5 Ways of Calculating Construction Estimating Fees

5 Methods of Charging Construction Estimating Fees

The overall stages of a construction project are well laid out in the SACQSP and
ASAQS guideline for Tariffs of Professional Fees. The breakdown allows the
consulting quantity surveyor / estimator to set fees for the pre-contract and
contract phase. The pre-contract stage is whereby the original estimate is
produced. This estimate will change as drawings are developed, so the concept
estimate will differ from Bills of Quantities based on fully developed working
drawings, which will be used for tendering purposes and contract
administration. The question is how does an Estimator calculate fees for taking
off quantities and pricing an estimate?

Professional estimators calculate fees in different ways, which can be based on

negotiation with the client. A professional estimator will not under-price their
work, which is the case with most self taught and uncertified estimators.
Uncertified estimators also tend to miss many items of cost which should be
included in the estimate. The following are methods in which quantity surveyors
and professional estimators determine their consulting fees in the planning and
cost advice stage:

1 – Tariff of Professional Quantity Surveying Fees

This is a guideline for charging consulting fees based on rules and structure set
by a professional quantity surveying body. This guideline is usually used in high
value projects run by government departments, top level organizations and
corporations. If an estimator or client has doubts about how their project should
be charged for quantity surveying fees, the Tariff of Professional Fees is the best
guideline to follow. It is published by the QS body and also found in annual
government gazettes.

The ASAQS and SACQSP method entails a Basic Fee, a primary charge and
marginal rate for projects within a particular value range, tabled in the schedule
of tariffs. The primary charge is a lump sum (fixed sum) and the marginal rate is a
percentage. The sums are combined to arrive at the Total Fees for a project at a
specific phase. To calculate the Fees Due at a specific or current stage, a
percentage rate quoted from an Apportionment table is applied. This is
multiplied by the Basic Fee. If the design development at a specific stage is not
complete, i.e. halfway through, the Estimator should apply a percentage for
work in progress (e.g. 50%).

2 – Charge Per Hour

If a building project does not necessitate the use of a Tariff of Professional Fees,
the Charge Per Hour may be used. This is a common method of charging
consulting fees. Most professionals like Quantity Surveyors, Architects, Engineers,
Tutors, Programmers, Lawyers and Attorneys use this method. Anyway, for
accounting purposes and production costs, every worker has their basic wages
and salaries set in pay per hour. Thus, a low level worker like a painter will have
their labor rates at something like US$15.65 per hour. An Office Administrative
Assistant will earn somewhere between $11.47 and $21.39 per hour.

The following are hourly rates for professionals in the construction industry:

Construction Estimator (USA)

Range $17.25 to $49.64 per hour. Average -$29.71 per hr

Annual Wage: $35,870 to $103,250 per year. Average – $61,790 per year.

Professional Quantity Surveyor (South Africa)

The SACQSP Tariff of Professional Fees contains hourly time charges for registered
professionals and other employees in the quantity surveying office:

 Up to 5 years experience – R850 per hour

 6 to 10 years experience – R1,700 per hour
 11 years or more in experience – R2,400 per hour
 10 years or more in specialist work – R3,000 per hour
The rates don’t include disbursements described in clause 10.14 of the SACQSP
guide (i.e. travelling, accommodation, documentation, printing, photocopying
and other administrative tasks)

Hourly Rates for other Employees – 17c per R100 of gross annual salary.

3 – Charge Per Square Metre of Gross Floor Area

In the pre-construction period (Estimating and Cost Advice stage), a Quantity

Surveying Technician can also charge their fees based on the gross floor area of
the buildings in the blueprints.

The Estimated Contract Value is used as a basis for calculating fees. In this case,
the Professional Estimator will assess an appropriate percentage charge for
consulting services rendered in the pre-contract stage. There are many ways of
assessing this percentage. The consultant can find out what other consultants
are charging or refer to a Professional Fees Tariff such as the SACQSP or the US
Federal Bureau of Labor Statistics.

Below is a rough example of converting Contract Value Percentage

Fees into Rates Per Gross Floor of Building Area.

