULTING ENGINEERS

COUNCIL TO QUESTIONNAIRE WITH RESPECT TO FEES RECEIVED FROM AGENCIES

OF THE ARMED SERVICES CONTRACTING FOR ARCHITECT-ENGINEER SERVICES A. A. Heft, chairman, Fees and Contracts Committee, Consulting Engineers

Council, October 20, 1958

A. SCOPE AND EXTENT OF QUESTIONNAIRE AND REPLIES

1. Under date of July 21, 1958, questionnaire was issued to the members of the Consulting Engineers Council with respect to architect-engineer services which they have performed for the Corps of Engineers, the Bureau of Yards and Docks, the Air Force Installations Office, or other similar agencies of the armed services. The questionnaire was directed to the fee, cost, and profit aspects of contracts which members had performed.

2. As of May 1958 the consulting engineering firms represented in the Consulting Engineers Council include 1,195 principals.

3. Replies were received from 144 members who indicated that they have had no recent experience with the armed services but are interested in performing such types of architect-engineer services, and replies were received from 157 furnisbing fee and cost data about specific projects.

4. The number of replies analyzed herein does not coincide with the number of 157 given above. In some instances, replies concerning more than one project were received from one member. In other cases, replies were omitted from the analyses because certain data was omitted. Many valuable replies were received summarizing experience on a number of projects and making comments of a general nature. These also could not be included in the analyses, but are included in section B hereof.

5. It is believed that the replies are representative of the experience of architest-engineers in recent years on a wide variety of services performed for agencies of the Armed Forces. There is no indication that they represent unduly either favorable or unfavorable experience.

6. Firms replying are spread very widely throughout the country, the principal exception being the New England region. They include large, medium, and small firms, principally large and medium ones. Replies were received from a number of firms of outstanding national reputation, including several who are doing quite a large amount of work for the armed services.

7. Some of these firms have been performing architect-engineer services for the armed services since 1940; most replies are from firms which have been doing such services during the last 10 years.

B. GENERAL COMMENTS BY ARCHITECT-ENGINEERS 1. As previously stated, in addition to replies which could be analyzed, numerous replies were received which are felt to be of great value but which must be summarized in terms of the comments presented rather than in tabular form as the analyses in section ( hereof. Most of these replied covered in this section were received from large firms which have been doing a considerable amount of work for the armed services and represent their comments on experience over a number of projects. In addition, although the questionnaire related directly to fees only, numerous individual comments were received on replies concerning specific projects and warrant consideration.

2. Widespread reports are received from engineers that their overhead costs run from about 75 to as much as 125 percent of productive costs. This appears to be a very serious problem inasmuch as many of the agencies of the armed services will not recognize overhead costs of this magnitude. These comments have been received principally from large- and medium-sized firms whose overhead would not be expected to be unusually high.

3. There is widespread disagreement with the profit basis allowed by the Corps of Engineers of approximately 10 to 12 percent on normal projects. It is pointed out that this low profit percentage results in padding of costs. Most firms making such comments feel that the profit should be set up as approximately 25 to 30 percent of the total fee, depending upon all of the circumstances for a particular job, analogous to the profit which is expected on civilian work.

4. There is widespread criticism of the 6-percent maximum fee which is allowed, as well as the per diem rate allowed for consultation and similar services. There is also criticism of the practice of some districts of grouping together a number of small unrelated jobs and endeavoring to base a fee on the total estimated construction cost as though they were a single large job instead of many small ones.

5. Although most members do not object to lump-sum fees as such, many comments were received that fees originally negotiated based on preliminary cost estimates for construction furnished by the contracting officer should be revised based on either actual costs or final estimated costs. There is widespread criticism that the preliminary cost estimates furnished are frequently grossly inadequate. Because of the architect-engineer's unfamiliarity with the proposed job at the time the fee is negotiated, it is difficult, if not impossible, for him to make a check of such estimates and to prove that they are inadequate. There is also criticism of the practice of requiring extensive alternates without making provision for them in the fees negotiated, which is usually not done.

6. Many comments were received that practices of a given agency vary from district to district, with different interpretations being placed on standards and policies. This results in both confusion and needless expense to the architectengineer. There is extremely widespread criticism of review policies. Many firms feel that reviews are unnecessarily detailed if the architect-engineer is expected to do a responsible piece of work. Similarly, it is felt that unnecessary changes are requested, many of them being of a nature that the desired details should have been furnished to the architect-engineer when he commenced work. Many firms point out that different changes are required by different reviewing offices without significant benefit to the project but with substantial expense to the architect-engineer. All those commenting feel that reviews should be made by only one office and that these should be final, unless the architectengineer is to be additionally compensated for other changes which may be required.

7. Many changes are reported required by changes in directives without additional compensation to the architect-engineer. In many other cases there are criticisms of standard manuals furnished as being inadequate, obsolete or not applicable to a particular project. There is very widespread feeling that better and more economical construction would be obtained if general requirements were established and design and details made the responsibility of the architect-engineer.

8. Although this questionnaire was confined to fees, very widespread comments on other aspects of such architect-engineer services were received. The principal one appears to be that those replying feel that the contract terms for architect-engineer agreements with agencies of the Armed Forces require substantial improvement. The principal changes sought are a relation of the fee paid to the actual or final estimated cost of the work performed instead of the

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