Ramblings on Pricing and Selling Time

"The successful producer of an article sells it for more than it cost him to make, and that's profit. But the customer buys it only because it is worth more to him than he pays for it, and that's his profit. No one can long make a profit producing anything unless the customer makes a profit using it. " [Samuel B. Pettengill]

Price is not cost plus desired profit. Price is the mutually agreed value of exchange between buyer and seller. Further more unless there are crazy laws in place, it is not necessary to make a profit on each item, it is the over all business which needs to make a profit. Considered another way the contents of a retail store are an assembly of components, it is the sale of this assembly which has to make a profit, not the sale of an individual component within the assembly. If a sole proprietor does not make a profit then they will not get fed: profits are their bread and butter. If a proprietary limited  (Pty Ltd) company with owner-operators does not make a profit, it does not matter as the owners are paid wages by the company which is a different entity than the owners themselves. Therefore a Pty Ltd company can operate as a zero profit company. If there are non-working shareholders then the company needs to make profits.

Desired weekly wages, annual salary or hourly pay rate, are simply numbers pulled out off a hat, they are subjective opinions, they are not a matter of science. At any point in time, there are items in the market place available at some currently defined price. Some of these things are essential to the individual for  survival, others are imposed needs by society, and still others are optional extras. Thus we can identify 3 different levels of income:

1) Survival
2) Social
3) Optional

For an individual can also identify their current level of income, this may be higher than the minimum social level but less than the desired optional level. Whilst we can calculate these levels based on prices in the market place none of these levels are fixed. The survival income for one person can be considerably different than that for another. There will also be differences between different geographical locations, and different cultures. The income levels are therefore relative values not absolute values. Further more individuals have differing capacities to adapt and improvise: so that whilst one person may struggle with a specified minimum wage, another person may flourish or at least get by comfortably. As I have mentioned many times before, once something is released to the market and environment, people will find uses for it way beyond the original intents of the designer.

In similar manner to the income levels for individuals, it is possible to work out different price levels for goods and/or services. However when working these prices out we should also give consideration to the entire assembly of goods and services, or the over all product mix, and  the over all performance of the business. Most important of all is what the buyer is willing to pay. An amount for the price which exceeds what the customer is willing to pay, isn't a price. The amount the customer is willing to pay, is an impression, a feeling, a perception of worth: something pulled out off a hat. That whimsical intangible perception of worth, is transient and can be changed.

So can work out accurately how long a job is going to take and then multiply by an hourly rate, the resultant value however is not the price unless a customer is willing to pay such amount. There should be no buts or may be's about it, the hourly rate was pulled out off a hat. Sure may have checked industrial awards for minimum rates, and checked job advertisements for market rates in excess of the minima: but at the end  of the day all the numbers were dreamed up by someone, and the numbers felt right, or they were all they could afford. Not much point conducting complex mathematical calculations with fiction.

So calculated an amount from time and hourly rate, and the customer perceives it as way too high. If the customer can perceive it is too high, then the person doing the calculation should also be equally able  to perceive that it is too high. Now could review the project, reduce feature's and thus reduce total time, or otherwise revise estimates of times for the existing features, however the real problem is that not every hour is worth the same value.

By being focused on selling time and using a constant hourly rate as a measure of self worth, proposed prices are exceeding the markets willingness to buy. If can pull a number out off a hat for desired annual salary or for hourly rate, then can also pull a number out off a hat to define a fixed price for a project.

Prices placed on goods in a retail store are an indirect negotiation with the customer. If they like the proposed prices they will buy, if they do not like the proposed prices then they will not buy. The retailer therefore has to adjust their prices in response to the market behaviour.

In a more traditional market place, there is a more direct negotiation between buyer and seller. Further more the buyers go to the sellers: there is no annoying people who are not in the market to buy. Such people have no stated need for the items, and no stated discretionary income they are willing to spend on such items, then some seller comes disturbing them: the negotiation has one major outcome no current sale and no future sale. No future sale because there is no price low enough to encourage keeping such an annoying enterprise in business.

Like a retail store, or mail order catalogue, the proposed price has to be there to be found by the potential customer. That means that potential customers need to have reason to visit the vicinity of the stores even though they have no need or intention of buying anything. Shopping malls, plaza's and precincts draw people in with regular consumable services, and whilst there, they may then become buyers of more discretionary items.

So for example, the confectionery stall in a department store draws parents, with kids, into the store. If the confectionery stall is near the middle of the store, the customers then have to pass more expensive items, where upon there is potential to buy such things. The confectionery may not make much profit itself, but it is essential to the over all experience of the store which ultimately results in sale of high value items. Similarly the cafe, potentially makes less profit than the department store selling electrical gadgets and operating from the same precinct. But without the cafe, the precinct is likely to be empty and no one buying tthe electrical goods. Owners of such shopping centres should take such things into consideration before charging the shop rents which are typically seen as extortionate. Be certain as to who is generating the traffic, and who is benefiting from such traffic.

The point is, that price, cannot be calculated. Calculate expected times, give consideration to the cashflow requirements over the time frame of the project., use an hourly rate if must do, but make the final proposed price a judgement. This can be done by applying weightings either to the over all calculated price or to the components of the calculated price.

It should also be noted that whether selling goods or services, there is a component of work which is not directly attributed to the product being sold. The cost of this work needs to be recovered by applying an overhead charge to each item sold. Say for example that intend to spend 2000 hours per year, but only 1000 of those hours are directly billable. The other 1000 hours is used up on adiministration, research design and development of product made available, marketing and finding new projects to work on, learning and training to keep up to date and develop greater proficiency, and a multitude of other minor activities too small to identify or otherwise track. So every hour billed has to cover the cost of every two hours worked. if throw sick days and vacation time in, then every hour worked has to cover even more indirect costs.

That a product has to be designed before it can be made, isn't always noted by the customer, plus many products are just repetitive copies, so there is an expectation that costs of design have been recovered already. Additionally such costs of design are hidden from the customer with respect to physical goods like cars and electrical gadgets, whilst with services it is not all that apparent that design is required in the first place. So can end up formulating an hourly rate which is heavily weighted by factors which have little value to the buyer of services.