Cost of newly completed building or past project – R$2,177,500.00

Gross floor area of newly completed building or past project – 347m2

Find pre-contract professional fees – 5% of construction cost = R$108,875

(R$2,000,000.00 to R$4,000,000.00 Range)

Contract Value/Building Gross Floor Area =

2,177,500.00/347m2 = R$6275.22 per m2

Pre-contract professional fees – 5% of R$6275.22 = R$313.76 per m2 of gross floor

area
Stage A – 7.5% of R$313.76 = R$23.53 per m2 (US$1.81 per m2)

Stage B – 42.50% of R$313.76 = R$133.35 per m2 (US$10.26 per m2)

4 – Percentage Charge Based on Value of Project

As you already know by now, the first and third method make use of
percentage rates to charge consulting fees. The Professional Fees are based on
the Estimated Contract Value of the project.

5 – Lump Sum Charge

A Lump Sum is a fixed cost for total work done. It can be charged per project,
per phase or stage. The Estimator can arrive at their own cost based on past or
similar projects. The scope and size of the project is taken into account, so it’s
not an arbitrary fee.
How to Calculate Consulting Fees for Professional Quantity
Surveyors and Construction Estimators

How to Calculate Consulting Fees for Professional Quantity Surveyors and

Construction Estimators

A quantity surveyor/professional estimator is responsible for managing the costs

of a building project, from project inception to completion. Throughout the
project, the client will be responsible for paying the consulting fees for services
rendered by a quantity surveyor. The amount of professional fees charged by a
quantity surveyor depends on the method used / contract between the
consultant and the client. There are many factors which influence the fee
structure within a contract. This includes the type and value of project, type of
client, the type of estimate and valuation method used in the pre-contract and
post-contract stages respectively.

For quantity surveyors and professional construction estimators who are

registered with a regulating body such as the institute of quantity surveyors, the
professional body will devise its own fee structure or guideline for charging fees.
If a cost estimating consultant is appointed to manage projects / tenders run by
a high level client such as the government, state-owned enterprise or Major
Corporation, the fee structure used by a QS professional body is usually
adopted. This fee structure is often displayed in annual government gazettes
published by the Department of Works and Infrastructure, known by different
names depending on your country.

Method 1 – Tariff of Professional Fees Charged by a Quantity Surveyor (Set by a

Professional Body of Quantity Surveyors)

In this case, a construction project (Building Works) is divided into 4 or 6 stages.

We shall use a 4 stage example. This starts with the planning and estimating
stage, followed by the documentation stage, contract administration and
ending with the final account stage, also known as project close-out.
The ASAQS 1996 Guide for Quantity Surveying Appointments defines the stages
as follows:

Service A – Estimating & Cost Advice Stage

Service B – Documentation Stage

Service C – Contract Administration Stage

Service D – Final Account Stage

In the SACQSP (South African Council for the Quantity Surveying Profession)
2015 Guideline Tariff of Professional Fees, a construction project is divided into 6
stages:

Stage 1 – Inception

Stage 2 – Concept and viability

Stage 3 – Design development

Stage 4 – Documentation and procurement

Stage 5 – Construction

Stage 6 – Final Account

In the ASAQS 1996 Guide, Service A is a combination of Stage 1, 2 and 3 of

the SACQSP 2015 Guide.
Apportionment of Total Fees throughout a Project

A client will pay an apportionment of fees due to the Quantity Surveyor in all
stages of the contract until the project close-out. The apportionment of the total
fees for quantity surveying services rendered throughout the project is shown
below:
BOQ Contract:

For a contract based on Bills of Quantities (BOQ), the total fees are apportioned
in the following manner:

 Service A (Estimating & Cost Advice Stage) – 7.5%

 Service B (Documentation Stage) – 42.5%
 Service C (Contract Administration Stage) – 30%
 Service D (Final Account Stage) – 20%

Provisional BOQ Contract:

For a contract based on Provisional Bills of Quantities (PBOQ), the total fees are
apportioned in the following manner:

 Service A (Estimating & Cost Advice Stage) – 7.5%

 Service B (Documentation Stage) – 22.5%
 Service C (Contract Administration Stage) – 40%
 Service D (Final Account Stage) – 30%

