In low bid consultant selections – we all lose

By Bill De Angelis, P.Eng., MBA, Vice-President Engineering AWS Engineers & Planners Corp.

Is public sector consulting engineering in a death spiral in Ontario with today’s low bid mentality in all levels of government? Does low bid consultant selection ultimately provide the best value for clients in the provision of engineering services? I think not.

Consider the implications of a low bid price mentality in today’s marketplace:

• Low bid means low margins and little profit. Any scope deviation or change eliminates profitability.
• A low margin means fewer dollars to hire and train new engineers.
• Trends towards the hiring of intermediate engineers with developed skillsets rather than hiring and training new graduates.
• Fewer junior engineers results in higher charge out rates.
• Mentoring and succession planning initiatives delayed or stalled.
• Training fewer engineers reduces the candidate pool for public and private sector positions.

Other direct and indirect indicators/impacts of the low bid mentality are seen in the following trends:

• Client capping of rates charged by consulting engineers.
• Engineering skills considered commodities rather than intellectual services in some procurement processes.
• Movement of a small pool of well-known engineers back and forth between consultants and municipalities.
• Lack of “new faces” in the Ontario engineering fraternity.

In the face of the low bid mentality, U.S. firms are now advertising for Ontario engineers, at substantially higher rates than local firms are able to pay to be competitive in the current marketplace.

Can traditional consulting engineers survive in this marketplace? We are seeing a proliferation of small companies that work at low cost; they are able to do so because of low overheads.

Large or small, we all need to ask ourselves: Is my firm helping to sustain the engineering community? Does my firm hire new graduates, train and mentor future leaders? Does my firm give something back to the communities within which I work? Many companies build these costs into their rate structures. Our clients need to understand that these are real costs of doing business.

Capping rates for professional engineers at artificially low levels has contributed to the sustainability crisis. Lawyers and chartered accountants are remunerated in proportion to their levels of responsibility.

Why then are professional engineers not afforded the same rights? More than likely, it is because we traditionally have gone about our business without much fuss, contributing to public protection under a cloak of invisibility and anonymity.

As engineering consultants we have to accept some of the blame for the current situation, because we let it happen. Until recently, we haven’t done a very good job of educating our public, in terms of communicating the value we as engineers provide to them, and the real costs to our firms of providing our services.

What is not well understood is that consulting engineering firms and clients need each other, feed off each other, and support each other. Clients need engineering services and engineering firms need clients. If we are unable to bill at our real rates, we can’t make a profit. If we can’t make a profit, we can’t hire new trainees. If we can’t hire new trainees, mentoring and succession planning initiatives are stalled, and the overall engineering talent pool shrinks.

Municipal restructuring initiatives are generating engineering vacancies that are increasingly being filled by trained intermediate and senior engineers from the Ontario consultant pool, further eroding the availability of consulting engineering resources.

The only real asset we as consulting engineers possess is our intellectual skill set; under the current regime, staff are retiring, moving to other sectors and relocating in the U.S.

What would retain current staff in consulting engineering and allow for an infusion of new staff, would be fair market compensation for engineering services provided.

A move is afoot in some larger municipalities to move to quality based selection processes, wherein price is a contributing but not the overriding consideration in consultant selection. Those who are moving in this direction are to be applauded.

The old adage that you get what you pay for certainly holds true in the consultant selection process. A low price does not guarantee high quality; fair, competitive pricing gives consultants the resources to provide high quality deliverables to our client base.

When clients hire based upon cost and quality, we all win. In the long run, it provides the best deal for the ratepayers of the province, and ensures the sustainability of our consulting engineering industry.