MEP Consultancy and design – Fee structure

Fee structures for MEP engineering (Mechanical, Electrical and Public health) consultants can vary depending on a number of factors including the scope of work, project complexity, location etc.

Fee for MEP Engineering services may be based on one or more of the following methods. The application of the particular method will vary with the standing and specialized knowledge of the Consulting Engineer, as well as the nature and extent of the work.

The fee structure of MEP consultancy services typically varies based on the pricing methodologies adopted by the company Different clients may have different preferences and budget requirements when itcomes to MEP consultancy services. Thus, the selection of pricing methodologies by the consulting company is critical to ensure client satisfaction and profitability. Here are some of the common pricing methodologies used in MEP consultancy services.

The fee for typical MEP consulting services can be based on:

• a time-charge basis / hourly rates;
• as a percentage of construction cost;
• as a fixed fee / lump sum basis;
• fee per square meter of the building;
• fee could be linked to value added;
• success fee;
• fit for purpose;
• additional costs.

Mechanical, Electrical, and Public Health (MEP) consultancy companies play a critical role in the construction industry, providing expert advice and guidance to ensure that buildings are safe, efficient, and functional.

There are several pricing methodologies that MEP consultancy companies can employ, each with its own advantages and disadvantages.

Hourly rates / Time-charge basis

The hourly rate or time-charge basis is a common pricing methodology used by MEP consulting engineering companies. In this approach, the company charges clients based on the number of hours worked on a project.
In this arrangement, every hour charged by a Consulting Engineer’s staff working on the project is billed at agreed hourly rates. In a time charge agreement the client pays for the time spent in delivering the services. No more no less. If the services are difficult to determine, this is a good way of making sure that the Consulting Engineer gets a fair wage and the client pays for only what is actually done. It suits some clients because they know they are paying only for actual services performed.
A good example is when Consulting Engineer is agreeing to attend site during construction ‘as and when needed’ rather than making regular inspections.
The hourly rate varies depending on the level of expertise required, with senior staff charging higher rates than junior staff.

The advantage of this approach is that it is transparent and provides clients with a clear understanding of the work performed and the associated costs. However, it can also be challenging to estimate the total cost of a project accurately, as the number of hours required can vary significantly depending on the project’s complexity.

The main advantage of this approach is that it provides flexibility for both the consultant and the client, allowing for adjustments based on changing project requirements. However, the downside is that clients may view this approach as unpredictable and may be hesitant to engage in projects where the cost is uncertain.

Current suggested hourly rates are shown by classification below:

Note: The above rates are just an example and can vary based on factors such as qualifications, depending on their level of expertise, experience, the location of the project, the size and complexity of the project, project duration and market demand. Additionally, these rates may not include expenses such as travel, accommodations, and materials. Some consulting firms may have different rates depending on the specific services being provided, so it is important to confirm the rates with the consulting firm directly.

Percentage of construction cost

The cost of providing engineering services is dependent upon the size of the project and the complexity of the assignment.

Percentage is good for most projects. If the size and complexity of the project increases, so does the time spent on it. Size and complexity correlate reasonably accurately to cost.
The great advantage of a percentage fee is that MEP consulting company doesn’t have to keep renegotiating fees during the project if the scope changes.
This is good for example if company does not know whether you are going to build 10 or 20 houses on a site. The advantage of agreeing a fee structure and implementing it, rather than renegotiating it, is that you are not putting your own interests as a practice against your client. Once appointed company simply do what is best for client, as the agent [until the contract phase where if MEP consultant are administering it MEP consultant must act impartially and protect both parties’ interests].

Is possbile to find opinions that a fee for services based on a Percentage of the Construction Cost is discouraged. There is an inherent incentive for the cost of construction to remain high. Even if the percentage is based on the savings created, there is an incentive to have a high initial cost of construction which could open the door for inflated fees for our services.

The percentage can vary depending on the scale and complexity of the project. This pricing methodology is suitable for projects with well-defined scopes and timelines. The main advantage of this approach is that it aligns the consultant’s fee with the overall project value, incentivizing the consultant to provide cost-effective solutions. However, the downside is that the consultant’s fee may increase if the construction cost escalates, even if the consultant’s input remains the same.

