CHAPTER

THE SELECTION OF THE CIVIL ENGINEER

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LEARNING OBJECTIVES
1. Discuss the Qualifications based Selection Procedure.
2. Discuss the different methods used in computing for charges involved in civil engineering
services for a project.
3. Discuss why the civil engineering practice is regulated by the government.
4. Prepare standard contract documents for a particular project.

3.1 GENERAL

Selecting and engaging a Civil Engineer is a critical decision in the development of any
engineering project. Each Civil Engineer brings a unique combination of training, experience,
capabilities, personnel, workload, and professional strengths. Choosing the most qualified
engineer for a specific project contributes significantly to achieving a well-planned, cost-
effective, and successful outcome.

This section outlines the recommended procedures for engaging a Civil Engineer, based on
proven practices and industry experience.

3.2 BASIS FOR SELECTION

The client should develop and implement a formal administrative policy along with clear and
consistent criteria for selecting qualified Civil Engineers suited for specific projects. This
structured approach ensures transparency, fairness, and alignment with project goals. The
initial step in this process involves clearly defining the proposed scope of the project. This
definition may range from a broad overview of the expected services to a more detailed and
comprehensive breakdown of specific tasks and deliverables required for successful project
execution.
By clearly identifying and articulating the expected services, the client can objectively assess
the qualifications, experience, and capabilities of potential Civil Engineers. This ensures that
the selection is based on merit and relevance to the project’s unique demands. Establishing
such criteria is critical in determining whether a particular Civil Engineer possesses the
appropriate skills, knowledge, and resources to effectively deliver the required services and
contribute to the project's success.

Some of the factors that should be considered in the selection process are:

1. The professional and ethical reputation of the Civil Engineer and his staff as determined
by inquiries to previous clients and other references.
2. Responsible Civil Engineers and their employees must be registered professional Civil
Engineers.
3. Civil Engineers should have demonstrated qualifications and expertise, performing the
services required for the project.
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4. Civil Engineer should be able to assign qualified engineering staff who will be in
responsible charge of the project and will be able to provide and complete the required
services within the time allotted.
5. The Civil Engineer should have the necessary financial and business resources to
accomplish the assignment and provide continuing services.

The selection procedures described in PICE manual apply to projects of the private sector.
For government projects, E.O. 164 and PD 1594, and RA 12009 as amended apply to
procurement of consulting services and selection of contractors for construction,
respectively.

3.3 CLIENT'S SELECTION COMMITTEE

The client’s organization should have a clear administrative policy that designates individuals
authorized to oversee and recommend the selection of Civil Engineers for particular
assignments. These designated individuals must be well-acquainted with the project’s needs
and must remain free from internal or external influence throughout the selection process.
An effective approach is to form a selection committee composed of at least three members,
including at least one professional engineer with expertise relevant to the project. For public
undertakings, this procedure is especially recommended for individuals who demonstrate
objectivity to avoid the appearance of a conflict of interest in the selection of a Civil Engineer.
At least one of the individuals should be thoroughly familiar with the civil engineering
practices. The committee is responsible for making recommendations after conducting
appropriate investigations, interviews, and inquiries. The final selection is then based upon
the selection committee’s recommendations.

3.4 QUALIFICATIONS-BASED SELECTION (QBS) PROCEDURE

The selection procedure is considerably enhanced when the client is fully familiar with the
purpose and nature of the proposed project, can describe the project in detail, and can
prepare a project scope. In many other services expected of the Civil Engineer in special
studies, the client may not have professional staff available to define the project scope and
describe the required services. In some cases, the client may learn enough of the project
requirements to enable a fair and impartial check of the Civil Engineer. The selection
procedure, therefore, can be modified to suit the circumstances.

The client’s usual steps in the selection procedure are presented below. If the client has had a
satisfactory experience with one or more Civil Engineers, it may not be necessary to follow all
of the steps outlined.

1. Through invitation or public notice, the client should announce the general scope of the
project and the required services, and request statements of qualifications and relevant
experience from Civil Engineers deemed capable of performing the work. This may be
done by issuing a “Request for Qualifications” (RFQ) or a “Request for Proposals” (RFP).

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 RFQs are typically used to gather general qualifications within a particular field of
expertise, while RFPs are used to invite more detailed proposals and to develop a "short
list" of Civil Engineers for a specific project selection.

2. Prepare a budget for the staff time and costs that can be expected from potential Civil
Engineer prior to receipt of the RFQs or RFPs.

3. Evaluate the statements of qualifications received. Select at least three Civil Engineers or
firms that may appear to be best qualified for the specific project. It should be noted that
often more than three Civil Engineers or firms may appear to be equally qualified in which
case more Civil Engineers or firms may be considered. However, in fairness to those not
selected it is usually best to make a conscientious effort to keep the number selected for
further consideration realistic in terms of view of the cost and time required to prepare
competent proposals.