Consider a retail store again. The store sits there and people come in and either buy or don't buy the goods which are on display. At the end of the year either the shop made enough money to cover the living expenses of the owner or it didn't. One major problem for the store owner is not so much the price of the items, but the mix of the items and whether or not they are of any value to any of the people who visit the store. If have the wrong product then it won't sell at any price. If have the right product but wrong price then it won't sell.

Now goods and services are interchangeable. A product previously offered as a goods, can be converted to a service or substituted/complemented by a service. A product previously offered as a service can be changed into a physical goods. For example when lawnmowers are few and expensive, then more likely to hire someone to cut the lawn with a mower. When lawn mowers are plentiful and low cost then people more likely to cut their own lawn, if they have the time. There are thus competing  circumstances which shift the demand in favour of either the service or the dependent product.

Similarly designing a building is time consuming activity, but if design the building once and distribute the cost of design across many buildings then the cost of design per item is considerably reduced. This is essential for small buildings, as the cost of engineering is not proportional to the size of the building but to the complexity and risk involved. Small buildings with the same structural form as large buildings require the same design effort. With small buildings therefore the cost of engineering can exceed the cost of the building. With large building projects, fees are likely to be a proportion of the capital value of the project: this can be far in excess of the costs and therefore highly profitable. Whilst for the small buildings the cost exceeds the market price of the engineering: and therefore its is not a viable business to engineer small buildings on a one-off project basis. There has to be repetitious use of the engineering, in the form of documentation, so that the cost of the engineering can be recovered by the sales of multiple documents. Price is therefore intimately tied to the product definition.

Another example is the design and development of web sites, this can be a time consuming exercise and expensive. However today there are many blogging platforms, and more general purpose platforms like WordPress. Almost everyone can build themselves a website in a few minutes. The value of the services offered by the website designers/builders thus decreases significantly. The web designers can jump up and down and complain about the quality of such sites, identify flaws, wish for regulations and monopolies, talk about solutioneering and insist that custom design is a must: but at the end of the day they have to prove the value of their services. Just like architects and engineers of buildings the majority just talk about custom design for the site, they don't actually do it.

A general principle is to introduce no more than 20% of the total features as new, novel and original. These 20% of the features will take 80% of the time. The implication is that if we therefore know 80% of the features or characteristics with certainty then we can calculate the total time for the project: however doing so is likely to generate an unacceptable time frame and unreasonable price if we resort to selling time.

Rather what it tells us, is that the time for 80% of the characteristics is relatively certain, and that it effectively defines a fixed product with a fixed price. The other 20% of the characteristics involve a high level of uncertainty, and therefore a highly variable cost and consequently unknown ultimate price to the buyer. I would contend that the majority of people want to buy off-the-shelf exactly what they want. They do not want the uncertainty of custom design at the point in time they seek suitable product to satisfy their needs. Designers and makers therefore need to be pro-active and make product available for selection. Concept documents are easier to produce than full production documentation, and documentation is easier than actual manufacture of physical object. When it comes to computers and digital products then production and distribution are relatively low costs.

A society built around selling time is going to be in big trouble when production times are cut to near zero. Whilst time may be a measure of an employees work, it is not a measure of the employees contribution to the income of the business. People become self-employed so that they get a greater share of the income that they perceive their work actually generates: though without all the resources of their previous employer the usual result is that the self-employed person earns less but possibly with less pressure. Some employees have to generate income to cover wages of other employees: employees who do not produce directly billable or saleable work.

If don't sell time then what do you sell? In the main sell expertise and know how, and willingness to do the work required. For example the person selling lawn mowing services could charge by the hour or sell at a fixed price. They have a willingness to do work that the home owner may not be interested in, further more they can develop expertise in grass and weeds, they can turn a weed ridden patchy lawn, into a well manicured lawn. Household lawns have relatively similar sizes therefore all take similar time to complete, so a fixed fee would be possible. However different lawns irrespective of the size may require different amounts of work to maintain depending on the environment, and depending on whether in a poor state needing improvement or a good state needing maintenance. This may therefore suggest having hourly rates and selling time. I suggest this is a bad idea.

To start with most things have a minimum fee. So for example say that decide want $30/hour and determine that the time required for the job is 0.5 hours, therefore the fee for the job is $15. From a perspective of convenience however people are likely to have more $20 dollar notes in their wallets than fives and tens, at a sale price of $15 the supplier needs a ready supply of $5 dollar notes to provide change to the customers. The hourly rate was a desired rate, its not an absolute. Does $20 seem unreasonable for the work? Note that people go into stores and hand over a lot more than that, for physical goods, in a few minutes.

Take from another perspective the job takes 2 hours and therefore the fee would be $60, does that seem reasonable and is it convenient to pay? Would it be better if the fee was dropped back to $50? Similarly is an hourly rate of $29.95 a sensible rate to have? It may mislead some people into working with blocks of 20 instead of 30, which is roughly the marketing objective of such prices: however the customer is not going to be happy with the final price if they believe they have been misled.

Note that it is the seller setting the buyer up with perceptions of price. A seller should have some awarenesss of average incomes, and disposable portion of income, for their market sector. Also if accept cheques or credit cards then the inconvenience of various denominations is removed, but then again there are minimum fees which are acceptable.

Given that in an industrialised nation less than 10% of population is involved in agricultural, can assume that the majority of the population is attempting to grab a share of the disposable portion of peoples income, that portion not required for food or other essentials. Assuming that with time all the other essentials also only requires a small portion of the population: housing for example, once it is built it can last for 50 to 100 years possibly longer: so with the bulk of the housing existing already do not expect many people involved in housing construction. So have a relatively small percentage of population supplying essentials, and rest trying to find something to supply.