1. Mechanical Engineering: Mechanical engineering services typically include the design and analysis of heating, ventilation, air conditioning (HVAC), plumbing, and fire protection systems. The fee structure for mechanical engineering services can be based on a percentage of the construction cost, hourly rates, or a fixed fee. The percentage of construction cost can range from 3% to 8% depending on the complexity of the project.

2. Electrical Engineering: Electrical engineering services typically include the design and analysis of electrical power, lighting, communication, and control systems. The fee structure for electrical engineering services can be based on a percentage of the construction cost, hourly rates, or a fixed fee. The percentage of construction cost can range from 3% to 8% depending on the complexity of the project.

3. Public Health Engineering: Public health engineering services typically include the design and analysis of water supply, drainage, and sewage systems. The fee structure for public health engineering services can be based on a percentage of the construction cost, hourly rates, or a fixed fee. The percentage of construction cost can range from 2% to 5% depending on the complexity of the project.

In addition to these fees, the MEP consulting designers may also charge for additional services such as project management, site inspections, and commissioning. It is important to note that these fees are only a general overview, and actual fees may vary based on the specific details of the project and the MEP consulting firm’s fee structure.

Lump sum / Fixed fee

A Fixed Fee or Lump Sum Contract is suitable if the scope and schedule of the project are sufficiently defined to allow the Consulting Engineer to estimate the engineering costs.
This pricing methodology involves charging clients a fixed amount for the entire project. The lump sum can vary depending on the scale and complexity of the project. This type of contract is frequently developed from Time Basis projections or specific services requirements for particular tasks.

Lump sums are easy for investors or for companies ordering MEP consulting. It works well when MEP consultants have a well-defined scope of work.
Note that if there are changes to the budget, timetable or scope, or if the architect is required to do extra work for reasons beyond the architect’s control, MEP Consultants are entitled to additional fees.

This pricing methodology is suitable for projects with well-defined scopes and timelines. The main advantage of this approach is that it provides certainty for both the consultant and the client, with no surprises in the fees charged. However, the downside is that the consultant’s fee may not be aligned with the project’s value, and the consultant may be incentivized to cut corners to maximize profits.

Fee per Square Meter of the building

This pricing model involves charging a fixed fee per square meter of the constructed area required. This method is suitable for clients who require consultation for a large project and allows MEP consultants to leverage economies of scale However, this pricing structure necessitates detailed project planning and adherence to timelines to maximize economies of scale’s cost savings.

Value Added Arrangement

This pricing method involves charging clients a fee that is directly proportionate to the value added to the project. It provides direct financial incentives for the consultant team to achieve clients’ goals and add value to the project.

The value-added can be in the form of cost savings, increased efficiency, or improved quality. This pricing methodology is suitable for projects where the consultants have a significant impact on the project outcome. The main advantage of this approach is that it aligns the consultant’s fee with the value they bring to the project, incentivizing them to provide high-quality solutions. However, the downside is that it can be challenging to quantify the value-added, leading to disputes between the consultant and the client.

Success fee

Fit for Purpose

Additional costs

Additional costs are another pricing methodology that can be employed in MEP consultancy services. This pricing methodology involves charging clients for additional costs incurred during the project. Additional costs can include travel expenses, equipment rental, and other expenses incurred during the project. The main advantage of this approach is that it ensures that the consultant is reimbursed for any additional costs incurred during the project. However, the downside is that it can be challenging to define what constitutes an additional cost, leading to disputes between the consultant and the client.

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In conclusion, MEP consultants have a variety of pricing methodologies that they can use depending on their client’s needs and budget plans. Some of the pricing models include Hourly Rate (Time-Charge Basis), Percentage of Construction Cost, Lump Sum, Fixed Fee, Fee per Square Meter, the Fee Linked to Value-added, Success fee, Fit for purpose, and Additional costs. Careful analysis of the project’s scope and determining the right pricing model ensures that the consultant provides the right service and customer satisfaction that lasts.

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Please  call  07923 104 425 or/and e-mail  info@remars.co.uk  to get formalise a quotation. -> Contact us to find out how REMARS MEP Engineering Ltd can help you with MEP Engineering services.