...published in ENR, Carr says. For example, ASCE’s fee curves called for fees to rise significantly between 1964 and 1968 to keep pace with construction’s rising value.

Carr writes that a project with a construction value of $500,000 in 1964 had an average fee of 6.8%. By 1968, the same project was scheduled for a 7.02% fee. "This adjustment in this four-year period was to reflect the recognition that with the increase in construction costs, a project of $500,000 had been equal to a $434,000 project in 1964," he says.

In the years following the Justice Dept. consent decree, ASCE steered away from percentage-of-construction fees. In the late 1980s, the association’s official policy was that based on research, fee curves were "no longer valuable as a guide for determining engineering costs." By 2003, ASCE moderated its stand and admitted the usefulness, in some situations, of percentage of construction. But the method still is widely used in the industry, according to industry surveys cited by Carr.

But professional societies have phased out or neglected fee curves, aided by the misperception that inflation alone would equitably increase engineering and architecture fees, and fearful of violating consent decrees that ended the Justice Dept. antitrust investigations, Carr says. Public agencies that pay architects and engineers have little incentive to make adjustments.

After the government action and the withdrawal of professional societies’ recommended fee schedules, many governmental agencies created their own fee schedules for design services, Carr writes. Among them were the Florida Dept. of General Services and quasi-public agencies such as the New York State Dormitory Authority. Most fee schedules reflect schedules published at the time of the Justice action against the professional societies, he says.

Prior to 1972, ASCE warned that it was essential to adjust fee curves to reflect the appropriate hours worked and fees to accomplish engineering services for certain values of construction, Carr notes. Click here to view chart

"The implication is that as the value of construction increases, the vertical scale of the fee curve must be appropriately adjusted to keep the relative value of construction in concert with the percentage fee," Carr contends. "If the cost to provide design services–i.e., engineers’ wages–tracked with construction inflation, as construction costs increased, the fee would have to track the inflationary increase. This is essential if wages are to keep pace with inflation and for a firm to deliver the same number of service hours."

In 2003, it cost over four times as much to build as it did in 1972, Carr points out. He recommends looking at the fee curve at a point that is 4.25 times higher than the 1972 cost point. If the value of engineering services had kept pace with the rate of inflation, he reasons, the professional service fee rate, as a percentage of construction, should be the same in 2003 as it was in 1971 for a building that is one-fourth the cost.

"A $500,000 project in 1971 would cost over $2.1 million today," Carr explains. The fee in 1971 would have been 7.9% ($39,500), while the fee in 2003, using the same fee schedule for the same project, now costing $2.1 million, would be 6.4% ($135,500), he adds.

Close Agreement

Carr and his co-author reviewed fee schedules for public agencies, including the State University Construction Fund of New York, the Florida Dept. of General Services and education departments in Kentucky and New Mexico.

The published agency fee schedules, particularly in the common project budget range of $1 million to $10 million, show "a good deal of agreement," Carr writes. "The average fee curve of the governmental agencies show "close agreement" with the 1972 ASCE fee curves even though agency fee schedules were developed or adopted as far back as 1974, with no indication they were ever updated. Carr says the average curve most resembles "the now fixed-in-time 1972 ASCE curve."

But Carr maintains that the only exception is Washington state, where designers are still counting lessons learned. One important issue addressed was "to define a specific level of service," says Rob Wydmeyer, managing partner for LMN Architects Inc., Seattle, and a member of the fees committee. "If you need a specific service and it’s not outlined, you do need an additional scope."

The new fees still come up short on smaller jobs and on some with contractor disputes, say Washington state architects. "Contractors will bid low and claim there were problems with the drawings," says Jeff Hamlett, risk manager for Callison Architecture Inc., Seattle. "The new fee schedule doesn’t address that adequately enough. The curve doesn’t really account for change orders."

Hamlett adds that "on smaller projects, you still have to do a basic amount of work, including weekly meetings, site visits and review submittals." He notes that "it’s all the same whether it’s a large or small project, but on the larger projects, there are enough fees. The new fee schedules will still be inadequate where the cost of construction is lower."

Even so, Carr believes that Washington state’s new approach of systematically updating the schedule by linking it to indexes is instructive. He suggests developing a new fee determination formula that could be reviewed and adjusted with inflationary trends within the market and proposes his own: Basic Services Design Fee=1.25/(Log C)^1.5.

In this equation, the value of C is the current construction cost in dollars and the basic fee is a percentage value. (For the full text of Carr’s ASCE Journal of Engineering Management article,please log on to www.pubs.asce.org/journals/me.html)

Different categories of fee schedules need to be established for jobs of different complexity. That would produce a family of fee curves that are more likely to reflect reality than many being used today, says Carr.