Any quote is based on the job indicated by the client. The indicated job to be detailed and quoted with always an option of unit rates for change in scope other than that indicated on inquiry. For sure, sometimes there are generic terms indicated on the enquiry, which makes the scope definition difficult. A pre-bid clarification meeting must be requested and recorded in the form of Minutes of Meeting as common understanding and this should form integral part of the contract.
-----Original Message-----
From: Gang Cvg [mailto:cvg_gang@yahoo.com]
Sent: Wed, January 14, 2004 9:16 AM
To: PipingDesign@yahoogroups.com
Subject: RE: [PipingDesign] Fixed Price Quote for Engineering - Thoughts and
Comments
Well said, Steve. Congratulations! Keep it up!!
C. V. Gangadharan.
--- Steve McKenzie <mechproj@xtra.co.nz> wrote:
> The posting is a rather gloomy one.
>
> First, fixed price is a reality in many areas. The
> fixed price is normally a
> lump sum or a percentage of the installed cost.
> There is a tendency to the
> former as management increasingly tends toward an
> accounting driven
> practice. Everyone is in the same boat; you have to
> get over it, or work for
> someone else who will give a fixed price and pay you
> an hourly rate.
>
> Where the scope is clearly defined there should be
> no problem; just work out
> the hours,hourly rate, materials, disbursements,
> fees, profit and risk. Then
> you guestimate what the market will stand, and
> decide what discount will get
> you the job. From these two sums you come up with a
> bid price. If you dont
> know how long it will take to do something, guess
> generously. Uncertain
> things usually take longer to do than anticipated. A
> client will have little
> confidence in your capability if you cannot tell him
> the effort involved.
> Where the scope is not clearly defined, then write
> your own and include it
> as a condition of your bid. This is quite a strong
> position to be in. I
> believe it is acceptable to include provisional sums
> for unclear work;
> although it is essential to ensure the client knows
> what a provisional sum
> is, and that he will be paying for the actual effort
> required, not the
> provisional sum.
> State clearly that deviations from scope will incur
> extra cost, and state
> the basis for the extra cost; normally hours worked
> at stated rate plus
> marked up materials/disbursements. I always state
> required client turnaround
> times for approvals etc because there is always time
> wasted in waiting for
> late information, or trying to work around it. Also
> state your quality
> requirements for example what file formats you
> require.
>
> Fixed price can have a downside for the client, for
> example.
> In a fixed percentage job, the fee is proportional
> to the total project
> cost. There is an incentive for the engineering to
> specify high capital cost
> solutions. Fixed percentage jobs can be expected to
> have expensive equipment
> and unnecessary overdesign. By overdesigning, any
> uncertainty is reduced by
> large safety factors instead of detailed design
> investigation.
> Similarly for fixed lump sum, there is no incentive
> for the engineer to do
> any work other than the bare essentials. If, for
> example a smart low capital
> cost solution for a particular problem is
> discovered, but significant
> engineering input is required, then the lump sum
> engineer may choose to
> avoid this and go for the solution which is more
> capital cost intensive but
> involves less engineering design work.
> Neither of the above examples are necessarily bad
> things, they are
> commercial realities imposed by others.
>
> Some types of work, such as troubleshooting and
> scope definition, are not
> suited to lump sum bidding. If a client is stupid
> enough to insist on a lump
> sum in this case, always write your own scope of
> works, and stick to it. If
> the clients expectations are not satisfied when the
> scope has been
> completed, then extra work can be negotiated,
> normally on a rates basis.
>
> As far as getting paid you are in a strong position
> until the deliverables
> are issued. Some contracts have payments tagged to
> milestone deliverables.
> No pay, no more deliverables issued. End of story.
> With variations/ scope
> changes, ideally they should be agreed and signed
> off as they arise. This is
> not always practicable, but there is nothing worse,
> from a clients
> viewpoint, than an engineer turning up with a bundle
> of claims near the end
> of a job, and expecting payment for them. Get in
> early with claims and they
> stand a good chance of being paid in full. How you
> go about this depends, in
> part, on how well you know thew client.
>
> Quality and comprehensiveness of deliverables is a
> perennial. It pays to
> look over the fence every so often, to ensure your
> output approximates that
> of your competitors. It is bad form to complain to
> the potential client
> about the work of others, however, especially if you
> missed out.
>
> I dispute that design and analysis is vastly
> superior nowadays. Slighty
> better perhaps but not vastly superior. More use of
> software, often by
> semi-skilled operators who have little insight. Some
> reduction in
> safety/design factors, and perhaps costs. Simple
> numerical methods have, in
> the large, displaced higher mathematics - when was
> the last time you used
> integral calculus seriously?
>
> You will really have to learn how to provide fixed
> price bids, however you
> should feel free to write your own scope or tag the
> clients scope so you are
> not unnecessarily exposed. In my opinion a bid is a
> commercial tool more
> than an engineering one, and should be treated
> accordingly, just like
> contractors do.
>
> Cheers
>
> Steve
>
>
>
> -----Original Message-----
> From: Paul Bowers [mailto:pbowers@pipingdesign.com]
> Sent: Wednesday, January 14, 2004 11:55 AM
> To: PipingDesign@yahoogroups.com
> Subject: [PipingDesign] Fixed Price Quote for
> Engineering - Thoughts and
> Comments
>
>
> A message from a listmember who prefers to remain
> anonymous:
>
>
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