Help! Regarding the calculation of the EM (Design Management) rate or cost in EMPC? ?
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Dear experts and friends: I am currently drafting an EMPC contract. Our company is the contractor, and since this is our first time preparing such a document, we are unsure about whether it is appropriate to charge the client fees for design management. We cannot find any relevant departments or industry standards that specify such fees; however, if these fees are determined solely through an agreement between the client and us, the client is concerned that ** party may not accept it! Please help me figure this out~ Thank you all~
Using man-hours, the total service cost is calculated by estimating the labor input and service hours required for design management services and procurement support provided by various specialized teams as per the design, along with the rates applicable to personnel at different levels.
Thank you, I think I understand what you mean. For the technical services specified in the contract, the cost is calculated based on professional man-hours * rate. But there is another issue: the amount of costs also falls under the management expenses of the company or project, and these costs are determined through agreement between the two parties. So how is the rate calculated?
Hello, I have another question that I hope you can help me answer. Since I have already included the costs for design management by using the EMPC approach, can I also claim the costs for EPC management and coordination? If the PC portion can be calculated, then how should it be calculated? Is it reasonable for me to set it at 2% of the total contract amount for now? ?
No. 1. In the Em+PC mode, since a design management fee has already been charged, it covers the coordination services provided by the design institute and the PC contractor; there is no additional cost involved, so why would a fee still be charged? 2. The management and coordination related to the PC work are part of the PC contractor’s internal management; why should the owner then pay you a fee for coordination? Unless the owner is an idiot. 3. If your Em service also covers interface coordination for other EPC or PC contractors, you can charge an appropriate fee. 4. If the owner agrees to 2% of the total contract amount, be happy about it.
To determine the amount of this cost, your company’s finance and business departments first need to calculate the total cost of various levels of employees, including expenses related to software and intellectual property rights as well as headquarters management costs. Based on the estimated hours of work required, the overall management cost can then be calculated. Based on the total administrative costs, the bid price is calculated through commercial analysis; of course, the client will require the bidder to provide the basis for such calculation. The price is determined through negotiation. Or, a rate can be deduced based on the investment, with the service fees determined according to the investment in the scope of services.
Okay, thank you. I understand now; it’s like clearing the clouds to see the moon again~ Thank you once more
In our design firm, we usually report the hours worked based on the workload (which is clearly defined in the WBS), and then multiply that by the hourly rate (which seems to be calculated by the finance department or cost center, taking into account various direct costs and allocated expenses of the company). The final amount is then the quote; all other costs are already included in this figure, so no separate charges are added to the quote. This way, during negotiations, the client doesn’t have any obvious areas where they can try to cut costs, haha
For hourly rate quotes, the client also needs to provide a breakdown of the cost components; unreasonable cost structures will be rejected by the client. It’s mainly reasonable and appropriate.