Professional services fee sample problem

[santa mimi]

The problem below is from ARE Pre-design Seminar ppt. dowloaded from FTP. It is the question on the last page. Based on my calculation it can make a big fortune. But I highly doubt it- usually the purpose of a sample is to show you that the fee is not enough.

Here is the problem:

A small museum Project has been awarded to your firm. The construction costs are projected to be $5,600,000.00 and the client is not expecting to pay more than 8% in professional services fees. You will need standard Civil, Structural and MEP consultant engineering services.


After analyzing the project and your staff available, you determine that you will need 1200 man hours (66% of an intern’s time making a salary of $24.00/hr and 34% of a PA/PM’s time making a salary of $38.00/hr) through Contract Documents and Bid Phase. The firm’s multiplier for overhead expenses is 2.8 times the individual’s salary. All expenses are reimbursable but we have spent $10,000 chasing the project and doing marketing presentations to win the project.


Is the fee sufficient to do all normal professional services?

If not what options would you pursue?

So, my cal. is:
Profeesional fee: $5,600,000.00 x 8% = 448,000
consultants' fee (civil@10.5%, S.@9.5%, M.@15%, E.@12.5%) = 212,800
Intern salary: 19,008
PA/PM salary: 15,504
Firm' s overhead: (19,008+15,504)x2.8= 96,636.6
marketing: 10,000

448,000-212,800-96,636.6-10,000=128,563.4- Is this the profit?
or I missed something important?

[xonicox]

This is correct. Usually Architectural fee is 4%, MEP 2%, Structural is 1% and Site is 1%. If the architectural office is not basing their price on a percentage base and they are just projecting the cost +overhead + profit then this is a sufficient fee. In my experience, $106,630 is a low fee for a $5.5 M job :) The job I am working on right now is $22 M. and the architectural services are $1 M. including contract admin at the rate of 4.5%. Engineering fees are in addition to that for an additional 4.5%

[santa mimi]

so the profit should be around 50% normally?

[xonicox]

50% is steep. Every project and every client are different. Profit should not be less than 30%-35% though.