Time isn't really something that people want to buy, especially if the output of the work effort is lower quality than they could produce themselves, and their own hourly pay rate is less than that of the service purchased. The funds available to the buyer are an important aspect of how they perceive value. For example say that a person can put $50 away each week, then they can save $2600 per year. Then chances are they are not going to be impressed paying some $1800 for a weeks worth of design producing a few drawings and some calculations: if the perception concerns selling and buying time and the report they get turns out to be defective relative to their needs but otherwise what they asked for. The longer it takes to save the money the more discerning the buyer is likely to be about the purchases they make: on the other hand they may lack adequate knowledge to make a proper selection of suitable supplier.

{... lost my track.}


However, just because should avoid selling time, doesn't mean shouldn't measure time.

Brain leak: Pricing, Labour Costs and Politics

Price is NOT the sum of cost plus profit, but the fee the buyer is willing to pay and the seller is willing to accept.

"The successful producer of an article sells it for more than it cost him to make, and that's profit. But the customer buys it only because it is worth more to him than he pays for it, and that's his profit. No one can long make a profit producing anything unless the customer makes a profit using it. " [Samuel B. Pettengill]

There is little point producing something which does not recover the total costs of supply. Note that is the total costs of supply, not costs of production. More often than not people complaining about undercutting, and product dumping, are only comparing unit costs of production, when should be comparing total costs of supply for the enterprise, along the industrial food chain. Furthermore costs are not altogether tangible, also time and risk are important considerations. Most costing theory is based on production and retailing of goods, rather than services. Services can be considered partially analogous to perishable goods (typically foods).

If I go out and buy something, then the price paid is part of the cost of supplying to my business. There is a cost associated with seeking out, researching and finally purchasing of the item. For small business such costs are typically ignored: most of the labour supplied by owners is typically ignored because it has no identifiable cost. For small business owners the profits of the business equals their personal income, no profit then no wages. As for employees, they are paid or owed, whether the business makes a profit or not. Furthermore employees are often paid to produce stuff that cannot be sold.

A business is not exactly a tribe, a cohesive social group, battling for survival in the wilderness of the economy. A business is something of an abstract entity which resides on paper in the form of its financial accounts: its has no social purpose, no soul, and cares not for people or the environment. It is thus not surprising that many new businesses are centred around the invention, selling and buying of financial instruments: simply a scrap of paper. When everything is reduced to monetary terms, all that matters is getting money to flow in your own direction so that can exchange it for the essentials of survival. All that is required is a mutually agreeable transaction.

Consider: Have an IOU for say $2, which will eventuate 2 years from now. Cannot wait 2 years, need $1.50 now, so I sell the IOU for $1.50 to someone who is willing to wait for 2 years. A year later that person sells it for a $1.20 to someone who is willing to wait the remaining year. Now multiply by millions and take that the original IOU was based on wishful thinking.

Business is in general a high risk real world experiment: a game of chance. Except this game of chance potentially has better odds than the lotto, than poker, than poker machines, than casino's. You get rich owning the casino and the poker machines, not playing them. Gambling is just using money to make money. Just like banks use other peoples money to make money. If no willing participants, no willing buyers, then there would be no transactions of exchange and no business. During the 1990's just about every business adopted the mantra: the purpose of business is to make profit.

Thus instead of getting industrual engineers (IE's) to minimise costs, to eliminate waste, instead optimise for maximum profit. After all the minimum cost of everything is zero: don't do it. If choose to do it, then maximise profit, and the simplest way to maximise profit is to increase unit price. But increase in unit price tends to bring about a reduction in sales volume. But this may not be a problem, as Akio Morita of Sony pointed out, will supply 10,000 units at $100/unit or 100,000 units at $1000/unit. The wholesale distributor thought he had his graph upside down. But not so. Supplying 100,000 units required significant investment in increasing the capacity of production, with the risk of only having a supply contract for one year. There after Sony set up their own distributors. As may also be aware Sony betamax video format is apparently superior to VHS, but they lost market since nothing to put on the tapes: a supply chain problem. Which they resolved by part or fully purchasing CBS: now they have no problems putting stuff on any new media format they may invent. Given the merging of computers and home entertainment multimedia centres, what ever new format emerges is likely to be totally transparent to the user: or is that opaque and hidden. Basically already at the point where data is stored on some remote drive somewhere, and downloaded to some usb device, or wireless technology device.

After all just how many times can people change, LP's, audio cassettes, video cassettes, CD's, DVD's to still some other media. Similarly 5-1/4 disks, 3.5 disks, Zip disks, CD's, to memory sticks. Further more just how many of these things can individual people own. How many photo albums, family video's? How many books, and how much paper can one person accumulate? I'm personally buried in books and paper.

For business to continue with its its forward distribution, it really needs to develop the reverse channels of distribution, so as to unclog the channels and permit movement and flow, to develop a cycle. Its like a magic number slider game: cannot play if there is not an empty space to move into. To play the game also similar to a rubiks cube, have to be willing to scramble the order thus far achieved to reach the final fully ordered solution.

Thus far business has used "built in obsolescence", whilst this ensures that people have to replace goods and so provides for continuity of the business, it hasn't resolved the problem of where to get rid of the old stuff. Simplistically, it is supplying defective goods, and not providing, space to move new goods into. It's not just a little matter of video cassettes out, and DVDs in. The problem extends to the cities, to nations to the world.

Take Singapore and Hong Kong, almost a constant state of construction. I recollect some figure of 1 apartment every 2 minutes in Singapore. These near city states, have next to no land available for construction. It is definitely a magic slider game: the people are the sliders and buildings are the spaces. Existing buildings either require further internal division, extra floors adding above, or demolishing and replacing with taller buildings. For example knock down a 10 storey building and replace with a 20 storey building, move people from another 10 storey building into the new building and knock the empty building down.

Here in Adelaide, we are considered to be a large rural town: have a general reluctance to new developments and especially opposition to large mulitstorey buildings and high density dwellings. However, the city is spreading too far. The building industry keeps pressuring government to release more land. Not sure what they mean by that: I assume changing zoning of existing land, though some times they are referring to government selling off its land. In the CBD many government office buildings have been sold and converted to appartments. In the suburbs blocks of land are getting smaller and houses larger. The traditional Australian dream home, was on a 1/4 acre block, this dropped to a 1/6th of an acre, and now local government development plans specify minimum land areas and minimum frontages and minimum set backs. A block typically minimum of 300 sq.m if isolated, if part of a group 200 sq.m (eg. retirement units).