4. Write a letter to each Civil Engineer or selected for further consideration describing the
proposed project in detail, including a project scope and outline of services required, and
request a proposal. The client is seeking the Civil Engineer’s plan for handling and
performing the indicated services. The proposal should include the proposed schedule,
experience with similar projects, the depth of qualified personnel, financial standing,
present workload, and references. Each Civil Engineer or firm should have an opportunity
to revise the proposal after the review and clarification of any items as required. For major
or complex projects, a pre-proposal meeting may be desirable to explain details of the
proposed scope of services and to answer questions.

5. On receipt of proposals, invite the Civil Engineers or firms to meet individually with the
client for interviews to discuss an understanding of the desired end results of the project
and the engineering services required. These interviews may be held at the Civil Engineer’s
office. The client may consider supplementing the selection committee with personnel
who have specialized expertise to advise the committee, when appropriate. During each
interview, the selection committee should review the qualifications and experience of
each Civil Engineer or firm, the capability to provide the services within the time allotted,
and the key personnel to be assigned to the project.

6. Check with recent clients of each Civil Engineer or firm to determine the quality of their
performance. This check need not be limited to references listed by the Civil Engineer.

7. List the Civil Engineer or firms in the order of preference, taking into account their
approach and understanding of the project, reputation, experience, financial standing,
size, personnel available, quality of work, assigned location, and other factors pertinent to
the project being considered.

8. Invite the Civil Engineer considered to be best qualified to develop a detailed scope. List
of deliverables and schedule, and negotiate fair compensation for the services.

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9. The compensation proposed by the Civil Engineer should be evaluated based on the
client’s experience and budget estimate, taking account of the range and rates outlined in
Section 4 of the PICE MANUAL or Chapter 5 of this manual hereof, and of the project
characteristics and the scope of services agreed upon. Fair and reasonable compensation
to the Civil Engineer is not only in the client’s best interest, it will enable the consultant’s
expertise to be fully utilized.

10. If satisfactory agreement is not reached with the first Civil Engineer, the negotiations
should be terminated. The second Engineer or firm be notified in writing and invited.
Similar negotiations should then be held with the second Civil Engineers or firm and, if
necessary, with the third Civil Engineers or firm. If no accord is reached, the client should
seek outside assistance before continuing with the selection process. Such a procedure
will usually result in the development of a satisfactory contract. All such negotiations
should be on a strictly confidential basis, and in no case should the compensation
discussed with one Civil Engineer be disclosed to another.

11. When agreement has been reached on scope, schedule and compensation, the client and
selected Civil Engineer should formalize their agreement in a written contract.

3.5 SELECTION PROCEDURE FOR “LEVEL OF EFFORT” CONTRACTS

A “level of effort” type of contract for engineering services is a contract procedure used to
supplement a client staff, either by moving an engineer into existing disciplines and
capabilities already on board or by adding special disciplines not available on the client’s staff.

As applied to “level of effort” contracts, the QBS procedure sets forth the general nature of
the services, the types of disciplines required, and the estimated number of hours required
for professional personnel for each type and grade of specialist, and then requests proposals
from Civil Engineers. Proposals usually state the experience of the firms as it pertains to the
scope of services, the names and qualifications of individuals who will be assigned. After
narrowing the proposals to those with the best qualifications, the client then negotiates an
agreement as described in sub-section 4.4 nos. 9-11 above.

3.5.1 Bidding

Professional engineering and architectural societies recognize QBS as the preferred method
for the procurement of professional services only by a process similar to that described in
"Qualifications-Based Selection Procedure," above.

Selection of Civil Engineers and related service professionals, including consultants and sub
consultants on construction projects, should result from competition based on the
qualifications and resources best suited to complete a project successfully in terms of
performance quality and cost-effectiveness. Qualifications and resources, including technical
and professional licensing experience, skills, capabilities, special expertise personnel, and
workloads, are paramount considerations in selecting engineering services. Costs of these
services, while important and meriting care of negotiation and thorough accountability, are
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ancillary to overall professional project costs and should be subordinate to professional
qualifications and performance.

There are several reasons why the procurement of consulting Civil Engineering services
through bidding frequently leads to unsatisfactory outcomes for the client. The most notable
among these are:

1. Bidding does not recognize professional judgment, which is the key difference between
professional services and the other items subject to bids. Judgment is an essential
ingredient in quality engineering services.

2. It is virtually impossible to completely detail in advance the scope of services required for
an engineering project especially for those projects not yet designed. The services require
lengthy discussions and negotiations with the selected firm. Lacking this, the bidding
method invites the selection of the lowest price offer which may be least effort envisioned.
The selected service performer is likely to be less familiar with the scope and requirements
of the bid documents and will not necessarily suit the client’s needs or expectations.

3. In-depth studies and analyses by the consulting Civil Engineer are not likely to be
performed. The consulting Civil Engineer selected by lowest bid will often provide only the
minimum necessary services to satisfy the client’s scope of services.

4. The consulting Civil Engineer’s ability to be flexible and creative in meeting the client’s
requirements is severely limited.

5. The engineering designs are likely to be minimal in completeness with the details left to
the contractor. This produces a lower first cost but tends to add to the cost of the
completed project. The lack of design-details also can and frequently does, lead to a
greater number of change orders during construction as the contractor claims at a later
date.

For these reasons, bidding for professional services is not recommended.

