extent of services to be provided etc.

The Terms of Reference for

the consultancy assignment is of high importance in the
preparation of a fee proposal by a Consulting Engineer. More
comprehensive and precise the Terms of Reference are, more
consistent will be the fee proposal. Therefore the Terms of
Reference for any consultancy assignment should be carefully
drawn up avoiding ambiguities.

IESL GUIDELINE STRUCTURE FOR ENGINEERING

CONSULTANCY FEES
1.

INTRODUCTION

With respect to the practice of engineering, the Institution of

Engineers Sri Lanka (IESL) Act is intended to ensure the
provision of competent engineering services in compliance with
the Code of Ethics of the IESL.

The Consulting Engineer, for the purposes of this Guideline, is

understood to mean a Corporate Member of the Institution of
Engineers Sri Lanka (IESL) with appropriate experience in the
relevant field of engineering.

This Guideline Structure for Engineering Consultancy Fees is

prepared for the benefit of clients who propose to procure
Consulting Engineering services, and for Consulting Engineers
proposing to provide an engineering service to a client. It is
intended to serve as an aid for use in selecting a Consulting
Engineer, for defining the Consulting Engineering services being
contracted for and in selecting the basis of fair remuneration for
those services.

A Consulting Engineering firm must also hold a Certificate of

Authorization issued under the applicable Act.

2.

SCOPE OF SERVICES

The services provided by a Consulting Engineer may be classified

under one or more of the following categories:

Consulting Engineers fees are determined by the Scope of

Services to be provided. The Scope of services may be
determined by the Client in consultation with the Consulting
Engineer and in so doing, it is advised to discuss the project and
Fee Guidelines so that both parties thoroughly understand the
project.

(i) Pre-feasibility Studies

(ii) Feasibility Studies including Conceptual Designs
(iii) Detailed Engineering Designs and preparation of Tender
Documents
(iv) Procurement
(v) Contract Administration
(vi) Project Management
(vii) Technical Services
(viii) Dispute Resolution Services
(ix) Technical Advisory Services
(x) Project Management

Adopting a fee scale or scales set out in this guideline would

enable a Consulting Engineer to provide his Client a competent,
reliable and high standard of service.
These Scales and rates are not mandatory but guidelines only may
be by negotiation be adjusted upwards or downwards to take
account of the complexity of design, increase or reduction of the
1

2.1

(a) Review of the Terms of Reference for the study, discuss

with the Client and submit comments, if any, including
suggestions for improvement
(b) Collection and study of all necessary data and information
relevant to the study
(c) Carrying out topographical surveys, site investigations
and other investigations appropriate in extent for the
study
(d) Study of feasible alternative proposals
(e) Preparation of preliminary designs and drawings for
selected proposals
(f) Carrying out Environment Impact Assessment (EIA)
studies
(g) Preparation of cost estimates for selected proposals
(h) Carrying out economic / financial valuations and
determine the viability of alternative proposals
(i) Comparison of alternative proposals and make
recommendations to the Client for selection of preferred
alternative
(j) Study of statutory and local authority requirements and
advise the Client to obtain approvals where necessary
(k) Coordinating the services provided by other consultants

PRE - FEASIBILITY STUDIES

A Pre-feasibility is resorted to in order to determine the viability

of a project prior to embarking on a detailed feasibility Study with
or without a number of feasible alternatives. As a part of prefeasibility studies, the Client may seek consulting engineers
services to develop his project concept in order to plan and
formulate a Project that would be subjected to subsequent
appraisals and valuations for funding considerations through
investment, grants or loans.
The activities may include, but not limited to the following;
(a) Study of the Client's Terms of Reference and conceptual
proposals for the project
(b) Collecting and reviewing all available data and
information relevant to the study
(c) Carrying out preliminary reconnaissance surveys and
investigations appropriate in extent and detail where
necessary to supplement available information
(d) Study of alternative proposals where alternatives are
feasible
(e) Carrying out Initial Environment Examination (IEE)/
preliminary Environment Impact Assessment (EIA)
(f) Preparation of preliminary cost estimate
(g) Carrying out preliminary economic / financial valuation
and determine the most viable alternative
(h) Reporting of the merits of proceeding to the next stage of
Detailed Feasibility Study.
2.2