Market gardens have disappeared under housing, and more and more rural land is being sold for housing. All largely because they get more money now, by selling the land, than working the land producing food and fibre. Australia basically has houses built on prime agricultural land, and farms land with shallow soils: no deep plough agriculture here.

Now houses are typically large so that children can stay at home longer in formal education. But that has problems. For example high wages for parents to pay off a family house. Children who want independence, their own place, but cannot get because there are no low cost rental accomodation for singles and couples. There is a lack of accomodation for school leavers and the retired. Houses have become a financial investment for retirement, and so the owners oppose the construction of high density student accommodation and retirement villages. The result is retirement houses are in short supply and extremely expensive, the sale of the large house won't cover the cost of the house and provide money to live off. This results in people moving to remote rural and coastal regions where property is cheap, but facilities like hospitals poor. Its not natural: money based decisions are driving human behaviour against nature.

On Professions/Engineers
Also consider the growth of professions. These arise from some nonsense about protecting the welfare of the public. Professions are an alternative to a union, though a profession may also have a union (eg. IEAust and APESMA). A profession gives the impression that they are there to serve some greater need, and not just themselves. But it is nonsense, the greater need is secondary to serving themselves. During the nineties, most unions and professional bodies changed their legal structure and became full trading companies, with constitutions which maintain the rights of members of the orignal association. Thus the IEAust became Engineers Australia (EA). Creating legislation is not about the public welfare its about business: not profits for EA, but for the big businesses who make use of the EA, it is also about politics. Holding office in EA is good for promotion within the big businesses. Purchasing the post nominal detritus on annual subscription sold by EA, is good for promotion within the big business. Creating legislation which restricts practice to those who purchase the postnominal detritus, is also good for the big businesses. It doesn't have anything to do with technical competence or the welfare of the community. Sorry, but the EA/IEAust assessment process is the dumbest in the world it is so generic the stage 2 competences could apply to a retail sales assisstant, it has nothing to do with technical competence: and that applies to the newly revised stage 2 competences as well as the previous. The American FE/PE exams and the IStructE part 3 exam assess technical competence. The EA/IEAust work practice report stuff is far too much he says she says. It assumes that someone is actually under the supervision of someone who is competent. The work practice report just becomes hyperbole. I would place B.Eng. MIEAust CPEng NPER 2nd to the top of my list of incompetents. The IEAust keeps dragging Queensland up, because of registration of engineers, RPEQ: they are top of my list. The RPEQ's self certify way beyond their authority and competence: the Queensland's system is stupid not something to be held up as a bench mark. How do I know? Because manufactured structural products flow into SA, where we don't have registration, but demand an independent technical check. So the Queensland stuff first rejected for lack of independence, then when checked, further rejected because not technically correct. If going to have restrictions make sure they are valid.

The Queensland system was reviewed by the competition watchdog, because national consultancies considered it was an hindrance to cross border business. The basic conclusion was that it was in the interests of the public welfare most especially with respect to the building industry and also with respect to amusement rides. At the time there was some failures of amusement ride equipment. The IEAust response take MIEAust away from someone. Who cares? Many don't have in the first place, nor care about getting. In the review report there was a large appendix which tended to indicate that in Queensland a large amount of the work was done by 2 year qualified engineering associates, and consulting businesses also owned by such: their work needed to be reviewed and approved by RPEQ's. All very well but, there appears to be a lack of checking on the RPEQ's. A high quality assessment process is not a once off exercise: it cannot be achieved by granting authority and responsibility to individuals. There is need for constant monitoring: the more established the technology the greater the communities expectations for achieving expected performance requirements.

As I remember the IEAust appeared to loose its status as a reliable indicator of technical competence around the 1980's. First I think union type laws prevent job advertisements stating a requirement for MIEAust, they typically have to make reference to elligible for membership. Some Australian standards make a reference, to MIEAust being the definition of engineer when so referenced: but there is little that actually requires an engineer. Also standards are recommendations, for the building code of Australia (BCA) to be incorporated into law, and its referenced standards, the language in those codes and standards needs changing. The BCA makes reference to CPEng and NPER, but that is just one option, the primary requirement is suitably qualified. That is important, because when it comes to new technology, an engineer may not be suitably qualified.

To create NPER and develop legislation which restricts, requires adequate number of registrants. Thus since its creation the IEAust has had periods of fast tracking MIEAust to CPEng NPER. The consequence of that is diminishing the whole system back down to the unreliable nature of MIEAust as valid indicator of technical competence. Competence has to be sustained in the workforce and in society, and the IEAust needs to work at that, it did not do so. I reiterate the proposal and achievement thus far is not about the community, it is about the status and recognition of those with a B.Eng, about political power, a grab for work, an illusion hiding monopoly and cartel controlling prices. This is already in play.

Take a look at something else to see how it all starts. The workers in child care facilities have recently been on the news declaring they cannot survive on minimum wages and should be on the same industrial award as teachers and educators not the state/federal minimum for those not otherwise covered by an award. The 90's saw a period of rationalisation attempting to minimise the number of awards: so try to create common professions and trades at various levels of responsibilty. This in turn partially aligned with the Australian Qualification Framework (AQF) providing recognition of education and training.

On Professions/Child care Workers
The child care workers argument: they are not just minders but educators, responsible for the early development of children before school. Meanwhile the parents of the children are paying somewhere between $70 and $100 per child per day for child care. This is apparently equal to the mothers wages: which I think is more the issue than the mothers just working for child care (some article been written saying its a shared cost: which it is). Apparently the mothers are not working because they need the money now, but because they will need the money at some future date, and they contend they will have trouble getting back into the workforce if they don't stay in it.

