Mar 24

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 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 Work Apportionment Progress Basic Fee
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