2.3

Detailed Engineering Designs and Preparation of

Tender Documents

The activities can include, but not limited to the following;

(a) Arranging detailed surveys, detailed site investigations
and other investigations necessary for the preparation of
the detailed designs and drawings
(b) Preparation of design criteria, design reports, develop
detailed designs and tender drawings

Feasibility Studies including Conceptual Designs

The activities may include, but not limited to the following;

2

(c) Coordinating of the designs and documentation provided

by other consultants
(d) Preparation of complete tender documentation comprising
of Conditions of Contract, Bill of Quantities,
Specifications, Drawings and Tender Advertisement, as
appropriate
(e) Preparation of implementation programme for the Project
(f) Preparation of the Engineer's Estimate
2.4

(d) Ensuring testing and quality control for conformity with

Specifications and Standards.
(e) Reviewing the project cost and advise the Client of
significant variations.
(f) Checking measurements and certify interim and final
payments.
(g) Ensuring the preparation and submission of As-built
Drawings and Manuals.
(h) Issuing Taking Over Certificate according to the contract
on substantial completion of the works.
(i) Inspecting the works during the Defect Liability Period
and ensure that the contractor attends to all the defects.
(j) Inspecting at the end of the Defect Liability Period and
report to the Client.
(k) Issuing Defect Liability Certificate when due, as final
completion of contract.
(l) Advising the Client on final payment of all amounts due to
the contractor including release of the retention money and
bonds.
(m) Evaluation and preparation of comprehensive reports on
all claims made by the contractor to enable the Client to
follow up in the event of arbitration and assisting in
negotiating claim settlements.

Procurement

The activities may include, but not limited to the following;

(a) Advising the Client on appropriate methods and
procedures of procurement
(b) Assisting the Client in prequalification of contractors and
invitation of tenders
(c) Assisting the Client in reviewing and evaluation of
tenders received and advising on tenders in negotiating a
contract
(d) Preparation of Contract Documents for signing.
2.5

Contract Administration

In addition to the above, the following services of

consultancy may include under the Electrical and
Mechanical Engineering works:
(a) Approving Working and/or "Shop" drawings and the
installation programme.
(b) Supervising installations, testing and commissioning of
plant and equipment including acceptance of test
certificates and reports.
(c) Approving Operation and Maintenance Manuals.

The duties assigned to the Consulting Engineer in terms of the

contract can include but are not limited to the following;
(a) Approving the contractor's work programme.
(b) Reviewing the contractor's work proposals and request for
revision if necessary to ensure satisfactory execution and
safety of work and personnel.
(c) Carrying out detailed day to day supervision through a
resident Engineer.
3

2.6

will not give rise to a conflict of interest with any ongoing

assignments he has undertaken. He may be appointed to any one
of the above positions as set out in the contract which provides for
such adjudication or arbitration or dispute review, or by an
appointing authority stipulated in such contract. His services shall
be confined to the scope provided under the relevant contract and
he shall not tender advice or consultation to either party on
matters outside the scope of the dispute resolution.

Project Management

The scope of Project Management services provided by a

Consulting Engineer can vary depending on the different methods
of project implementation such as:
(a)
(b)
(c)
(d)

"Engineer" administered contracts

Design and Built contracts
Turnkey Contracts
Coordinating the work of all contractors

2.9
2.7

Technical Services

A Consultancy assignment may include Technical Advisory

Services of a Consulting Engineer in respect of:

The scope of Technical Services of a Consulting Engineer may

include;

(a)
(b)
(c)
(d)
(e)
(f)

(a) Investigating and reporting on the condition of an existing

structure/facility and assessment of the
strength/stability/suitability for a specific purpose.
(b) Investigating and reporting on damage to or collapse of a
structure/facility
(c) Investigating and reporting on quality of works
(d) Testing and reporting on a structure or part of a structure
(e) Investigating and reporting on defects and their
rectification.
(f) Providing expert evidence for litigation & arbitration
2.8

Technical Advisory Services

Pre-investment studies
Policy and Strategy
Restructuring, Reorganisation and Institution Building
Capacity Building, Training and Knowledge Transfer
Technical, Operational and Management Advice
Provision of Expert Evidence

BASIS OF COMPUTATION OF CONSULTING

ENGINEER'S FEE

The fee to a Consulting Engineer should cover all his costs on

completion of the scope of services envisaged and a reasonable
margin of profit. Such costs include
(i) Salary costs
(ii) Social charges and statutory charges
(iii)
Overhead
(iv) Reimbursable costs.