Schedule of Rates Contract:

For a contract based on a Schedule of Rates (SOR), the total fees are
apportioned in the following manner:

 Service A (Estimating & Cost Advice Stage) – 7.5%

 Service B (Documentation Stage) – 12.5%
 Service C (Contract Administration Stage) – 40%
 Service D (Final Account Stage) – 40%
Calculating the Basic Fee

When calculating the basic fees for each stage or service, the Quantity Surveyor
has to include a Primary charge and a Marginal rate as prescribed by the
schedule of Tariffs. The schedule of Tariffs breaks down projects into contract
value ranges or categories. There is a specified Primary charge and marginal
rate for each category, so depending on the value or contract sum of the
client’s project, the Quantity Surveyor will charge a different fee.

Namibia Government Gazette 6 October 1998 – ASAQS Guideline Tariff of Professional Fees No.
1968
 SACQSP Basic Fee Schedule 2015 Guide for Quantity Surveyors

What is the use of a Marginal Rate?

The Primary charge is basically a project category fee that a quantity surveyor
will quote from the schedule of Tariffs.

Unlike the Primary charge, the Marginal Rate has to be calculated and added
to the Primary charge to come up with a Basic Fee. Since contract sums will not
fall exactly on the minimum and maximum values of a category range, the
Quantity Surveyor has to calculate a deviation from the minimum value to meet
the contract sum.

Example:

The category range for a Contract Sum of R2,404,385.50 is [2,000,000 to

4,000,000]
Deviation from minimum value = [2,404,385.50 – 2,000,000]

But before you calculate the deviation, you have to adjust the Contract Sum.
The consultant has to identify BOQ items where the services of a quantity
surveyor are not required. These are usually Electrical and Mechanical
Engineering installations. If a Quantity Surveying Consultant is not providing a
service in respect of these, the sum of Electrical and Mechanical Engineering
installations has to be excluded from the Contract Sum.

Other items that have to be excluded are VAT and Contingencies.

Exclusions for Fee Calculation:

 VAT ( BOQ)
 Electrical Installation ( BOQ)
 Mechanical Engineering Installations (HVAC) etc. ( BOQ)
 Contingencies ( BOQ)

Apportionment Stages A & B

Rands Rands

Contract Amount 2,404,385.50

Omit VAT 313,615.50
Omit Electrical Installation 156,150
Omit Contingencies 95,000 564,765.50
Contract Amount (Less VAT) 1,839,620.00

Contract Sum (Excluding Building VAT) – N$1,839,620.00

The VAT that is excluded from the Contract Sum is the Building VAT charged by
the government. After deducting this VAT along with other items like Electrical
Installation and Contingencies, you have to add the VAT for the Quantity
Surveyor’s Sales:

Apportionment Stages A & B

Rands Rands

Contract Amount (Less Building VAT) 1,839,620.00

Add VAT for Quantity Surveyor’s Sales 275,943.00 275,943.00

Contract Value for Fee Calculation 2,115,563.00

Value for Fee Calculation – R2,115,563.00

Deviation from minimum value = [2,115,563.00– 2,000,000] = R115,563

Marginal Rate for [2,000,000 to 4,000,000] category = 4.50%

4.50% of R115,563 = R5,200.34

Primary Charge = R100,755.00

Basic Fee = Primary Charge + Marginal Rate = R105,955.34

Apportionment of fee to stages:

Category Service A Service B Total

1 2 3

Bills of Quantities 7.50% 42.50%

7,946.65 45,031.02 52,977.67

Total services A to B 52,977.67

15% VAT 7,946.65

Fees Now Due 60,924.32

Apportionment of fee to stages and progress of work:

Non-repetitive Apportionment Progress Basic Fee

Work
Sevice A 7.5% x 100% x 105,955.34 7,946.65

Sevice B 42.5% x 65% x 105,955.34 29,270.16

Sevice C 30.0% x 0% x 0.00 0.00

Sevice D 20.0% x 0% x 0.00 0.00

Total Fee due 37,216.81

Less: previously claimed 0.00

37,216.81

15% VAT 5,582.52

Total Fees Now due 42,799.33