3.5.2 Two-Envelope System

The two-envelope system involves submission of a technical proposal in one envelope and a
price proposal in a second envelope. The client then evaluates the technical proposals and
selects the best-qualified Civil Engineer based on the consulting Civil Engineer’s technical
proposal. At this point in the selection procedure, the client opens the price proposal
submitted in the second envelope and uses this as a basis for negotiation of contractual work
and fees. The second envelopes submitted by the unsuccessful proponents are returned
unopened.

If the client follows this procedure, the net effect is as outlined in “Qualifications-Based
Selection procedure,” provided that the client and the best-qualified consulting Civil Engineer
have extensive discussions to reach full agreement on the scope of services. This allows the
client to utilize the knowledge and experience of the consulting Civil Engineer in establishing
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the scope of services. Upon agreement of scope, the price of services should be negotiated to
reflect changes from the original scope used for obtaining proposals.

If both envelopes of all proposers are opened at the same time, a bidding process, as discussed
in the section on "Bidding," is initiated with attendant disadvantages. Procedures should be
established to provide confirmation that the second envelope is opened for only the
successful proposal.

The two-envelope system is not recommended. If used as intended, it is similar to the

recommended QBS procedure except that the added cost to prepare a comprehensive scope
and price discourages some consulting Civil Engineers from participating. The costs to prepare
a proper price proposal are considerable to the firms not selected, which increases the overall
business costs of consulting civil engineering and ultimately of the clients.

3.6 Charging for Civil Engineering Services

Charges for engineering services are usually computed using one of six methods:

1. Salary cost times multiplier plus direct non-salary expense ("Reimbursable").

2. Hourly billing rates plus reimbursables.
3. Per diem.
4. Cost plus fixed fee ("CPFF").
5. Fixed price.
6. Percentage of construction cost ("Percentage").

Combinations of methods of payment for different phases of the contract may be used. The
method or combination of methods used depends upon the nature, scope, and complexity of
services required by the client. The first four methods are based on using the Civil Engineers'
costs to perform services. They are particularly applicable to assignments where the scope of
services is not self-defining. These risks and the percentage of costs of performance are based
upon a specific deliverable and do require that the project scope be well defined. The cost-
plus fixed fee method provides more flexibility to accommodate both scope and fee changes
than do either the fixed price or percentage methods of cost.

The potential risks and problems faced by both the client and the Civil Engineer, when the
scope of services is not well defined should be recognized and discussed during contract
negotiation. Often, initial estimates of maximum engineering costs for projects of uncertain
scope are requested by the client for budgeting purposes. Such budget estimates should state
that they do not constitute an agreed-upon maximum and that they are to be revised as the
scope of services becomes better defined.

When a reimbursement method such as salary cost times multiplier, hourly billing rate, per
diem, or cost-plus fixed fee is chosen because of the uncertainty of the scope of services, it is
logical to propose that an upper limit (maximum amount) for these services be included in
the agreement. The inconsistency of such a proposal is proportional to the uncertainty of the
scope. Hence, if these methods are used with a “not-to-exceed” amount. In this case, it is
important for the client and the engineer to agree beforehand on the method of adjusting the
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“not-to-exceed” amount if such an adjustment is warranted. One reasonable approach to
compensation for uncertain assignments is to require the Civil Engineer to provide written
warning as costs are approaching 75 percent of the stated budget figure and to forecast the
probable total cost. This allows both the client and the Civil Engineer to review the remaining
progress at that point and, if appropriate, to revise either the scope of services or not-to-
exceed amount or both for the remaining services.

The charge for engineering services using the fixed price or the percentage of construction
cost methods is based entirely on the scope of services. The fee, unless mutually modified as
the scope of services is well defined and the Civil Engineer becomes familiar with his/her own.
Certain types of investigations and design will tend to suit these two methods of determining
charges.

Determination of charges for services such as resident project representation during

construction, where the Civil Engineer’s costs may be affected significantly by the contractor’s
performance can be more equitably by one of the methods based on the actual cost of service.

Occasionally, a Civil Engineer has unique qualifications, and/or expertise that is not readily
available, and/or computer programs and procedures that reduce time required for project
execution. In these instances, the Civil Engineer may demonstrate that his/her proposal will
make the project easier, faster, safer, or less expensive to achieve the client’s objectives.

Similarly, the client may wish the Civil Engineer to undertake a project characterized by an
accelerated schedule, non-routine services, and/or high-risk activities. Under these
circumstances hourly rates or engineering services may be based on “value pricing,” which
reflects a premium rate not tied directly to the Civil Engineer’s cost, but based on the Civil
Engineer’s unique qualifications or the extenuating circumstances. One of the more common
value pricing tactics is to provide expert witness services.

3.6.1 SALARY COST TIMES MULTIPLIER PLUS DIRECT NON-SALARY EXPENSE

Compensation based on the salary cost times an agreed multiplier is a frequently used method
of determining charges for engineering services. With this method, charges for engineering
services are based mainly on direct salaries. It is therefore advisable that the Civil Engineer
reach an agreement with the client on the salary cost and a clear classification of service-
applicable personnel. This agreement facilitates cost accounting and billing, and may help
avoid future surprises, misunderstandings, and disputes.