Dispute Resolution Services

A Consulting engineer may as an individual provide his services

as a Mediator, an Adjudicator, an Arbitrator, a Dispute Resolution
Expert or a member of an Adjudication Board, an Arbitration
Board or a Dispute Review Board, provided that such services
4

3.1

(x)
(xi)
(xii)
(xiii)
(xiv)
(xv)
(xvi)
(xvii)

Salary Costs

Salary costs include the basic salary and allowances such as cost
of living allowances of the technical staff of the Consulting
Engineer, deployed on the particular project.
3.2

Social Charges and Statutory Charges

Social Charges include costs incurred by the Consulting Engineer

in respect of;
(i) Employees' Provident Fund
(ii) Employees' Trust Fund
(iii) Holiday and sick pay
(iv) Bonus
(v) Gratuity benefits
(vi) Staff Welfare
(vii) Taxes & other statutory charges
(viii) Miscellaneous benefits.
(ix) Taxes & other
3.3

3.4

Business promotion
Entertainment
Foreign travel
Training
Depreciation of plant and equipment
Accounting and auditing
Insurance including professional Indemnity Cover
Miscellaneous

Reimbursable Costs

Reimbursable Costs include costs directly related to the particular

assignment such as;
(i) Travelling
(ii) Per-diem and out of pocket expenses
(iii) Communication, postage and courier service charges
(iv) Electronic data processing
(v) Printing of reports, Tender documents
(vi) Maps, photographs, aerial photographs
(vii) Site surveys
(viii) Site investigations, laboratory services, testing charges.
(ix) Hire charges of plant and equipment
(x) Protective wear

Overhead

Overhead are costs of administering the consultant's organization

and include;
(i) Administration
(ii) Salaries of non- technical supporting staff
(iii) Technical supervision
(iv) Rental of office
(v) Electricity and water.
(vi) Stationary, brochures and reproduction of documents
(vii) Maintenance of plant and equipment
(viii) Communications (fax, telephone ) and postage.
(ix) Bank charges

3.5

Basis of Computation of Fees

Professional fees for Consulting Engineering Services are

calculated according to one of the following basis or a
combination thereof.
Basis I : Lump-sum Fee
Basis II : Percentage Fee
Basis III : Time Based Fee
5

(see Chapter 4)
(see Chapter 5)
(see Chapter 6)

FEE BASIS I : LUMP - SUM FEE

4.1

Lump Sum Fee is suitable for scope of services of

Percentage fee for service under categories (iii) and (iv) may be
read from the shaded area in Fig. 1 and the total fee is calculated
by multiplying the applicable project cost by the percentage fee.#
Note 1

categories (i), (ii), (iii), (iv), (vi), (vii) and (viii) listed in
section 2.

5.2

This is often used for projects that can be easily compared with
similar projects and where the scope is known and defined. This
basis of fee may be used when the nature of the services to be
provided is clearly defined, distinctly identifiable and is unlikely
to change significantly. It has the merit of simplicity and is
satisfactory when the nature, scope and duration of the assignment
is known and fixed.
4.2

4.3
4.4

In projects consisting of more than one of the following

groups of services: (i) Civil Engineering
(ii) Electrical Engineering
(iii) Mechanical Engineering,

the total fee for the project shall be determined from Fig.1 but
calculated as if each of the group is a separate work; that is fee
shall be calculated for each of the group of works by applying
their Percentage fees to individual costs and then summing up the
individual fee components to arrive at the total fee for the project.

Lump - Sum Fee shall include the following;

(i) Salary Costs
(ii) Social Charges & statutory charges
(iii) Overhead,
(iv) Any Direct Costs
(v) Profit.

5.3

Percentage fee shall be negotiated with the Client for

projects costing less than Rs 10 million. #Note 2.

