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Federal Public Works Projects." The data is presented in considerable detail, and proves without question the following conclusions which are listed on page 2 of the above booklet:
A. The average fees of private consultants are considerably lower than the figures widely publicized.
B. A common eroneous assumption is that the consulting engineer always receives a maximum fee based on a percentage of construction cost.
C. It is impractical to generalize on engineering fees as a function of construction cost for a specific project. Lump sum fees are generally more equitable to the Government and to the engineers.
D. By using private consulting engineers, the public pays for the services only when needed.
E. Private consulting engineers, motivated by a profit desire, constantly strive to minimize overhead and can adjust more quickly to changes in conditions.
It is our hope that we have presented a clear picture of the consulting engineers in private practice and their desire to be of service to the Government. Their services are highly qualified, both technically and professionally, and can be obtained more economically than similar services furnished by Government staffs. This, we believe, is certainly of great interest to the public and will further the principle of private enterprise.
Thank you for the privilege and opportunity of appearing before your committee.
Supporting data follows:
Appendix A: Statement of Consulting Engineers Council Policy Regarding Private or Public Engineering.
Appendix B: Consulting Engineers and Private Enterprise. A statement by Hueston M. Smith, president of Consulting Engineers Council 1960-61.
Appendix C: A Resolution-Consulting engineering services by private firms v. public agencies prepared and adopted by the American Institute of Consulting Engineers on May 4, 1960.
Appendix D: California Division of Highways-Representative Cost Data. Abstracted from 12th annual report, dated January 1959.
Appendix E: Some Toll Highways-from official reports of toll highway agencies.
APPENDIX A. STATEMENT OF CEC POLICY REGARDING PRIVATE OR PUBLIC
CONSULTING ENGINEERS COUNCIL BELIEVES IN PRIVATE ENTERPRISE
The council believes that the question of whether public staffs or private consultant firms should design and supervise construction on public projects should be resolved by one criterion only:
WHICH APPROACH WILL BEST SERVE THE INTERESTS OF THE TAXPAYER? One of the few impartial studies of the relative merits of public and private engineering has been made by the Commission on Organization of the Executive Branch of the Government, headed by former President Herbert Hoover. The Commission recommended that Federal design and construction agencies retain in their own organizations only the personnel required for preliminary study, preplanning, and budgeting, and the essential supervisory management and control, and that private organizations be engaged for design and supervision of construction to the maximum extent consistent with national security.
Bulletin 60-2 issued by the Director of the Bureau of the Budget contains the following:
"2. Policy: It is the general policy of the administration that the Federal Government will not start or carry on any commercial-industrial activity to provide a service or product for its own use if such product or service can be procured from private enterprise through ordinary business channels."
The council subscribes wholeheartedly to the philosophy expressed by the Hoover Commission and by the Bureau of the Budget.
It is clearly uneconomical for Government agencies to expand or reduce their engineering organizations to meet the changing demands for design and supervision of construction. Retention of personnel during slack periods results in
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
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 benefit 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.
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:
$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:
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:
$289, 810, 370. 00 $26, 131, 045. 00
Source, West Virginia Turnpike Commission: Statement of construction costs, as of Feb. 29, 1960:
Engineering cost, percent of construction cost..
Source, Indiana Toll Road Commission: 1959 annual report:
Engineering cost, percent of construction cost
$95, 042, 623. 65 $8, 301, 767. 56 8.96
$167, 219, 375.83 $16, 871, 334. 61
Source, New York State Thruway Authority: 10th annual report and letter,
dated Apr. 4, 1960:
$799, 663, 799.00 $76, 894, 371. 00
Engineering cost, percent of construction cost--
Source, Richmond-Petersburg Turnpike Authority: 15th progress report: Construction
Engineering cost, percent of construction cost___.
$49, 130, 282. 56 $3, 536, 904. 28 7.20
Source, Florida State Turnpike Authority: Sunshine State to Fort Pierce section, final engineering report, dated July 1, 1958: Construction cost-
$42, 903, 786. 00 $3, 368, 636. 00 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
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 receivedsummarizing 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.