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---- Planning survey-. $1,178, 000 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 NOTE.-California makes 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 Engineering cost. Engineering cost, percent of construction cost.. $33, 136, 929. 80 $3,044, 984. 02 8.43 Source, the Illinois State Toll Highway Commission: 15th quarterly progress report, Sept. 30, 1959: Construction cost_ Engineering cost. $289, 810, 370. 00 $26, 131, 045. 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--- Engineering cost.. Engineering cost, percent of construction cost_. Source, Indiana Toll Road Commission: 1959 annual report: $95, 042, 623. 65 $8, 301, 767. 56 8.96 $167, 218, 375. 83 $16, 871, 334. 61 10. 09 Source, New York State Thruway Authority: 10th annual report and letter, dated Apr. 4, 1960: Construction cost-- Engineering cost_ $799, 663, 799,00 $76, 894, 371. 00 Engineering cost, percent of construction cost-- Source, Richmond-Petersburg Turnpike Authority: 15th progress report: Construction cost_ Engineering cost--- Engineering cost, percent of construction cost__ 9.62 $49, 130, 282. 56 $3, 536, 904. 28 7.20 Source, Florida State Turnpike Authority: Sunshine State Parkway, Miami to Fort Pierce section, final engineering report, dated July 1, 1958: Construction cost-. Engineering cost-- $42, 903, 786.00 $3,368, 636. 00 7.85 Engineering cost, percent of construction cost___ 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 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 furnishing 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 C 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 74109-61--22 preliminary estimate of cost furnished by the contracting officer, compensation for various alternates requested, a much clearer definition of the architectengineer's responsibilities, a limitation on changes or provision for additional compensation for making them and more authority for the architect-engineer to exercise responsible judgment in the performance of his services. It is especially interesting to note that these comments were received even though not requested. 9. There are many criticisms of circumstances where an architect has been retained and has later retained an engineer on a subcontract basis; presumably, there would be similar criticisms from architects in the reverse situation. Engineers performing such work on a subcontract basis feel that they should participate in the negotiations between the architect and the contracting officer in order to be familiar with the obligations undertaken. They also criticize the inadequate information furnished them by the architect, requiring unnecessary revisions and changes in their work. 10. Comments of particular interest were received on a large number of different projects from an outstanding firm which does a great deal of soils and foundation work. On six fairly large sized jobs, the fee received by this firm was substantially inadequate and resulted in a fairly large loss. On one project for which the firm was not retained, after expending a very substantial amount of money on preliminary studies and surveys necessary for estimating and negotiating, the firm learned that it did not receive the job because of its supposedly high fee. This appears to be somewhat in conflict with the Department of Defense policy that consulting engineering services are not to be retained on a price basis. This firm is doing a large amount of similar work for numerous clients both public and private, on the same basis of fees which it sought in this instance. C. ANALYSIS OF REPLIES 1. Replies on fees for specific projects were separated, tabulated and analyzed as set forth on the following sheets. It was necessarily difficult to make a uniform classification of projects, particularly because many overlap. They were assigned to the various categories set up in accordance with the best interpretation of the information furnished. Fees shown are the actual final fees reported for each project, including adjustments and extras. Construction costs of projects where shown are in accordance with the information furnished. Although there was very widespread criticism in the replies received of the unrealistic preliminary cost estimates upon which fees are based, comparatively few replies gave data on this point which could be included in an analysis. To do this would require both the preliminary estimate of cost of construction used in the fee negotiations and the actual cost of construction or the final estimated cost based on completed plans-both figures were furnished in only a few cases. The figures shown for actual cost of construction is either such actual cost or final estimated cost in event that the work did not proceed or the architect-engineer did not have available information as to the actual cost of construction. The percentages shown are based on the replies showing the architect-engineer's costs as a percentage of the total fee and his profit as a percentage of the total fee. Where a loss is involved, the profit is shown as a negative figure. As a matter of interest, the fees are shown as percentages of construction cost; for many reasons which are apparent, these percentages vary widely even within a given classification of work. The total dollar profit or loss for each given project is shown. Based on the total net profit for each category into which projects have been subdivided and the total fees represented, both the cost of doing the work and the profit or loss are shown as a percentage of the total fee. These percentages are, in effect, averages for all of the projects reported in that particular classification. For purposes of analysis, replies were classified into nine categories according to type of service performed. A summary of these replies is shown below: 1 Several projects included in fee totals for which construction costs were not available. This percentage was developed from reports where full data was available. From this analysis several things are evident: 1. Certain types of work are much more profitable to the architect-engineer than others. 2. In no category is the profit greater than many Consulting Engineers Council members consider necessary to properly perform responsible services. 3. Preliminary reports or advance planning, and utilities, paving, and grading, categories No. 1 and 5, result in the largest percentage of profit to the architectengineer, yet many members consider this a minimum profit which must be earned to maintain an adequate staff and perform services of the quality required. 4. Certain types of work which carry heavy responsibility and should be adequately compensated for, such as performing complete services for major installations, do not appear very attractive. While it is true that fees as a percentage of construction should vary inversely as the cost of construction, projects of this type usually result in several construction contracts, each of which requires an individual set of plans and specifications. This is often not considered in negotiations, but rather, the total cost of all construction contracts is used as the basis for fee determination. 5. Major design of buildings, which in the replies included several large buildings of a specialized nature, resulted in an average fee of 4.3 percent of construction cost. Fifty percent of the projects reported showed a net loss to the architect-engineer. This fee is less than that required for similar civilian work, and the low margin of profit on this basis is evidently inadequate to make the project attractive to responsible architect-engineers. 6. Site adaptation of standard buildings is quite often represented as a project of a simple nature. The marginal profit reported indicates that perhaps more work is actually required in site adaptation than was intended when building plans were standardized, or that possibly too much emphasis is placed on using standard buildings when they do not readily fit local conditions. 7. Alterations, conversions, repair and rehabilitation are projects which require much additional work not normally required of new construction and, in |