Any other costs shall be paid or reimbursed as agreed

with the Client.
The validity of period of the Lump Sum Fee shall be
specified.

FEE BASIS II : PERCENTAGE FEE

5.1

In general Percentage fee is suitable for scope of

services of categories (iii) and (iv) listed in section 2.

On projects involving normal services with a well-defined scope

of services, it is accepted practice to calculate the fees for
Consulting Engineers services on the basis of a percentage of the
cost of the work for which the Consulting Engineer is responsible.

Fig. 1. Consultancy Fee as Percentage of Project Cost

(Courtesy: Association of Consulting Engineers, Sri Lanka (ACESL))

# Note 1: Curves in dotted lines show the upper and lower ranges suggested by
ACESL in June 2005. Considering the rise in CCPI by about 200% as of now
(September2011) the shaded area is accordingly shifted starting with an Applicable
project cost of Rs.2.0 Million. (for Comments please)
# Note 2: Limiting value of Applicable Project Cost for Percentage Fee negotiation
suggested by ACESL is Rs. 5.0 Million. Here it is taken as Rs. 10.0 Million.(for
Comments please)

5.4

The 'Applicable Project Cost' in Fig 1 shall be deemed

to include all costs incurred /to be incurred by the
Client for execution of the project, except the
following:
(i)
(ii)

(iii)

Payment to the Consulting Engineer

Interest on capital during construction, cost of raising
capital for the project, and margin money for working
capital and
Cost of Land.

FEE BASIS III : TIME BASED FEE

6.1

This is suitable for scope of work in all categories

particularly for large projects, Also this basis is
applicable when:
(i)

(ii)

6.2

(iii)

The time likely to be devoted by the Consulting

Engineer bears little relation to the value of the project,
or

(iv)

In very small projects where it is more appropriate to

compensate the Consulting Engineer for services
rendered on the basis of hourly rates,
or

(v)

The work is of an unusual or specialised nature.

Under this fee basis the Client shall pay the Consulting
Engineer the sum of the following.

(i) Basic Salary of the technical staff of the Consulting

Engineer deployed on the particular project.
(ii) Social Charges as given in 3.2
(iii) Overhead as given in 3.3.
(iv) Reimbursable costs as given in 3.4
(v) Profit
The fixed percentage of Fee (profits) of the Consulting
Engineer varies from 10% to 20% of the sum of Basic
Salary + Social charges + Overhead.
6.3

The extent and duration of the service to be provided by

the Consulting Engineer are difficult to foresee at the
time of appointment,
or
The scope of services is not clearly defined or likely to
change substantially,
or

Man-month Rate

The Man-month rate comprises of:

(i)
(ii)
(iii)
(iv)
7

Basic Salary
Social charges expressed as a percentage of Basic
Salary
Overhead expressed as a percentage of Basic Salary
Fee expressed as a percentage of (i) + (ii) + (iii).

6.4
Multiplier
The ratio of Man-month rate (sum of (i), (ii), (iii), and (iv) in
section 6.3 above) to Basic monthly salary called the multiplier,
normally ranges from 2 - 3 for full time employees of the
Consulting Engineer and 1.1- 1.5 for other employees engaged for
the assignment. However, slightly higher Multiplier may be
permitted by clients when the Basic monthly salary is particularly
low.
6.5

Designation
Partner/Director
Chief Engineer
Dy. Chief Engineer
Senior Engineer
Junior Engineer
Senior Technical Officer
Junior Technical Officer
Senior Daftsman
Junior Daftsman

Indicative Man-month Rates

A range of indicative man-month rates for design office and

construction supervision is given in Table 1.
Table 1. Indicative Man-month Rates
(for Design Office/Construction Supervision)

Minimum Years of
Experience

6.6

20

340,000

400,000

Chief Engineer

15

280,000

340,000

Dy. Chief Engineer

10

220,000

280,000

Senior Engineer

160,000

220,000

Junior Engineer

120,000

160,000

Senior Technical Officer

15

90,000

120,000

Junior Technical Officer

60,000

90,000

Senior Draftsman

10

60,000

60,000

Junior Draftsman

40,000

60,000

629,000
518,000
407,000
296,000
222,000
166,500
111,000
111,000
74,000

~
~
~
~
~
~
~
~
~

740,000
629,000
518,000
407,000
296,000
222,000
166,500
111,000
111,000
Ratio:1.85