The salary cost times multiplier method may be utilized as either a multiplier times salary cost
(two multiplier version) or a multiplier times direct salary cost (single multiplier version).

The direct salary times multiplier, or as it is frequently called, the direct labor times multiplier
version, is very similar to the salary cost times multiplier, with the exception that it applies a
single multiplier to unburdened direct labor costs, i.e., direct salaries without employee
benefits. The single multiplier includes costs associated with employee benefits, overhead,
and a margin for contingencies, risk, and profit. The direct salary times multiplier version of
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this method is being utilized more frequently due to the simplistic nature of utilizing a single
multiplier. Of the two versions of this method, the salary cost times multiplier is the more
easily accountable due to the basic premise of providing two separate multipliers. One
multiplier is based upon definitive costs, i.e., employee benefits and the other multiplier
based upon costs which may vary from project to project.

Regardless of the method utilized as a basis of compensation, a provision in the agreement

should state that payments will be made to the Civil Engineer during progress of the work,
usually monthly invoices, and within a reasonable time after billing. Direct non-salary
expenses are a separate item for reimbursement and apply to either the salary cost or direct
salary cost (times multiplier) method. With the multiplier version of this method, they are also
subject to a multiplier which is agreed to in the agreement.

1. Salary cost is defined as “direct salaries plus employee benefits” and includes salaries for
partners or principals of firm; technical, professional, administrative and clerical staff only.
Chargeable to the project, and includes vacations and holidays; incentive pay; unemployment
and other payroll taxes; and the contributions for Social Security, workers’ compensation,
insurance retirement, medical, and other group; benefits.

Note that salaries or imputed salaries of partners or principals, to the extent that they perform
technical or advisory services directly chargeable to the project, are to be compensated in the
same way as are other direct salary costs.

2. Multiplier which is applied to salary cost is a factor that compensates the Civil Engineer for
overhead (as defined hereinafter) plus a reasonable margin for contingencies, interest or
invested capital readiness to serve, and profit. The size of the multiplier will vary with the type
of service, the nature and experience of the civil engineering firm, and the geographic area in
which its office is located.

The average multiplier should be between 2.5 and 3.0 times the average salary cost. For some
services, however, a higher multiplier is usually applicable for services requiring
recommendations based on extensive experience and special knowledge, or for services
involving expert testimony in legal proceedings. The Multiplier may also increase with the
experience and special capabilities of the Civil Engineer’s firm.

3. Direct non-salary expenses usually incurred in engineering engagements may include the
following:

a. Living and traveling expenses of principals and employees when away from the home office
on business connected with the project.

b. Identifiable communications expenses, such as long-distance telephone, facsimile,

telegraph, shipping charges, and special postage charges (for other than general
correspondence).

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c. Expenses for services and equipment directly applicable to the project, such as for
specialized technical equipment, special legal and accounting services, special computer
programming and modeling services, data processing and storage, CADD charges, sub
consultants and subcontractors for technical drafting and binding, and courier services that
are not applicable for inclusion in general overhead.

d. Identifiable drafting supplies, stenographic supplies, and reproduction work (blueprinting,

photocopying, and printing charged to the client’s project) as distinguished from such supplies
and expenses applicable to several projects.

e. Expenses for unusual insurance and specialized health and safety programs and for special
clothing for projects with extraordinary risks such as toxic and hazardous waste conditions.
Such projects may require special insurance, which is also normally billed as a direct cost to
the project. Such expenses are normally reimbursed by the client at actual invoice cost plus
an administrative charge to compensate for associated accounting, purchasing, contract
administration, risk of liability, etc.

4. The Civil Engineer’s overhead, which comprises a major portion of the compensation
derived by the multiplier on salary cost, includes the following indirect costs:

a. Provisions for office expenses—light, heat, telephone depreciation, rental furniture, rent,
drafting equipment and engineering instruments, transportation expenses, and office and
drafting supplies not identifiable to a specific project.

b. Taxes and insurance other than those included as salary cost.

c. Library and periodical expenses and other costs of keeping abreast of advances in
engineering, such as attending technical and professional meetings and continuing education
courses.

d. Executive, administrative, accounting, legal, stenographic, and clerical salaries and

expenses (other than those for direct services included in salary costs and expenses) plus
salaries or imputed salaries of partners and principals to the extent they are engaged in
executive or administrative services as distinguished from technical or advisory services
directly applicable to particular projects. These services and expenses, essential to the
conduct of the business, include preliminary arrangements for new projects or assignments
and interest on borrowed capital.

e. Business development expenses, including salaries of principals and employees so engaged.

f. Provision for loss of productive time of technical employees between assignments, and for
time of principals and employees on public service assignments.

g. Costs of acquiring and maintaining computers, development of software, and training staff
when not billed as a direct cost.

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5. Accounting records. The Civil Engineer who performs services under a salary cost times
multiplier agreement or other cost-based agreement must provide the accounting necessary
to segregate expenses and record the appropriate expenditures. Adequately detailed hourly
time records must be maintained for principals, employees, and others who devote time to
the project.

