Alan Benevides, who came into talk on December 5th, has over 30 years of professional civil engineering experience. That experience is mostly in the business of consulting engineering. In those 30 years he has work on sites planning and designing water/wastewater and storm water/drainage systems. He also makes watershed evaluations, NDPES and TMDL investigations, hazardous and solid waste assessments and remediation, and construction management.
Over the years he has become aware that the engineers who are right out of college do not have a true sense on how the consulting engineering world works. He finds it hard to find the time in his busy work schedule to teach the young engineers exactly how everything works and because of that most of the entry level engineers just have to get accustomed to the set ways of consulting engineering. Our class was lucky enough to have the business of
consulting engineering explained to us well before we enter the work force.
Benevides went on to explain that the difference between consulting engineering and other civil engineering fields, like municipal engineering, is that in consulting engineering, someone pays the engineer specifically to get a job done. In the other fields someone is paying for a specific item to be completed. The money that was paid for the item is then separated among the team that worked on it, including the engineers. So the basic concept of consulting engineering is that when there is a need for engineering a consulting firm is seeked out and a proposal is created by the firm involving their idea of the scope of the work, the schedule, and budget of the project. Benevides told us to keep in mind though that most firms can only usually maintain 2 out of the 3 main concepts of their proposal. Sometimes it is not the companies fault when they go array, but there are times when either the schedule or the budget ends up being extended. After all these steps are
completed the owner of the project will decide what firm they want to complete their project and sign a contract with the firm and start work.
At the end of a project the actual bill is finally arranged. To determine the final figure price the actual salaries of the engineer’s that worked on the projected is multiplied by 1. Then the overhead, which is all the extra expenses that a company incurs due to operating, is either 1.5 to 1.75 times the salary and then the profit of the project is determined to be either .5 to 1.0 times the salary. After all those figures are computed the final amount is all three combined. Essentially there are two ways to bill people, either with Labor and Expenses or Lump Sum Billing. Lump Sum Billing is a slightly riskier way to bill since the company is giving a projected total price. By the end of the project they could have either used more or less of the projected money, so theoretically they could either gain more profit then they intended off the project or they could owe money after the project is completed.
Benevides then explained utilization rate, which is billable hours/ total hours worked. Typically there is only a certain amount of hours that an engineer is billable for during a work week even if the engineer does end up working more than he is going to be paid for. The youngest of engineers will usually have a utilization rate in the upper 80 percentile. That is because they are expected to work more on the actual projects. With more experience comes the opportunity to sell work though. This means that the utilization rate
decreases as you get older. These utilization rates correlate with the functional roles within the company. In a company/firm there are doers, doer-sellers, seller-doers and just sellers. The doers, or typically the entry level engineers are expected to do the technical work of the project so they have the highest utilization rates. The doer-sellers mostly work on the technical parts of projects, but every once in a while will sell their work and team. The seller-doer, which is someone that is extremely valuable in a company, will go out and sell projects on a typical basis, but also be able to go back to the office and work on the same projects they have just sold. Lastly are the sellers who are generally just on the sales track.
Their utilization rate is extremely low, but they contribute to the company because they are giving the company in return millions of dollars’ worth of projects. The last two roles, the seller-doers and the sellers, are a big part when talking about overhead prices. Since they are not doing a lot of actual engineering work, it’s a risk for the company to take since the seller-doers and sellers also need to walk away with a paycheck at the end of the day.
Overall Benevides’ talk was eye opening for me. Of course I have heard about billable hours, but I never knew how it actually broke down and hearing about utilization rate was a brand new concept for me. There are no courses in high school or college that talk about “engineering finance” and I can see why so many engineers would enter the work force with so little knowledge of it. I’m glad that I can enter with at least a little knowledge to get me by.