Industrial Relations
The Australian industrial awards represent semi-regulation of the labour market. The awards set minimum conditions of work, minimum wages, maximum hours, define ordinary time, time and a half and double time, and possibly career progression. Market pay rates however may be higher than the award minimum. A sense of equity has been lost from the culture, so that whilst in the past there was little difference in wages,  there are now deliberate attempts to ensure wage relativities: the greater importance or one person or profession over an other. This is somewhat silly at a society level, unfortunately attempts to create enterprise level agreements meet opposition from unions. Take engineers for example, they believe they should be paid more than a drafter: rubbish. Such view stems from a single minded view of organisational structure, a single type of business, with engineers at the top controlling. With also the view that those controlling should get paid the most. Once again refer back to small business, due to the industrial awards the owners are highly likely to earn less than the employees. Only the owners income can fluctuate up and down with changes in the market. The result is that the workforce typically shrinks and contracts rather than wages.

Engineers think they should be paid more than a teacher and more than scientists, because engineers have 4 year degrees and the other only 3 year degrees. Once again rubbish. Engineers also always dragging doctors up: once again nonsense arguments. The importance of a profession is not merely relative to a society, but also a point in time, and to an enterprise and a situation. There is no point holding doctors in high esteem when people are starving, the important people are the farmers. Once food is in high supply then feeding twice the amount of food to the sick maybe possible, and doctors may then become important, for production of food is taken for granted. If doctors are taken for granted, then they also loose importance: there has to be sickness and ailments which only doctors can treat for them to be of high value. So there is the doctor versus pharmacist, and the pharmacist versus the local supermarket.

So if attempting to determine the cost of something need to place a cost on labour. But what is the cost of labour? Its what the worker is willing to work for. The cost of labour may however be distorted by unions and government interference. A business can keep operating by contracting wages back to award minimum only if the workers agree, but they cannot reduce to lower than award minimum. Some local businesses, have attempted to work at less than industry awards, to keep traditional enterprise going, but whilst have the agreement of the workers, the unions may otherwise oppose. The current labor government (thats a joke, should try reading constitution doesn't mention anything about political parties: further executiive council is not the government it executes the will of the government: all members of parliament and the senate are the government. But let mass media talk about government and opposition. Anyway thats another story.)

The labor party basically drove a campaign against the previous governments "workers choices" system, and with a partial mandate to make union membership compulsory. Their view being that unions defend the industrial awards, so all persons who benefit should contribute to the funds. They oppose enterprise agreements and individual contracts. During the nineties, and "the recession we had to have" under a labor government the unions were making agreements to the effect: can reduce labour force as long as those that stay behind get paid more. Not surprising membership of unions only 40% of workforce. As stated earlier, they have the legal structure of full trading compaines and have employees on staff. They are businesses, cartels, they sell labour, and shouldn't be granted any form of government sanction. Political power is extremely important to pricing.

How to cost labour, or services? APESMA publishes guidelines for determining contract rates. Basically start with the award minimums of 38 hours/week and 52 weeks/year, to get 1976 hours/year. These hours are what everyone gets paid for, but not the hours they actually work. These hours are therefore reduced for sick day allowance, vacation time, long service leave, and a multitude of other benefits provided in the industrial awards. Then an allowance of 20% is allowed for extra time searching for work between short term contracts, thus two charge out rates are determined: one for short term contracts another for long term contracts. This is for labour hire only, so no costs of equipment considered. Now this determines the hours worked and actually billable, but what about the price? Where do we get the price from to determine the hourly rate? Well thats simple, pull a number out off a hat. You, the individual choose what annual salary you want, and divide this by the expected billable hours to get an hourly charge out rate. A starting point is the industrial awards, and the APESMA salary surveys.

At the end of the day however the income generated over a year may be greater or lower than that estimated, and likewise the hours worked. No real need to mess around with the hours, just pull a number out off a hat for the hourly rate. Large consulting engineer business tend to rely on contractors, they allow the business to expand and contract as the economy varies, contractors have a fixed rate no time and a half, or double time, and contractors, even casual labour, may work some 50 to 90 hours per week. Contractors may also work until they have the job complete. So whilst workers, work 9 to 5 (not sure where that actually comes from: try 8:30 to 17:15, to provide 45 minutes unpaid lunch break. And forget about the 37.5 or 38 hours/week in the awards.) Contract drafters may work through the night, and be on their way home, when the employees are just starting work. Contractors can have several days, to months off, due to the income they have generated whilst working, and not generated through high fees, but by working a full years hours in half a calendar year (365.25*24=8766 hours/year, sleep 1/3rd leaves, 2/3rds for activity: 5844: a life of luxury).

People who make a living doing what they like, and therefore don't require income and time off work to pursue other interests, are unlikley to determine hourly rates following guidelines like those put out by APESMA. The problem is rooted in Simonian Simplification of (S2,S-squared as my lecturer called it). S2 is the simplistic view that all persons behave the same, that they act in self interest, and that the collective behaviour benefits the individual in the group. As shown in much of mentioned above, the collective behaviour of individuals result in adverse effects on the individual. For example if everyone opposes contruction of retirement homes to maintain value of their property so that can finance retirement, then have no alternative buildings for retirement. A house is not a financial investment, it is a life support system: it should be designed and built to be livable now and in future retirement. Is it in any way possible to put money aside for future needs? I don't believe it is possible, the value of money is itself pure fiction.

If the purpose of business is maximum profits, and the simplest way to do that is to increase price, then the costs to labour increase (they have to pay more for goods they need). Labour therefore demands a greater share of the business profits, without shouldering any of the variable risk: their increase in income is permanent: if not sustainable it will be met by future unemployment for some if not all. With increase in labour costs, the profit to the business decreases. it remains as in the past, a never ending poltical battle to grab what the individual or collective considers a fair share of the available but limited resource: in general the single resource of money.


-- Interrupt for tea --

Business and Geography
The purpose of the abstract financial entity on paper may well be to increase profits, but that is not the purpose of the people who breathe life into a business enterprise. There are increasing calls to buy nationally produced goods, and still further calls to buy goods produced more locally, to use more local businesses. People have a connection to place: after all they have or are investing a great portion of their lives into a mortgage on property which locks them to that place. I have mentioned in previous blogs that in the past people in Adelaide have had a mortgage on a house here, whilst renting and working interstate. They being unable to sell their house in Adelaide since no employment for others to move to. Houses are not a financial investment, and increasingly they are poor life support systems. New types of housing are required along with alternative business structures. It should also be noted that many cities also have the legal structure of full trading companies.