Applicable payroll records, together with receipts or other documents to substantiate

chargeable expenditures, must be available for inspection audit by the client if required by
contract.

3.6.2 Hourly Billing Rate

The hourly billing rate method of compensation is very similar to the salary cost times
multiplier method in that the hourly billing rate includes all direct personnel expenses,
overhead, and profit. Direct non-salary expenses (of the same type under the salary cost times
multiplier section) are a separate item for reimbursement, usually with a service charge. Civil
engineering firms that elect to utilize this method of compensation on projects where the
scope of service is not well defined or for simple accounting and record keeping.

3.6.3 Per Diem

The term per diem normally refers to an eight-hour day. Direct personal services of the type
described in Section 2 which are frequently charged on a per diem basis. This basis is
particularly suited to expert witness or other legal-type services and to other short-term
engagements involving intermittent personal services.

Where per diem services are furnished, the Civil Engineer should be compensated for all of
the time devoted to providing them, including travel and standby time. The per diem charge
should be based on the complexity, risk, and important of the services and on the Civil
Engineer’s professional standing, experience and breadth of experience. The Civil Engineer is
also reimbursed for travel and subsistence costs and for other out-of-pocket expenses
incurred when away from the home office.

For engagements in which the Civil Engineer is to appear as an expert, a per diem charge is
considered to be earned for each day of such appearance, even though the Civil Engineer
might not testify or, if called, may finish testifying in only a part of the day.

On occasion the urgency of the engagement requires the Civil Engineers time regularly for
periods longer than the normal eight-hour day. In such cases an understanding should be
reached with the client, and the per diem rate increased accordingly.

Per diem rates can vary widely, depending on employee classification, regional location, and
period of service. Rates for expert testimony in connection with litigation and appearances
before commissions and courts are normally higher than the standard rates.

3.6.4 Cost Plus Fixed Fee

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Under a cost-plus fixed fee agreement, the Civil Engineer is reimbursed for the actual costs of
all services and supplies related to the project, including:

• Salary costs, as previously defined

• Overhead, as previously defined (The Civil Engineer should be prepared to support the
basis for overhead charges.)

• Direct non-salary expenses, as previously defined

• Fixed fee, an amount to compensate the Civil Engineer for contingencies, interest on
invested capital, readiness to serve, and profit.

The cost-plus fixed fee basis requires, as a prerequisite to equitable negotiations, that the
client and the Civil Engineer define and agree on the scope of services the Civil Engineer is to
perform. Such definition of the scope of service is essential to enable the Civil Engineer to
estimate costs and propose an equitable fixed fee. Where uncertainties of cost estimation
exist, the fixed fee should be incorporated into the client-engineer agreement.

The cost-plus fixed fee method can also be used when the Civil Engineer is required to start
providing service before the detailed requirements can be determined. In such cases, special
considerations apply:

1. The general scale and intent of the project should be fairly well defined, even if the full
scope is indeterminate; for example, the number, size, and character of buildings or other
facilities, the type of utilities, and other such essential information should be available.

2. The types of service to be performed by the Civil Engineer should be agreed upon and fully
set forth. The agreements should also provide for appropriate adjustments in the fixed fee
in the event that the physical scope of the project, time of completion, or level of effort
and services required are materially changed over those contemplated during the
negotiations.

The fixed fee amount varies with the complexity and scope of the engineering services
required. It is frequently calculated as a percentage of the salary costs, overhead, and direct
non-salary expenses.

Agreements for cost-based methods should provide for reimbursement of all costs to be
incurred directly or indirectly in connection with the project, including but not limited to those
foreseen when the agreement is negotiated. The list of reimbursable items should be as
complete and detailed as possible. One advantage of the cost-plus fixed fee method is that it
eliminates any suspicion that the costs have been allowed to grow in order to increase the
Civil Engineer’s fee, which by definition is a fixed amount. Because the entire fixed fee amount
is due the Civil Engineer, whether or not the estimated project costs have been reached the
Civil Engineer has an incentive to complete the service promptly.

3.6.5 Fixed Price

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The fixed price method of compensation is frequently used for investigations and studies and
for basic services on design type projects where the scope and complexity of the assignment
can be clearly and fully defined. The fixed price amount can be calculated as the sum total of
estimated engineering costs for salaries, overhead, and direct non-salary expenses, cost of
materials and interest on invested capital, readiness to serve, and a reasonable amount for
profit. Fixed price compensation for basic services on certain design-type projects can also be
computed as an appropriate percentage of estimated construction costs; this method and its
limitations are discussed in the following section. Results using the percentage method and
the direct calculation method are frequently used to check each other.

A fixed price agreement should contain a clearly stated time period during which the services
will be performed and a provision for adjustment of compensation if the project is delayed for
reasons beyond the Civil Engineer’s control. For design services, there should be a provision
for changes required after approval of preliminary design, with a clear understanding as to
where the final approval authority lies.

Partial payments should be made to the Civil Engineer at stated intervals, usually once a
month during the performance of the services. These payments are usually based on the Civil
Engineer’s statement of percent completion to date.