Man-hour Rates

When the time spent by technical personnel is of short duration,

generally fractions of a day at a stretch, the time is reckoned in
Man-hours. The hourly rate is calculated as follows:

Man-month rate (SLR)

Partner/Director

20
15
10
5
2
15
5
10
5

Man-month rate (SLR)

Modified based on CCPI: May 2005 -127.2, May 2011- 234.8

Adopted by ACESL in June 2005

Designation

Minimum Years
of Experience

Hourly rate= Monthly rate / 22 x 8 x 2

Here, 22 being the average number of working days for a month,
8 being the number of working hours per day and 2 a multiplier
on account of the short duration of service.
The Man-hour rate method is recommended for assignments such
as:
(i) Consultations
(ii) Advisory services
(iii) Part time services
(iv) Time spent on behalf of the client
(v) Inspection of materials and equipments
(vi) Site Inspections.

Proposed herein for IESL:

6.7

following formula may be used to determine the fee for such

portions of repetitive work.

Fee for a fraction of a month

For the period of services rendered less than a full month,

payments shall be made pro rata basis considering a month of 22
days. No deduction shall be made in calculating a month for
weekly off day and public holidays observed by the Client.
6.8

Fn = F1 * (n+5) / (6n)
Where,
F1 = fee for the first item of the same design,
Fn = Fee for the nth item of the same design
n = number of items of the same design.

Travelling Time

Time spent on travelling under Fee Basis III shall be half the time
counted from time the technical personnel of the Consulting
Engineer leave the office till his return to the office, it being
understood that a day shall consist of maximum 8 working hours.
7
GENERAL PROVISIONS

For works where a major portion is of similar character, such as

pipe laying or road works where standard designs and drawings
are adaptable, a factor to be applied to the normal design stage fee
for such repetitive portion of the work may be negotiated, based
on the extent of repetitive work involved.

7.1

7.3

Adjustments of Fees

The fees shall be adjusted every year according to the following

adjustment formula:
Fn = Fo *In / Io
Where,
Fn = Adjusted fee n years after commencement of services
Fo = Original fee
Io = Colombo Consumer Price Index published by the Central
Bank of Sri Lanka.
In =Colombo Consumer Price Index published by the Central
Bank of Sri Lanka n years after commencement of services.
7.2

Prolongation of Service Period

For Fee Basis I and II, where the period over which the
Consultant's services are to be provided is prolonged beyond the
period originally envisaged by the parties for completing the
services, and the Consultant is not responsible for such
prolongation, the Consultant shall be entitled to the extra cost due
to such prolongation.
7.4

Facilities To Personnel of the Consulting Engineer

For construction supervision, contract administration and initial

operation and commissioning services performed at the project
site, or any other location away from the place of normal work of
the Consulting Engineer, the client shall provide free of cost the
following facilities to such personnel of the Consulting Engineer.

Repetitive works

For works comprising wholly or partly of work items which are

repetitive in character such as a number of identical buildings,
structures or facilities of same capacity and identical design, the
9

(i) Furnished accommodation equipped with drinking

water, electricity and telephone.
(ii) Medical facilities and other civic amenities as
available to Client's personnel.
(iii) Furnished office accommodation equipped with
drinking water, electricity, telephone and other office
equipment
(iv) Secretarial facilities.
(v) Transport facilities

(ii) 20% of the fee shall be paid upon issue of Letter of

Intent by the client towards initial expenses. This
amount shall be recovered in instalments from the
subsequent monthly payments.
(iii) Monthly invoices shall be drawn by the Consultant
based on man months spent by the personnel, up to
90% of the fees.
(iv) 10% of the fees shall be paid on successful
completion of the assignment by the Consulting
Engineer.
(v) Reimbursable costs shall be paid on monthly basis.