Economics texts attempt to differentiate between capitalism and communism and between economic and political systems. Doing so is not all that helpful. The problem of scarcity which economics supposed to study, generates the need to exercise power and control over limited resources: economics is political. The difference between capitalism and communism is purely academic, it has no practical value: reality is a continuous spectrum of alternatives. A market is just an ecosystem of exchanges which supports a cycle of life. The invisible hand of the free market gives rise to markets in regulation and centralised planning. Modern western government is just a market sector with businesses vying for their share.

Just about everything has been reduced to economics. Marriage maybe a religious ceremony, but mostly it is a civil law contract for economic gain: typically restricted to a single partner with non-commercial benefits and advantages. But mostly an economic contract. When take divorce into consideration and the custody and support of children. Then it represents the formation of a special kind of economic entity which cannot be broken. Increasingly businesses are being seen has holding similar responsibilities to their employees has parents do to their children. Whilst government has similar responsibilities as parents to its citizens.

Now citizenship is a strange thing. I hold dual citizenship: Britain and Australia. Prior to the 1986 Australia act, most commonwealth subjects with permanent residency, automatically gained similar rights to Austrailian born citizens. The 1986 Act and associated laws was going to change that, so prior to its introduction many immigrants took up Australian citizenship. But it was silly, British subjects required to swear allegiance to the Queen, the head of the commonwealth, her heirs and successors. Like already required to do that by nature of birth in a monarchy. Which therefore raises a question, why don't all citizens have to swear allegiance to the nation which they expect to support them? Like if have a true democracy, and the government has true legitimacy, then the majority of inhabitants of the land will owe allegiance: if not then the nation, the government is illegitimate. Further if the government is little more than a business enterpise which provides certain services through a collective centrally planned model, then will people buy services from the available providers. Under the Australian system it is compulsory, mandated to vote the useless, dishonest, integrity lacking low skilled politicians into power. Its relatively pointless exercise since just a bunch of fools changing seats. As I mentioned above, there is not meant to be a so called government and opposition: that is a creation of the mass media. There was no problem at the last election, for once everything went right, not wrong as the media made it out to be. We the people, the electorate, elect representatives. They form parliament and the senate, collectively the government. From these the governor general appoints the members of the executive council to advise and execute the will of the government. The prime minister is not supposed to belong to a political party and represent that party, the prime minister is supposed to represent the government and the electorate.

But politics divides the government along party lines, and it also suits the mass media to create stories. In practice the political party with the majority of seats forms the executive council and the governor general agrees, more over the governor general ultimately ends up being appointed by the political party. The political party excluded from the executive council, then becomes the shadow cabinet or opposition. The executive council then dictates to the government, rather than executing the will of the government, because it is now referred to as the government. If the opposition doesn't oppose enough the mass media call them weak, if they oppose too much they are referred to as obstructive. It seems to exist for the benefit of mass media rather than actually carry out the functions of government. Australia also has a unique industrial relations system, with unions belonging to a state level trade and labour council (TLC), and the TLC's belonging to the national Australian Council of Trade Unions (ACTU),  which resides in the Australian Capital Territory (ACT) along side the federal government. Labour has a significant influence over government, an influence which business is largely and deliberately excluded from. At the last election the unions basically destroyed the resident government, but they didn't achieve that much of a success, to place the Labor Party with a clear majority: hence a perceived problem. Surprisingly they did this by opposing a set of industrial relations reforms called "workers choices", and they did it with advertising amongst which was an advert where by some twit in a suite says he was laid off and job given to someone else for $25,000 less. Laid off, the true revolutionaries would have put him against a wall and shot him. The cost difference is someones entire salary. But no, you are supposed to feel sorry for him and his family, which no longer has an income. Sorry! But no way, some people didn't and don't have incomes in the first place because industrial awards set minimum rates which are too high: and to a certain extent make the employees the biggest bludgers in the land. Loosing sales to imported goods, dumped on the shores. Not really dumped, but produced by people who are actually working trying to achieve the life of luxury which Australian's and most westerners take for granted. Loosing overseas markets because of the same problem.

Ability to Buy
A small cold-formed steel shed may only cost around say $2000, and may provide a simple shelter. We have regulations which hinder building sheds and turning them into houses over a period of years, which was common in rural fringes. Still even in the suburbs there are houses whereby verandahs and garages have been converted into extra living space without actually compliying with BCA requirements: this is usually highlighted when background checks on approvals are checked at sale time. Anycase we have expected levels of quality for various products, housing and others. Various organisations keep checks on quality supplied, such as Choice magazine. None the less individuals can still choose to live in a shed if they wish to, if they can find some place to do so: however typically costs more than a garden shed, and otherwise made habitable, but at significantly lower cost than a brick veneer on timber framed house.

In developing countries after buying food even with government assistance, people have less than $2 to spare at the end of the year, it would therefore take 1000 years to pay off the capital on a $2000 shed. If we make it, we cannot sell it to them, for our labour costs are too high. They however can make at much lower costs, and exported to the west, supply costs can be significantly lower than local. Such lower prices allows westerners to redistribute their income, more surplus for nonessentials, for luxuries. But at some point we cease to have employment and cannot buy anything. The invisible hand of the economy doesn't care about community: the community has to care.

Now Australia has raw materials, from mining and agriculture, and whilst a major supplier in these areas, it doesn't mean have great control over prices. First we don't have the population to produce, first a shortage of numbers, and secondly a cultural shift away from such hard manual labour. A land increasingly of:, business executives, sports stars, entertainers, and retailers.

Retailers are political
Retailers are political. Whilst most capital cities are more or less open 24/7, Adelaide the sleepy backwater rural town, has vocal business associations which hinder such trading: and bills are passed in state parliament to set trading hours. Its seems everything is on the basis of one in all in, one out all out. The argument is that small business cannot afford to employ staff to operate 24/7, if they are not open when the big retail stores are  then they loose business income and may have to shutdown. Secondly the owners of large shopping plaza's and malls, typically require all stores to be open, since looks bad when most stores are closed. This is an entirely different issue to operating hours restricted due to noise and traffic generated by industry.