3.6.6 PERCENTAGE OF CONSTRUCTION COST

The percentage of the construction cost method is seldom used raw. Because of increasing
complexity and large variation in tasks for projects, the percentage of construction cost fee
curves no longer have a direct correlation to the required engineering fees for specific
projects. Owners should utilize experienced “in-house” staff or retain consultants to develop
detailed program budgets for construction projects, with way, legal, administrative,
engineering services and permits.

This Method may be used to determine the compensation of the engineer for services where
the principal responsibility is the detailed design or construction supervision of facilities to be
constructed.

Construction Cost is defined as the estimated total cost of constructing the facility to be
covered by the proposed detailed design or construction supervision services, excluding the
fees and other costs of such services, the cost of land and right-of-way, and legal and
administrative expenses.

Over the years, engineering experience has established some appropriate correlations
between engineering costs and construction costs for certain types of engineering design,
where design procedures and materials of construction are more or less standardized. These
correlations have resulted in cost curves and schedules that have been widely used.

The validity of the percentage-of-construction-cost method rests upon the assumption that
detailed design and construction supervision costs vary in proportion to direct construction
costs. When judiciously applied, and with due consideration of the ranges within which
50
engineering scope may vary, this method is valuable for general comparison with line-based
fees for design services. Its acceptance over many years also affords a valuable basis for
judging the reasonableness of a proposal for consulting services.

The percentage fee shall consider the type, complexity, location, and magnitude of the
construction cost of the project and shall not exceed the following percentages of the
estimated construction cost:

a. Feasibility studies, three percent (3%);

b. Detailed engineering design, six percent (6%);
c. Detailed architectural and engineering design—eight percent (8%); and
d. Construction supervision, ten percent (10%)
These percentages include only those works normally undertaken in arriving at the expected
outputs and do not include special studies or investigations indicated under Section 2.5
hereof, the outputs of which are ends by themselves.

It is further emphasized that the above percentages are only ceilings and it does not
necessarily mean that the said percentages should be adopted for each project. The actual
percentage fee for a particular project will depend on the factors mentioned above, i.e., the
type, complexity, location, and magnitude of construction cost. As a rule, projects with a
higher range of construction costs will have lower percentages of fees than those projects
within a lower range of construction cost. The above percentages shall be reduced to the
extent that some of the activities undertaken by the client.

3.6.7 SCHEDULE OF MINIMUM BASIC FEES

Rates of compensation for Civil Engineers engaged in various capacities are given in Annex B.
The PICE shall regularly update the schedule of fees stipulated in the Annex. Certain principles
should, however, be observed as follows:

1. When doing work on foreign assisted projects, or in projects where international

consultants participate, the Civil Engineer performing similar or equivalent work, should
accept compensation that approximates the international standard rates (see Section
6.1.1 of the NEDA Guidelines).

2. Civil Engineers regularly employed in the private sector shall have a minimum
compensation corresponding to 10% more than the minimum wage prevailing in the
region as basic monthly salary. Civil Engineers employed in the government sector shall
have a minimum basic monthly salary corresponding to appropriate entry positions
provided by the Civil Service Commission.

3. A Civil Engineer employed in the private sector who signs and seals the Civil Engineering
plans, specifications and other related documents of a certain project for and in behalf of
his employers shall be compensated with a minimum of 10% of the professional fee for
the project, over and above the basic monthly salary.

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3.7 Total Project Cost

In Civil Engineering, the total project cost represents the comprehensive financial requirement
for the successful completion of a construction project from inception to completion. It
encompasses all direct and indirect expenses, including but not limited to land acquisition,
design and consultancy fees, materials, labor, equipment, permits, contingency allowances,
and administrative overheads. Accurately estimating and managing the total project cost is
essential for ensuring financial feasibility, maintaining project schedules, and achieving the
desired quality and performance standards. A well-defined cost framework enables
stakeholders to make informed decisions, minimize risks, and optimize resource allocation
throughout the project lifecycle.

3.7.1 GENERAL

Probable total cost is a major concern of the client throughout the planning, design, and
construction phases of a project. The probable total capital cost, often used to establish
budgets for a typical project, is made up of:

1. Professional engineering costs.

2. Construction cost.
3. Legal and land costs.
4. Owner's costs, including project administration, staffing, financing, and other
overhead.
5. Contingency allowance for unknowns.

3.7.2 PROFESSIONAL ENGINEERING COSTS

A Civil Engineer is often engaged to make a study and to render a planning report on the
contemplated project, including alternative solutions, layouts, and locations, along with initial
estimates of the probable project cost. These may involve alternative or phased
implementation schemes, which add flexibility to the project.

The study and report phase may include the cost for field or traffic surveys, planning analyses,
geotechnical explorations and analyses, in addition to the direct engineering costs.

The costs of coordination, evaluation, implementation and compliance have increased

correspondingly. The extent of these concerns may not be identified during the study and
report phase, and sometimes not even after final plans and specifications have been prepared.
As a result, the estimated probable total cost of the project based on the study and report
phase must be understood to be preliminary.

