I am sure it depends on the type of work being done, but how many do field work on an hourly basis? I would say that 99% of our field work is lump sum, which also includes office work. About the only amount of work I do at an hourly rate is some office processing of data collected by others.
This came up today because another firm is adding us as a sub for contract with a local government agency, and they need hourly rates. I do have hourly rates prepared, but they are used very rarely.
Most of my work is from multi-year IDIQ service contracts where the hourly rate is negotiated at the time the contract is put in place then the budget for individual tasks are negotiated as they arise. So most of the billing is hourly.
Additionally many agencies require time sheet back up be submitted along with the monthly invoice.
I know many rail against it, but field work done hourly can be a win-win situation. One area firm with a very good reputation will only work by the hour. The result is that no one comes to their door looking for a guaranteed low price, and they have to maintain the trust they have earned with their large clients by continuing to not pad the bill.
The clients know they are getting the job done right, by a firm that didn't "run out of money" in the early stages of the job when unforeseen complications arose. So this firm may not hit the proverbial home run, but they always have runners on base and batted in.
Also, for ad hoc work, or work of unknown quantity, do you always want to be writing new proposals and change orders?
My accountant and attorney both charge by the hour, have good reputations, and give good weight.
I'm with you John, rarely do I discuss hourly rates, and then I just make it what ever works.
I can say, well my rate is $900/hour but I never take more than an hour, or I can say, well if it's a 40 our job to you, and I can do it in 20 then my hourly rate is 100/hour for 40 hours, or 200.hour for 20 hours..
Hourly rates are meaningless.
I also do a lot of work under negotiated contracts that have fixed hourly rates. But, each task order is negotiated as a lump sum using number of hours for each category times negotiated rate. It winds up being lump sum based on hourly rates.
I was a sub on a contract in 2012 where my client asked for a lump sum, we did the work, and then their client wanted hours worked after the fact (months later).
We have a well calculated hourly rate schedule from our overhead and profit multipliers (using the AIA method). We do all construction work hourly, it works best for everyone involved. We also do a lot of development and research projects hourly since I can't always estimate how many hours of research or how many sub-division revisions there will be. All of my lump sum projects are based off of our hourly rates anyways. I have spreadsheets that I use to cost each project (around 3 different ones for different types of projects).
The vast majority of our projects though are a mix. We give a lump sum based on a very detailed scope included in the proposal. All additional work is based on hourly rates that are also in the proposal.
The nice thing about hourly is that it's hard to loose money on a project if you calculate your rates properly and have good communication with your clients.
Tom
When I was in business in the 60's, 70's, and 80's, everything I did was by an hourly fee. All EDM time, computer time plus the operator, materials, milage and hourly vehicle charges, lodging and meal costs, were charged out and reproduction of drawings were charged at direct cost or direct costs plus 10% for some items. I don't know how you can put a lump sum cost on a project when there are so many unknowns lurking on each job.
I agree they are meaningless. Years ago when I ran a mapping division, we used to refer to it as "so many units of paving the parking lot."
I think an added bonus on projects where municipalities and agencies set an upside cap to the overhead and profit multipliers is that I'm incentivized to go out and pay top dollar to hire the best staff available.
Thats really it...to many variables on most projects. With the hourly rates I know how much profit I'll be making per billable hour. I just work on keeping the guys billable. I should also state that I have 4 different rate sheets for different types of projects/clients. Sometimes we're making 10% profit, sometimes we're making 25% profit (sometimes more!). Depends on what I feel I can get for the project and how badly I want it.
I prefer LS with a detailed scope of services. However, there are many situations such as construction or development type work where that is not practical.
Many local municipalities, particularly states, outline what your rates are based on your approved overhead rate(which is audited often) and the maximum allowable profit. This work often results in our cheapest rates but the work is steady and they always pay.
For other private or municipal clients without these restrictions we use a few different rates sheets depending on how bad we want the job and how much we think we can charge.
It varies from year to year but we try and do hourly as much as possible especially on construction.
I figure if someone wants to pay me what I think I am worth per hour than that’s a fair and reasonable professional service. I certainly don’t think hourly rates are meaningless in any way.
If hourly rates are meaningless how do you estimate your fee?
> If hourly rates are meaningless how do you estimate your fee?
It is estimated by how long it will take...oh wait...
Or maybe then by how much it is worth to the client...except how could the client, a layman, be expected to know the worth of a service? After all, he does not understand everything that is involved. If the hours spent to perform a surgery double because of unexpected complications, you can be sure that the hours/days/weeks will be counted.
One reason that the time of a professional is valued (instead of just his product), is that it is difficult to predict what due professional diligence will take. If you are a widget maker, then sure, just charge by the widget. If your product is a commodity, charge by the commodity.
I disagree that hourly rates are meaningless. I feel they have a place in every contract.
It has always surprised me that we as professionals never charge the correct amount to do the job. If you quote a fixed fee of X,XXX and then if you get into a nasty boundary quandry, with bad titles, deeds etc..then your stuck with that fixed fee.
Most of our contracts are fixed fee (except for construction stakeout). However every contract has in it that if we get into this job and there are survey issues beyond the norm (I'm paraphrasing here), then we will notify and start charging by the hour.
It depends on the Client and the Project. If the Scope of Services is clear in an area where you are familiar, a Lump Sum works well. Where the level of effort needed is unclear, hourly rates are usually better. The worst of all worlds is an unclear scope with an upset limit. You are limited on your profit and not limited on losses. Holding stubbornly to either method may limit your Clients and even your Market Sectors.I will let the Client determine how the invoice should be formated, as long as we are making money.
Agreed. Hourly with a not-to-exceed clause is generally a bad, bad deal.
Most of our contracts are fixed fee (except for construction stakeout). However every contract has in it that if we get into this job and there are survey issues beyond the norm (I'm paraphrasing here), then we will notify and start charging by the hour.
We have a similar clause in our contracts. All of our projects are based on hourly rates for whatever personnel are required to complete said job. We prepare an estimate of our total time to complete, assign our rates = cost of project.
We bill hourly for construction layout. I cant imagine doing that another way.
-V
Most of my work is cost plus fixed fee. I'll take lump sum when I can get it, which isn't often. Time and materials without a cap is rarer still. Time and materials not to exceed is second most common. My experience is that clients like to know what they're paying for, and that big projects with big budgets have strings attached to labor hours.
> We bill hourly for construction layout. I cant imagine doing that another way.
I know of at least one firm in my area that does residential subdivision layout -- anywhere from five to five hundred lots -- on a $$-per-lot basis. They spell out the scope items, note that restaking isn't included, and they're off to the races. They've been doing it like this for decades, and minting money in the process. Of course, they have well-honed procedures in place, which makes it all work.
