The fees issue is the bane of QSs’ lives. Even when a firm is profitable, the low fees still rankle. Quantity Surveyors Fees 99 looked at the 1600 jobs totalling more than £1.5bn that 250 QS practices won in the nine months to June 1999. Almost half of the firms responding were small practices, with one or two QSs; at the other end of the scale, 5% had more than 31 chartered staff. The majority of respondents came from the North (27%), the next highest proportion from the South-east (22%). Ulster produced the lowest number of responses, with only 2% of the sample.
The researchers found that average fees ranged from 2% for new-build, design-and-build contracts, to a maximum of only 3.3% for JCT contract refurbishment work. Looking at QSs’ hourly charge-out rates, the researchers found more disquieting results: a partner or director averages a measly £50 an hour. Postgraduates and junior surveyors go for a song, at an average of £20 an hour.
Tony Bevan, managing director of Citex Bucknall Austin, sums up the issue: “Fee levels are always too low,” he says. Gerry Fagan, managing partner of McBains Cooper, whose 250-strong firm employs about 70 qualified QSs, agrees: “We constantly complain about the level of fees in quantity surveying. It’s extremely tight.” RICS QS division president Neil Pountney goes further: “They are not going up at all,” he says.
There is no doubt that fees are a problem, and that many QSs see this as the cause of the profession’s low status with clients. They explain that fees are low because some practices are always willing to do jobs for less than cost, then find they cannot do the job properly at the price and give poor service, which means clients feel justified in not paying more for using them. The trouble with this is that other QSs get tarred with the same brush.
“The profession is not selling itself very well,” says Fagan. “It’s seen as a very pedestrian service in many respects, confined by its tunnel vision. It needs to brand itself as a higher value service – in fact, with the core skills QSs have, they are ideally placed to help clients manipulate finances. Those sorts of people are usually highly rewarded.”
Fagan says the £50 hourly charge-out rate the survey quotes for partners is a little low compared with what his staff earn. However, like everyone else in the profession, he bemoans the fact that QSs’ hourly rates are lower than those for lawyers, accountants and management consultants.
“We still remain the poor relations of the money-checkers and contract writers,” complains Gardiner & Theobald senior partner Michael Coates. Although a senior QS from his firm would charge £100 an hour rather than £50, a G&T management consultant can command at least £120 an hour. It is a situation he does not believe will change in the near future, despite saying the practice’s order books are full and that the “pressure is off fees a bit”.
EC Harris chairman Richard Clare insists that it is wrong to compare QSs’ charge-out rates with those of management consultants. He says the profession’s lack of top-notch academic graduates is reason enough for the difference: “Fair enough, we’re cheaper,” he says. However, he does not believe this is a problem. He sees it as an opportunity for QSs to undercut the management consultants in an area where they have more expertise.
Clare also thinks management consultants will not get away for long with charging higher fees for the same work QSs do:
“I think the mistake management consultants are making is hiring QS staff from firms like us and adding £100 an hour to their charge-out rates. It won’t wash,” he says.
Francis Ives, managing director of Cyril Sweett, is another optimist who has pinpointed management consultancy as a way of increasing his firm’s fees. To this end, Cyril Sweett is following in the footsteps of other big QS practices and launching Cyril Sweett Consulting. It is recruiting new staff and hopes that offering services such as legal advice, value engineering, contract drafting and capital tax allowances will enable it to negotiate higher fees. “We’re fighting back against management consultants,” says Ives. “At the end of the day, we do know our industry better. Management consultants borrow your watch to tell you the time.”
The profession’s other major bugbear is fee bidding. It is almost universally loathed, it seems – and no wonder. Peter Rumbelow, managing director of 35-strong QS Hills, says aiming for a 2.5% fee in a bid situation is unrealistic, although that would be his target. Nearer 2% is the norm. He describes fee levels as “static”.
One thing that all QSs agree on is that negotiated, lump-sum fee agreements are the way to avoid such low fees. The most optimistic QSs believe fee-bidding is now on its way out anyway: “The great majority of our work is now negotiated,” says Ives. “The trend is inevitable. A lot of clients suffered from either poor service or claims from consultants where a fee bid was too low. There’s a reaction away from the straight fee bid.”