Because projects vary widely in nature and scope, the study and report phase is important
because its implementation determines the scope and development of the entire project and
its ultimate capital and lifecycle cost. At times, preliminary investigations become so extensive
and lengthy that the study and report phase costs as much or more than the final design
phase.
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During the final design and construction phase, additional surveying and geotechnical
engineering services may be needed. Also, special or additional engineering services not
originally identified may be required by the client or recommended by the Civil Engineer.

3.7.3 Construction Cost

The study and report phase of the project usually includes a preliminary estimate of the
construction cost for the contemplated project and for alternative project configurations. Such
cost estimates are approximate, since the final design drawings and specifications have not
yet been prepared. In addition, the timing of the construction must be considered because
inflation will affect the construction cost.

Construction Cost is the estimated total cost of constructing the facility to be covered by the
proposed detailed design or construction supervision services, excluding the fees and other
costs of such services, the cost of land and right-of-way, and legal and administrative expenses
of the agency. The estimated construction cost must be approved by the client before the
invitation to submit a technical proposal is issued.

3.7.4 Legal, Land, Administration, Staffing, and Financial Costs

These costs, which include audits, the cost of issuing bonds, land acquisition, and interest for
borrowed money during construction, are not part of the probable total project cost and can
best be estimated in cooperation with the client because they are usually outside the
knowledge and control of the Civil Engineer.

3.7.5 Contingency Allowance

As a project progresses from the study and report phase to the final design phase and
ultimately to construction, more information becomes available regarding project specifics
and associated costs. By the time the project is completed, the total cost is fully determined.
To account for unforeseen or intangible expenses, it is standard practice to include
contingency allowances in the cost estimates. Typically, an additional 20% is added to the
estimated total project cost at the end of the study and report phase. This contingency is often
reduced to around 10% upon completion of the final design and may further decrease to
approximately 5% when the construction contract is awarded. However, larger or more
complex projects may require higher contingency allowances to address increased uncertainty
and risk. As construction progresses and uncertainties are resolved, the actual costs tend to
align more closely with the refined estimates. Properly managed contingencies help prevent
cost overruns and ensure the project remains financially viable.

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 Key Points

1. Selecting a Civil Engineer is crucial to project success; qualifications must align

with project requirements.
2. Clients should adopt a formal, transparent selection policy with clearly defined
project scope.
3. Selection must be merit-based, considering:
• Professional and ethical reputation
• Licensure (registered Civil Engineers)
• Relevant experience and expertise
• Ability to meet deadlines with qualified staff
• Financial and operational capacity
4. For government projects, follow EO 164, PD 1594, and RA 12009.
A Selection Committee should be formed:
• Minimum 3 members
• At least one licensed engineer
• Free from conflict of interest
5. Use the Qualifications-Based Selection (QBS) procedure:
• Issue RFQ or RFP
• Prepare internal budget estimates
• Evaluate and shortlist at least 3 qualified firms
• Request detailed technical proposals
• Conduct interviews
• Check references and past clients
• Rank firms by preference
• Negotiate scope and fees with top choice
• Finalize a written contract
6. For “Level of Effort” contracts, QBS applies, based on estimated hours and
expertise to supplement client staff.
• Bidding for professional services is discouraged because it:
➢ Ignores professional judgment
➢ Encourages minimum-effort service
➢ Limits design flexibility and completeness
➢ Often increases total project cost
• Two-Envelope System:
➢ Technical and price proposals are submitted separately
➢ Only the best technical proposal’s price envelope is opened
➢ Not recommended due to high cost for non-selected firms and similarities
with bidding if misused.
(Section 3.6)

Charging Methods for Civil Engineering Services

Civil Engineering services can be charged using six main methods:
1. Salary Cost Times Multiplier + Reimbursables
o Based on direct salaries plus benefits, multiplied by a factor covering overhead,
profit, and risk.
o Direct non-salary expenses are reimbursed separately.
o Common multipliers: 2.5 to 3.0 (can be higher for specialized services).
2. Hourly Billing Rate + Reimbursables
o Hourly rate includes all personnel costs, overhead, and profit.
o Direct expenses are reimbursed separately.
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 3. Per Diem
o Daily rate (typically for 8 hours) used for short-term, expert witness, or legal-
type services.
o Includes standby and travel time.
4. Cost Plus Fixed Fee (CPFF)
o Engineer is reimbursed for actual costs + a fixed fee for profit and risk.
o Suitable when scope is uncertain; offers flexibility.
5. Fixed Price
o One-time agreed-upon fee for well-defined scopes.
o Includes costs for salaries, overhead, profit, etc.
o Common for studies and clearly scoped design services.
6. Percentage of Construction Cost
o Fee is a percentage of the total construction cost.
o Often used for design and construction supervision.
o Recommended maximum rates:
▪ Feasibility studies: 3%
▪ Detailed engineering design: 6%
▪ A&E design: 8%
▪ Construction supervision: 10%
Key Considerations
• Method selection depends on the scope, complexity, and risk of the project.
• Flexible pricing (CPFF, Reimbursables) is best for uncertain scopes.
• Fixed pricing or percentage methods require a well-defined scope.
• When using cost-based methods, an upper limit or "not-to-exceed" amount should be
set, with provisions for adjustment.
• The Civil Engineer should notify the client when costs reach 75% of the budget to
reevaluate the project scope or fee.

