Why do Engineers constantly cut throat each other ? 12

[FixIt76]

Why do engineers constantly cut throat each others prices? Specifically I'm talking about civil/structurals, maybe others do to. Is the business sense of engineers in general that bad? We only hurt ourselves.

 

[JAE]

Let me tell you - it's all the architect's fault.
I'm not sure how, but it is, believe me.

 

[FixIt76]

They don't help that's for sure!! I do my best not to work for them.

 

[HuckleberryFinn]

A star to JAE because it's true.

I'm employed at a small firm and as a young man (26) entering this profession the cut throat nature of job pricing and the near slave-like hours demanded required to complete the job adequately on schedule and under budget from me and other employees at times have already caused me to consider leaving it.

Particularly bad over the past few months has been a lack of communication from the top down regarding appropriate project scope and deadlines. I sometimes wonder if any fore-thought is placed into our project fee's/schedule/scope at all or if we are not simply throwing darts at a dart board.

Add to that managers who have let their grasp of design standards/codes slip and the increasing complex nature of the codes (which are making things worse not better) and I sometimes ask myself why anyone would want to be a structural engineer at all.

/Rant off.

Maybe it will all get better one day after all you old fart's retire and there isn't quite so much competition? Just kidding, I wouldn't know my A$$ from my elbow if some "old fart" hadn't pointed it out to me.

I hope you all have a great week and get the fee/time you deserve on all your projects.

Best,

-Huck

 

[beej67]

It's called a free market. Other professions would do the same thing if they had to perform in a free market as well.

Hydrology, Drainage Analysis, Flood Studies, and Complex Stormwater Litigation for Atlanta and the South East -

http://www.campbellcivil.com

 

[IRstuff]

That's called supply and demand; it's basic Econ 101. Prices fall until the supply meets demand.

The only thing that bucks that trend is a cartel.

TTFN
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[Ron]

Because we are f&*%$##@ stupid!
There was a time when engineers in the US were precluded from bidding on jobs by ethical standards. The Supreme Court canned that in the late 70's. Most older line firms tried hard to maintain that practice for many years...some still do (round of applause for those!). Several recessions, scared engineers, arrogant architects (yes, JAE is correct...at least for one component), and loathesome financial vs. engineering management have led to the decline of our profession into its present state.

One major factor is the change from engineers managing engineering firms to accountants managing engineering firms. (I deplore non-engineers managing licensed professionals almost as much as Snorgy hates MBA's...same vein). I am convinced that this will be the ultimate killer of our profession.

What to do, what to do?

Don't get sucked into competing on price. Keep your head high and educate your clients that qualifications based selection is the proper approach. Set your fee structure and only change it upward as time progresses. If you must reduce the total fee to a client, reduce the scope of work, not the unit rate!! THERE IS A BIG DIFFERENCE IN THE TWO!!! If you reduce your unit rate, you are bidding. If you reduce the scope, you are saying to your client....I give you value for my services. Here is what I can do for you within your budget. If you want more, YOU will have to increase your budget. They will respect that more than they will respect the crappy job they'll get because some idiot engineer didn't value his fee and ended up reducing the scope anyway (without telling the client!) in order to stay within HIS budget.

Rant over, for now(...it will return, I promise)

 

[IRstuff]

"are f&*%$##@ stupid"

That's the whole point in a nutshell. Price differential is primarily required because the product, or service, offers nothing more than the bare minimum as a discriminator. That's why you go to Walmart; you get cheap products that do not last long or do not have a full range of features, and you don't care what brand it is.

That's why, while it was still alive, Jugos were absurdly cheap; they were mostly pieces of junk. Had they attempted to sell at the same price of an equivalent sized Toyota, they would have gone out of business even sooner than they did.

Therefore, by extension, if an engineer were "f&*%$##@ stupid" then one would indeed expect that they would be forced to sell their services at a discount. Aso Econ 101.

TTFN
faq731-376

 

[SteelPE]

A star for JAE because I love blaming architects for things.

I'm sure the current employment situation plays a roll in everything as well. You have to remember that you are paying for professionals and as long as the professional is licensed not much else matters (I know it does). Now when the economy went south you had companies laying off licensed mid-level engineers and keeping younger/"cheaper" unlicensed engineers. Well, now all those qualified engineers need is insurance and some business cards and they can make money on their own working out of their spare bedroom. They can then bid against his former employer (if they desires) and probably make more money with little to no overhead that his old company had (no office to rent, no secretary to employ, no copiers to rent, no HR people etc).

This is kind of similar to what had happened to myself (but my company went out of business). Now I have bid on projects against other larger engineering companies and have blown their doors off. Basically I looked at the job and tried to figure out how long it would take me to complete, multiply it by my rate add in a little fudge and I ended up with a bid that was less than my larger competition (made me think I might have done something wrong). Didn't get the job because the larger company had more "political" pull with the owner but I was much less than they were.

 

[JedClampett]

You need to get out of commodity areas and into more specialized ones. In a company seminar one of our owners gave a talk that compared our area as boutique work and the other areas as "curb and gutter" (sorry, I'm sure it's not an insult). His point was that we could never compete, price wise, with curb and gutter engineering. We needed to leverage our expertise to justify our rates. They might win a job from us, even in our area of expertise, every once in a while. But our knowledge of the technology will make it more likely that we'll be successful (and they'll screw up).
As a structural engineer, I've worked in Power Generation and Water and Wastewater. In both we were considered part of a boutique (some times a huge boutique) firm and were paid accordingly. The downside is you'll never own the place. If you want to hang out your shingle and own a structural engineering firm, unless you've got a speciality, it's likely you'll be viewed as a commodity and paid like one.