As mentioned above the suburbs once contained market gardens and rural fringe. It was possible to go for a drive not too far into the country and buy fruit and veg direct from farmers from road side stalls, also flowers on mothers day. This practice died out a while back. Whilst an increase in population may have increased traffic flows along roads, getting to and from the road side stalls wasn't exactly an hazard. But retailers basically squashed the practice, on the basis of such declared hazard. The other issues raised were rents on shops, versus using public property (questionable if stall on farmers land). Basically the new bricks and mortar retailers were loosing market share to these road side stalls, so they removed the suppliers. Approaching Mothers day, families with gardens may have sold flowers at the street side. But once again retailers loosing market share squashed the practice, as I beleive a license is now required to set up such flower stall. Though people may give the fruit grown in their gardens away via roadside stalls.

Get the Government to Make Your Products Mandatory
It is not about free markets but exercise of power in the political arena. Take bicycle helmets, smoke alarms and residual current devices RCD's, these items have become compulsory and mandated by law with fines for non-compliance. This mandatory requirement is largely to create a large enough market to sustain business providing. (And these power brokers want to know why the republic debate keeps failing. The people don't want to give such draconian governing political parties any greater power, and desire a democracy not a republic: want to get rid of the ruling elite.)

Retailers and Credit Cards
Retailers most recent activities concern credit charges and online sales. For use of credit cards they wanted to charge people a higher price: argument it costs them more. Missing issue, the point of accepting credit card is guaranteed payment compared to no guarantee with a cheque. This in turn results in higher sales, and potentially improved cashflow. Now there is a bank advertising, on basis that customers who use credit cards are withholding payment to the retailers, who typically have to wait 4 days before getting funds on credit card payments from banks. I think the bank is offering same day. Still seems to be missing the point: like business to business operates on time frames of anything from 30 days to 120 days. Some manufacturers also supply the retailers with goods on credit and take them back if the retailer doesn't sell. The retailers don't really have a difficult time, and mostly have lost this argument.

Retailers and Online Sales
The argument against online sales is that there is no goods and services tax (GST) on online sales, and typically no import duties. Not altogether true, such taxes and duties will be applied as passes through customs, and is dependent on the cost. The retailers lost this argument. People not really concerned about a 10% GST, it is significantly less than the 2 to 5 times the price retailers are selling stuff at.

Delivery/Transportation Costs
I typically order books from Amazon. I did try engineers australia books at one time, but if not going to filter metric from imperial units, and dificult to find books they advertsie in Engineers Australia magazine, and the delivery time still around 4 weeks whats the benefit? The Amazon website is easy to navigate, almost allows me to look through books as I would in a retail store, and separates book price from delivery costs. I recently found out about Booktopia an Australian equivalent of Amazon, so I thought I would check out their prices: far more expensive and just as long to wait, and books not in stock. Their pricing is likely all wrong. Namely it appears, they have added the price of obtaining a single book from over seas source to each and every book, the highest possible delivery price. To this is then added the delivery fee to get the book to the buyers door, or maybe they have supposedly free delivery. The problem is that for the overseas delivery fee a large number of books can be obtained. A buyer can therefore hold off on buying books until they can minimise their transportation costs.

Business needs to know what to hide in prices and allow to vary without the buyers knowledge and what needs to be disclosed. If detail too much then buyers argues about not wanting or otherwise not getting. If don't include any detail, then buyer may go elsewhere.

Whinge about dumping, and fee's being undercut, but don't expect anyone to take it as a serious and real issue: it identifies no grasp of the uncertainty and experimental nature of business. Price is simply a number pulled out off a hat, which the seller hopes to get the potential consumer to agree to.

Farmers, Small Retailers and the Supermarket Chains
Farmers and small retailers have been critical of the big supermarkets and retail stores, and the competition watchdog. Apparently checks by the watchdog, indicate no wrong doing on the part of the big retail chains. Competition is apparently good and so is the loss of small local stores, all that matters is lower prices and access to greater array of goods. Destruction of community not an issue. That action taken by the individual in their best interests, taken collectively not good for the community and in turn ultimately not good for the individual. Human behaviour needs regulating. Unfortunately government controls are seldom regulators, just interfering control. A true regulator is dynamically adaptive: it returns a system to an equilibrium position even if its a shifted position.

As mentioned above there is much done by small business which is not counted as a cost, but is so counted by large business. People coming from large business and setting up their own small businesses, tend to count costs others in their new market do not count. Their prices thus appear too high. They are paying more attention to what they want rather than what the market needs. When it comes to service industry, there is a fine line between what you believe is required and what the market actually wants.

Satisfying Market Needs, Not Yours
The child care workers are simply minders not early development educators. Some of the agencies may provide early development education, and have people qualified to do so, but not all. Furthermore how does early development education differ from traditional parental care? The issue is that there is a market, and an acceptable market price, but no clarity as to what is being purchased. The parents primarily require some facility in a convenient geographical location: they find and then pay the price. There is not a great deal of option, as with schooling. With little option, market prices can be near constant across suppliers, but with vastly different supply of services: and costs incurred.

Unlike engineers, architects are regulated in all Australian states. But for what purpose? The SA building contractors Act, grants architect as being equal to licensed building works supervisor and doesn't need to obtain such additional license. The act is mostly concerned with supply of housing. People mostly go direct to builders, building designers and drafting service businesses rather than to architects. Architects are seen as people who design works of art not practical buildings. Architects also seen as people who charge extortionate prices for conceptual scribble no use to anyone: except an architect who is going to develop further for still more fee. Architects may have set the original datum for consultancy fees, but others can supply more for such fee, do it faster, or otherwise supply faster and more for lower fees. They are not supplying architectural services, because they don't have that which makes an architect an architect, and thus makes the architects services unique. What ever that something is, most people have no need for and don't want to buy at the price offered.

