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  • Question

    1. What is an acceptable design fee percentage? What is the threshold for unacceptable? 2. Does the acceptable range depend on the specialty of work being designed (such as fire protection)?


    Answer

    Extract: 
    Modification to an existing contract
    Contract Type:  Unspecified
    Authorization for Modification:  Unspecified.  52-243-X ??
    A-E Services Contract or Design-Build Contract:  Unspecified
     
    Guiding Feedback: 

    DFARS 236 supplements FAR Subpart 36.6 - which is applicable to the acquisition of architect-engineer services.  Note:  DFARS 236.606-70 is not a clause. It is a rule. It applies to architect-engineer contracts 
     
    DFARS 236.606-70 Statutory fee limitation.
    (a) 10 U.S.C. 4540, 7212, and 9540 limit the contract price (or fee) for A-E services for the preparation of designs, plans, drawings, and specifications to six percent of the project's estimated construction cost.
    (b) The six percent limit also applies to contract modifications, including modifications involving—
    (1) Work not initially included in the contract. Apply the six percent limit to the revised total estimated construction cost.
    (2) Redesign. Apply the six percent limit as follows—
    (i) Add the estimated construction cost of the redesign features to the original estimated construction cost;
    (ii) Add the contract cost for the original design to the contract cost for redesign; and
    (iii) Divide the total contract design cost by the total estimated construction cost. The resulting percentage may not exceed the six percent statutory limitation.
    (c) The six percent limit applies only to that portion of the contract (or modification) price attributable to the preparation of designs, plans, drawings, and specifications. If a contract or modification also includes other services, the part of the price attributable to the other services is not subject to the six percent limit.
     
    The statutory limitation on the fixed fee that is payable on CPFF contracts. It has no application to profit under a fixed price contract nor is it a limitation on the total amount of an A&E contract.
     
    10 U.S.C. 4540, 7212, and 9540 limit the contract price (or fee) for architect-engineer services for the preparation of designs, plans, drawings, and specifications to six percent of the project's estimated construction cost.
     
    For architect-engineer services for public works or utilities, the contract price or the estimated cost and fee for production and delivery of designs, plans, drawings, and specifications shall not exceed 6 percent of the estimated cost of construction of the public work or utility, excluding fees.
     
    "Fee" in the context of an A-E contract is not the same as the fee under cost-reimbursement contracts. It is professional fee and includes both cost and profit. The limitation applies to all types of A-E contracts, not just cost-reimbursement.
     
    General Survey of Commercial Market: 
     
    When hiring a contractor to design and build a facility, you will need to pay engineering fees, among other costs. Engineering fees are mechanical and structural engineering costs not already included in an architectural design fee. These fees may be structured in a few different ways, including as a percentage of the overall construction estimate or costs.
     

    Fee Structures
    Engineering fees may be included in a construction contract or estimate in a number of different ways. These include a lump sum, or fixed overall price as part of the job; a unit price, with a certain cost per structural unit built; cost-plus, which includes the cost of supplies plus an amount for the contractor as either a set amount or percentage; an incentive basis, in which payment is based on the contractor achieving certain milestones; or percentage of construction costs, when payment equals a set percentage of the overall job cost.

    Fee Examples
    The engineering fee percentage amount may vary depending on the complexity of the job and the percentage fee of the architect planning the project. For instance, Red Pepper Consulting suggests the fee amount to one-eighth, or 12.5 percent, of the architect's fee, or roughly 0.5 to 1 percent of the overall contract. A 2005 court decision upheld a 6 percent cap on a government contract for a combination of architectural and engineering services. Private contracts, on the other hand, could allow for 9 percent or more for fees.
     

    Fee Breakdown
    Engineering fees themselves can be broken down into a few categories, each making up a percentage of the overall fee. Preliminary design services should be approximately 30 percent of the fees, while final design services and paperwork should equal another 45 percent. Construction and contract administration should be 20 percent, and tender call services should make up the final 5 percent.


    My gut feeling is that since this is in Subpart 236.6, it only applies to architect-engineer contracts and not to construction contracts


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