RFP To Project: Unlocking The Secrets Of The Engineering Proposal Process From An Engineering Firm Perspective

Communities across Missouri continuously seek services of engineering and design professionals to assist in designing public works and building projects. Their formal search process is often referred to by its abbreviated acronym: RFQ, or Request for Qualifications.

RSMo 8.285 provides direction by stating: “It shall be the policy of the State of Missouri and political subdivisions of the State of Missouri to negotiate contracts for architectural, engineering services, and land surveying services on the basis of demonstrated competence and qualifications for the type of services required and at a fair and reasonable price.”

RFQ Process

Step 1: City outlines its needs.

Once a city decides it needs to solicit services of a professional engineering firm, a professional RFQ is drafted to outline the scope of the project. At a minimum, RFQs as mandated by Section 8.289, RSMo, request the following qualifications from submitting firms:

1. Specialized experience and technical competence respective to the type of service.

2. Capacity and capability to perform the work in question.

3. Past performance with respect to costs, quality of work and ability to meet schedules.

4. Proximity and familiarity with the project location.

Step 2: The RFQ is distributed.

Depending upon the local municipal code, the RFQ can be advertised or sent directly to firms to solicit responses. The general logic is the broader the distribution, the greater the response.

Step 3: The engineering evaluation process.

Once an engineering firm receives an RFQ, it begins a “Go/No Go” process. This internal process can be formalized and often includes the completion of a quantitative question checklist or a lessformal process involving key decision makers.

For example, Olsson’s evaluation criteria features 30 questions, including:

• Do we have an existing relationship with the client?

• Do we have any professional conflicts if we decide to pursue?

• Who is the project manager?

The one question almost all engineering firms ask is, “Did we know this RFQ was coming out?” For many large projects, the local community may engage the services of an engineering firm to help with the RFQ or to generate preliminary cost estimates. In these cases, preexisting relationships are important, and engineering firms consider relationships to be among their most valuable assets.

The Cost To Submit

One of the other key factors in a go/ no go decision is the cost, both in time and dollars, to be selected. Once an engineering firm decides to respond to an RFQ, the firm begins to absorb cost. Often, the professional marketing team works closely with the project manager to develop the submittal’s theme, identify deadlines and establish protocols for internal quality review. A project manager is tasked with writing the submittal’s technical approach and approving the final package.

Most RFQs require an interview with shortlisted firms. This is typically limited to the top three firms, but, in some cases, communities interview all submitting firms. From Olsson’s perspective, most engineering companies prefer that the community narrow the field of submittals. We count on our community partners to provide the first filter and identify the top three firms that best match the community’s qualifications and style.

So, what does it cost to submit? At Olsson, once we decide to submit an RFQ, we factor in time to create the submittal and then prepare for, travel

Most see a downtown. We see a growing community.

to, and participate in an interview. Conservatively, a typical proposal through interview can cost a firm between $10,000 to more than $50,000, depending on the project’s magnitude and complexity. That is why we prefer that communities narrow the field of firms before the interview process begins. Pursuant to Section 8.291RSMo the city shall list three highly qualified firms after the interviews and rank them in order. The city will then select the firm considered best qualified and capable of performing the work and begin negotiating a contract for the project with that firm. If the city is unable to negotiate a satisfactory contract with the selected firm, negotiations with that firm will be terminated. The city will then undertake negotiations with the second-ranked firm. If the city and the second-ranked firm are unable to come to an agreement, then negotiations with that firm shall be terminated and so on. If the city is unable to negotiate a contract with any of the selected firms, then the city shall reevaluate the necessary architectural, engineering or land surveying services, including the scope and reasonable fee requirements and the RFP process starts over.

RFQ vs RFP And “The Dreaded Second Envelope”

As a local elected official, you are rightfully concerned about the cost associated with engineering your project. However, one tactic that can lead engineering firms to pass on submitting is a request for fees to be included in the proposal.

Here is how that usually works: the city solicits a legal RFQ – which meets all state requirements – but then adds a requirement that a second envelope be included containing the firm’s fees for the project. The second envelope includes a reassurance that fees will not be a determining factor and that the envelope will not be opened unless the firm is selected. This tactic is used to help the city save time. However, it usually does not provide the city a true understanding of its cost.

When the city requests fees as part of the original RFQ selection process, it will receive the absolute lowest price. But that price will reflect only what is requested in the RFQ and not reflect what may be required for the actual project. After selection, the engineering company will work with the city to define and refine the scope until everyone is satisfied. Then plans are created and bids are solicited and evaluated.

If time is an issue, visit with the selected engineering firm to determine a schedule that will meet the community’s needs.

How Engineering Firms Generate Revenue

You are almost there: you have identified a project; crafted and submitted an RFQ; received responses; narrowed the field; interviewed shortlisted firms; and made a selection. Now it is time to negotiate fees. While every firm has its own method of calculating cost, here is how the equations typically work:

The engineering company will outline a detailed scope that identifies all services needed for a successful project. Projects may differ, but most will require project management meetings, geotechnical reports, survey, engineering design, construction observation and material testing. Additional services may include public involvement, public engagement (yes, there is a difference), environmental studies and more.

To determine the cost of engineering services, the project manager typically classifies each task and uses historical data to estimate the number of hours required to complete the task. Those hours are then multiplied by a basic multiplier.

While cost estimates vary by company, the general format is similar to the following:

• Salary/2,080 annual working hours = an individual’s hourly rate

• Hourly rate x 3.0 = billing multiplier

• Total number of hours to complete the project x individual billing multipliers = project cost

For example purposes only, use a multiplier of 3.0 (multiplier = labor, overhead, and profit).

Take an engineer that makes $70,000 per year:

A $70,000 annual salary divided by 2,080 annual working hours = $33.65 per hour payable to the employee

Take that salary and multiply it by three: $33.65 x 3 = $100.95 billing rate.

If we estimate your project will take 200 hours, the engineering cost would be 200 hours x $100.95 = $20,190.

Again, it is important to understand that multipliers can vary by firm and are based upon a multitude of factors: services required, length of project, labor cost (which is escalating) and more. However, the concept remains the same.

Commitment

The intent of this article is to provide a quick, behind-the-scenes view into the process engineering firms use when pursuing public projects. Regardless of the firm you select, you will find hard-working professionals dedicated to providing the highest professional standards and committed to making your project a success.

Olsson is an engineering firm made up of people who craft expert solutions and designs that improve communities. The firm offers design and consulting services in planning and design, engineering, field services, environmental and technology. For more information, visit www.olsson.com.

Olsson

Olsson appreciates the article review by Lauber Municipal Law. Learn more about Lauber Municipal Law at www. laubermunicipallaw.com.