Cost Elements Defined

• Salary cost = direct salaries + employee benefits.
• Direct non-salary expenses = travel, communication, technical tools, supplies,
insurance, etc.
• Overhead = office and admin costs not directly chargeable to a project.
• Fixed fee = compensation for risk, profit, and readiness to serve.

Special Cases
• Value pricing applies when:
o The Civil Engineer has unique qualifications or tools.
o The project involves high risk or an accelerated schedule.
o Often used in expert witness services.

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SUMMARY

Selecting and engaging a Civil Engineer is a crucial step in any engineering project, as it greatly
influences the project's success through the engineer’s expertise, resources, and
professionalism. A structured and transparent selection process should be adopted, beginning
with clearly defining the project scope and using consistent, merit-based criteria to assess
candidates. Important factors include ethical reputation, professional registration, technical
capabilities, staff qualifications, and financial stability. A designated selection committee—
ideally with engineering expertise—should oversee the process to ensure impartiality. The
Qualifications-Based Selection (QBS) procedure involves publicly announcing the project,
evaluating RFQs or RFPs, shortlisting candidates, conducting interviews and reference checks,
and ranking firms by suitability. Negotiations on scope and compensation are held with the
top candidate, with confidentiality strictly maintained throughout. If no agreement is reached,
the next-ranked candidate is approached. The process concludes with a formal written
contract with the selected Civil Engineer. Public sector projects must also comply with
applicable laws such as E.O. 164, P.D. 1594, and R.A. 12009.

The “level of effort” contract selection procedure supplements client staff by engaging Civil
Engineers through a Qualifications-Based Selection (QBS) process that prioritizes professional
qualifications and scope-specific expertise over cost, discourages bidding due to its limitations
in evaluating professional judgment and service quality, and cautions against using the two-
envelope system as it may replicate the downsides of bidding and deter participation due to
increased preparation costs.

Civil engineering services may be charged using six main methods—salary cost times
multiplier, hourly billing rates, per diem, cost plus fixed fee, fixed price, and percentage of
construction cost—each chosen based on the project's scope, complexity, and level of
definition, with provisions for adjustments, risk sharing, and professional compensation
standards to ensure fairness and clarity for both the engineer and the client.

The total project cost in Civil Engineering refers to the comprehensive financial estimate
required to complete a construction project—covering professional services, construction,
land and legal expenses, administrative and financial costs, and contingency allowances—
ensuring feasibility, resource optimization, and informed decision-making throughout the
project lifecycle.

Exercises:

1. What does the total project cost in Civil Engineering represent?

2. Name four major components of a project's total capital cost.
3. Why is accurate estimation of total project cost important?
4. What role does the Civil Engineer play in the study and report phase?
5. What costs are included in professional engineering services?
6. Why is the study and report phase considered critical in project planning?
7. How accurate are the cost estimates during the study and report phase?

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 8. What factor greatly influences the construction cost over time?
9. What is excluded from the estimated construction cost?
10. Who must approve the estimated construction cost before technical proposals are
solicited?
11. What types of costs fall under legal, land, administration, staffing, and financial
costs?
12. Are legal and financial costs typically under the control of the Civil Engineer?
13. What is a contingency allowance in project cost estimation?
14. What is the typical contingency percentage added during the study and report
phase?
15. How does the contingency allowance change by the final design phase?
16. At what point may the contingency allowance decrease to 5%?
17. What type of projects may require higher contingency allowances?
18. What are owner’s costs in a construction project?
19. What document phase may sometimes cost more than the final design phase?
20. What benefit does a well-defined cost framework provide stakeholders?

References

1. American Society of Civil Engineers. (2022). Policy Statement 304 – Qualifications-Based

Selection (QBS). ASCE. [Link]
statements/policy-statement-304---qualifications-based-selection

2. Philippine Institute of Civil Engineers. (n.d.). Manual of Professional Practice for Civil
Engineers. PICE.

3. Association of Consulting Engineers of Canada. (2004). Selection of Engineering

Consultants: Guidelines for Best Practice Using Qualifications-Based Selection (QBS).
ACEC. [Link]

4. U.S. Federal Highway Administration. (2015). Qualifications-Based Selection (QBS): A

Guide for Procurement of A/E Services. U.S. Department of Transportation.
[Link]

5. Smith, M. (2020). Construction Engineering and Management. McGraw-Hill Education.

6. Course Hero. (n.d.). Six Methods of Charging for Engineering Services. Retrieved June 9,
2025, from [Link]

7. American Council of Engineering Companies. (2013). ACEC Guide to Standard Form of

Agreement Between Client and Consultant. ACEC Publications.

8. Project Management Institute. (2017). A Guide to the Project Management Body of

Knowledge (PMBOK® Guide) (6th ed.). PMI.

9. Association for the Advancement of Cost Engineering International. (2020). Recommended

Practice No. 40R-08: Contingency Estimating – General Principles. AACE International

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