 

[cranky108]

I don't know who is at fault. But from a cliant point of view, we are required to bid every major project. A standard fee structure is fine, but if you don't bid the job, you won't get the work.

And we don't like it any more than you. Having to deal with companies who don't have the experence, equipment, or means to complete the job. It would really be better if you just told us what you can and can't do up front. Take an exception. If your competer can't complete the job, then he gets a black mark on bids in the future. And don't stick us with the newby if you can't back him up.

Anyway, if the firm you work for sucks so bad, why do you work for them?

 

[IRstuff]

"get out of commodity areas and into more specialized ones"

That's product differentiation. However, there's probably a 10:1 reduction in available contracts. Moreover, specialization comes with the inherent risk that should the market direction change, you may be left hanging in the breeze.

TTFN
faq731-376

 

[McLJ]

I agree with Ron,
"Don't get sucked into competing on price."

Price is important, but I think reputation and quality has a bigger role than many realize. In a crappy economy, that doesn't always work so well.

Some architects are better than others. There is one I refuse to work with. Another consistently would tell his clients how much engineering should be, but he was always low-balling the price then trying to coerce the engineer to lower the price down to what he told the client. I've not worked for him in some time either.

As a singleton, I have one competitor in particular (I'll call him "R") who has consistently underbid jobs only to end up charging much more than the original estimate. I have several architect/designer clients who won't recommend him because of this. One job I remember clearly, the Architect told me I had supplied the lowest estimate and he was fairly certain I would be getting the job, but someone told the owner about "R" and received an estimate from him less than half of mine. In the end, "R" took far longer than promised to complete the work and his final bill exceeded my estimate by several hundred dollars. (It was probably not ethical for the architect to have divulged this information to me, but I appreciated it none the less.) Engineers like "R" eventually slit their own throats with this behavior.

My estimates always come with a complete scope of work, indicating everything the client will receive for that price. I very rarely perform flat fee services and charge hourly, but unless there are significant changes to the scope, I typically come in very close, and often under the estimate. There are no surprises with me and my regular clients know this, appreciate it and they keep coming back. When I hear, "So-and-so can do it cheaper.", I encourage the caller to hire So-and-so.

These last couple of years have been tough and I've underbid myself in order to increase my chances of getting the job, but I made sure that the final bill reflected the original estimate and ended up writing off some time. I hated doing it, but I hate not eating more. BUT - I always showed the real fee and the subsequent write off so that clients didn't get the impression that what they paid was the actual cost of the work.

For a lot of people, price is their focus, but for those in the know, they will take quality and integrity over "cheap".


LJ

 

[Ron]

McLJ...your approach to showing all the time and then writing it off is, in my opinion, the correct way to do it. This lets the client know that it took you more time, but that you stuck to your word and didn't try to weasel a few more bucks out of him. Clients appreciate that.

 

[GMcD]

It's the same in Building Services Engineering (MEP). In my area of the country the competition is increased due to Corporations buying up local medium sized firms over the last decade, which then spawns a bunch of new small start-ups as all the 40 year old senior designers and project managers flee the corporate culture to start small lean and mean operations of their own. Unfortunately a lot of the Building Industry sees the MEP services as a commodity that anyone can perform. Trying to sell quality falls on deaf ears (mostly Architects as clients). The bottom line (fees) is the only thing that is used as a differentiator.

 

[beej67]

What needs to happen, in my humble opinion, is all these guys who are commoditizing engineering need to be commoditized themselves.

Hydrology, Drainage Analysis, Flood Studies, and Complex Stormwater Litigation for Atlanta and the South East -

http://www.campbellcivil.com

 

[Ron]

beej67....or removed from the gene pool!

 

[IRstuff]

There but for the Grace of God, go I....



TTFN
faq731-376

 

[KENAT]

So, for those of us that sell products (or work for companies that sell products) is it OK for us to compete on various factors that typically include price?

Extrapolating, as engineers should we not consider price when selecting what to buy (be it at home or at work)?

Posting guidelines faq731-376

http://eng-tips.com/market.cfm?

(probably not aimed specifically at you)
What is Engineering anyway: faq1088-1484​

 

[IRstuff]

Sure, we didn't spend all that time in algebra solving price point problems for nuttin...

The objective is, as always, from the dawn of time, to establish a price point that maximizes one's return. However, most players don't have the same price point, so ultimately, there's a massive semi-simultaneous solution to a many-variabled problem. Unfortunately, most engineering markets differ from commodity markets in their elasticity, or lack thereof, i.e., you either need engineering services or you don't, based on other factors. It's not like you can decide to buy some services now, because you think you'll need the service's answer 3 yrs from now.

Therefore, the price point must always slide down to accommodate uncertainty in snagging a customer. This is different in two respects from the medical market, the patient is sick NOW, and can't or won't wait until next week for an appointment with a cheaper doctor, and most people do have insurance and don't have to pay the full amount, or even know about the full amount. My son was in hospital for a total of two days last year, and incurred ~$12K in costs. But the insurance covered 90% of it, and it's not like I could shop for hospitals.

I think we'd all like to think that we could have a medical market business model, but I don't think that's apropos. There are too many differences to make those comparisons plausible. After all, I've yet to actually need to contract with a PE, but I've gone to the doctor dozens of times.

TTFN
faq731-376