Note : In case the Consulting Engineer is required to provide for

items (iv) and (v) above, the actual cost shall be reimbursed by
the client to the Consulting Engineer in addition to the fees.
8.3
8

TERMS OF PAYMENTS

8.1

The fees under Fee Basis I and II shall be paid in the

following manner;

(i)
(ii)
(iii)
(iv)

(i) 20% of the fee shall be paid upon issue of Letter of

Intent by the client towards initial expenses.
(ii) 70% of the fees shall be paid in equal monthly
instalments over a period which depends on the
duration of services by the consulting engineer,
commensurate with the progress.
(iii) 10% of the fees shall be paid on successful
completion of the assignment by the Consulting
Engineer.
(iv) Reimbursable costs shall be paid on monthly basis.
8.2

For Pre-feasibility Studies and Feasibility Studies, fees

shall be paid in the following manner:
20% - On issue of Letter of Intent by the Client,
50% - Interim payment as mutually agreed
10% - On submission of Draft Final Report,
20% - On submission of Final Report

8.4
Payments shall be made within 30 calendar days of the
presentation of the invoices and the Consulting Engineer shall
be entitled to recover interest on sums not paid within 30
calendar days. The applicable rate of interest shall be 2 over
the Average Weighted Prime Lending Rate (AWPLR) of
commercial banks.

The fees under Fee Basis III and IV shall be paid in the
following manner;
10

Comments

consulting engineers and firms and clients (both in the private and public
sectors)is essential.

In determining the guideline fee scales as required by the Engineering

Profession in Sri Lanka,

Comment on 6.5

The indicative man-month rates given by the ACE refers to the senior levels of
consulting engineers as Partner/director with minimum years of experience.
In respect of a consulting practice in engineering, staff deployed by Consulting
Engineer may be redefined under the following categories:

IESL has a responsibility to ensure that the public interest is served.

The fee scales must not be excessive but must provide for fair and
reasonable remuneration for the providers of Consultancy services.
Clients should be provided with services not only at a fair, market related
cost, but also at a cost, which reflects adequate compensation to enable
service providers to render a good quality service.
As the scope of Consultancy services cover a large range of disciplines
(not limiting to rather common building and structure projects), the
guideline fees must also take into account the great variety in terms of
nature, size and complexity of engineering projects.
The basic fees must assume a project with an average (or normal) degree
of complexity with some repetitive content.
Adjustment factors need to be provided to make provision for different
types of work, or work requiring a greater or lesser effort on the part of
the service provider.
The fees must also reflect the size of the project by recognising that
because of scale of size, a proportionately greater effort is required to
provide an acceptable level of service on a smaller project when compared
with a large one.
Different fee scales must be applied to engineering projects where the
consulting engineer is the sole or principal agent of the Client, and to
other projects e.g. building projects where the consulting engineer is only
part of an overall professional team.

Category A shall mean a top practitioner whose expertise and relevant

experience is nationally or internationally recognised and who provides advice
at a level of specialisation where such advice is recognised as that of an expert.
Category B shall mean a partner, a sole proprietor, a director, or a member
who, jointly or severally with other partners, co-directors or co-members, bears
the risks of the business, takes full responsibility for the liabilities of such
practice, whose level of expertise and relevant experience is commensurate
with the position, performs work of a conceptual nature in engineering design
and development, provides strategic guidance in planning and executing a
project and/or carries responsibility for quality management pertaining to a
project.
Category C shall mean all salaried professional staff with adequate expertise
and relevant experience performing work of an engineering nature and who
carry the direct technical responsibility for one or more specific activities
related to a project. A person referred to in Categories A or B may also fall in
this category if such person performs work of an engineering nature at this
level.

Comment on 5.2

Category D mean all other salaried technical staff with adequate expertise and
relevant experience performing work of an engineering nature with direction
and control provided by any person contemplated in categories A, B or C.

Fig. 1 (referring to Fees as % of Estimated Project Cost vs. Applicable Project

Cost) needs to be updated based on the latest authoritative information and
adjusted to current status of the professional practice industry.

Their man month rates need to be determined based on Qualifications and

experience, level of responsibility etc.

To determine such graphs for different types of projects data for reasonably
long period of time must be collected from the industry and analysed using the
results of various studies and surveys for which cooperation of practicing

11