As far as the buyer is concerned they get the same from an architect as they get from a drafter: a set of drawings which will be checked for compliance by a building surveyor, and development approval granted. What they want is a building, and they typically wanted it last week. So they typically go to builders, the builders may produce their own drawings or employ a drafter. If they go to an architect, the drawings likely produced by a drafter, and specification written by another specialist not an architect. So the question is what did the architect supply other than additional cost?

With builders the cost of the drafting maybe hidden in the cost of the building: and otherwise considered free. The problem with that approach is that some buyers get the drawings from one builder then shop around for lower building price. Similar happened with timber suppliers and free material take-offs. Now more builders and timber suppliers charge a separate fee for drawings and material take-off's. A cost which was once an overhead and distributed across all projects becomes an explicit upfront charge to the project. Also something which may have been done in-house may now be outsourced. The result is that services which once appeared to be free, now sky rocket in price. The price increases because the new suppliers are businesses in their own right, and now incur additional overhead costs. Drafters once housed in the builders premises now require their own offices. Further these drafters now have other issues to consider, other then the needs of say a builder. Drafting becomes a product, an end in itself rather than a means to an end.

Similarly goes for engineers. The buyer simply gets a collection of drawings and maybe a pile of numbers. The drafting service can be isolated from the engineers. Then the engineers simply provide the numbers, which is a lot clearer than what the architects are supplying.

Once a product is released to the market, it will be put to uses way beyond the original intents of the designers. Engineers are in the main ignorant of the history of the market place. Art and crafts first, trade second, drafters, then designers and finally applied scientists and engineers. Engineers are not the top of an hierarchy: the hierarchy is their work of fiction. Engineering associates, technicians, and technolgists are not subordinate to engineers. They only become subordinate when employed by engineers.

Many small businesses would benefit from engineers on staff. But they view engineers as too expensive, compared to sales people on commission, and the trades people they employ. I would have thought the sales commission would surpass the industrial award for engineers. I think the real problem is engineers arrogance and consequently the perceived little value that engineers would bring to the business. That is the engineers do the numbers, and only do the complex calculations, other people can do the rest. The engineer is seen as highly specialised and of limted value. Whilst engineers themselves also tend to refuse to contribute all that they could to an enterprise: for example design drawing is below them and a drafter should be employed: or they produce conceptual drawings and expect a work shop detailer to do the rest. Put simply they are educated for, and get their training in businesses which have high division of labour, and cannot actually take a job from start to completion. Consequently engineers do become of limted value. With the emergence of software to do the numbers, engineers of even less value. Further it should be noted that in many instances engineers have been imposed by regulations. Things were being built long before drawings and long before calculations, and long before need for regulatory approval to go ahead and build. So drafting, architectural and engineering consulting services are services not entirely wanted, and an imposed cost to be eliminated as fast as is possble. Standard designs and computer software are providing the means of eliminating this unwarranted cost. The historical role of engineers was pushing technological frontiers forward, not life safety. Many engineers are definitely inline for a rude awakening: well especially if they cannot get their grab for work legislation passed. Life safety is not a quantitative issue resolved by carrying out complex calculations, it is a qualitative issue. A lot more community consultation is required for large projects, and there is a lot more feedback on all products.

There is a market place, people with needs which need satisfying. The task of a business enterprise is to identify these needs and find a way to satisfy from the resources they have available, and at the same time satisfy the needs of the members of the enterprise. Need to get rid of the concept of employee which is rooted in the the old master and servant laws, which control employment. Companies can do that since they are independent legal entities.

I believe entities like the IEAust are duds, currently redundant. We have more libraries, more educational institutions, and more indusry specific organisations. Better to be an alumini of a university than a graded member of the IEAust. Further learning will come from the university, not an institution like the IEAust, its time has been and gone. Well actually its time had gone when it was created, it was too late to the game. a A matter of business, economics and politics.

A degree acredited by the IEAust is irrelevant as is WFEO. Their activities only show partial understanding of the market, one high end sector, and yet their assessment process is dismally inadeqaute for the sector considered, whilst otherwise either over the top or completely irrelevant to the rest of the market. hence desire for legislation to gain an helping hand. Not necessary, as I've already said its about big business. Big business can operate what ever internal systems it wants, it doesn't have to impose such on the rest of us though. Does the market want to pay for these extra costs, do they actually get any value from them? The basic answer is they don't want to pay the current costs, and no they won't get any extra value. The extra value is wishful thinking, it cannot be guaranteed. It is upto businesses and individuals to provide value.

Price is a number pulled out of a hat. Do what ever complex calcuations desire to arrive at a number, but ultimately it has to be agreed to by the buyer and it ultimately becomes a number pulled out of a hat. The task is finding out how to supply for the market price, or how to get the market to accept the price desired. For example a buyer may consider a price of $1000 too high, but otherwise accept 6 smaller fees of $200 each. Working out the features, details and value of what is being provided and assigning appropriate prices is the main task, not working out a notional hourly rate. Hourly rates are crazy, they don't contain value, simply work more hours get paid more, but still fail to provide the value promised.

Costing Methods and Pricing are Important
Costing methods and pricing are important. Quantity surveyors typically cost structures by the weight, say $1000/tonne of fabricated steel. Beside my figure possibly being out off date, the figure is fiction. The only way to reduce the cost of the building is to reduce its weight: but it is the inherent labour cost that needs to be reduced not the weight. Other costing is done by the area, so that only way to reduce the cost is too reduce the building area. Basically the adopted costing methods require removing value from the structures not waste: reduce resistance, reduce useable area.

Roughly speaking once a structure is engineered its material content is fixed. However the cost of the structure can be reduced by redistributing that material to reduce labour costs. For example C75 girts at 600 c/c have almost identical material content to C150's at 1200 c/c, but installation labour is reduced for latter. Such cost reduction cannot be realised for shed suppliers because shed erectors either charge a fixed fee or work out on the basis of building plan area. Change costing methods and can change price and demonstrate greater value to buyers.

Buy versus DIY
Shed suppliers along with carport and veradah builders also have a marketing problem. Small builders and house owners consider the prices are extortionate, even when they work out material costs based on retail prices of materials. Stuff which has passed through my office with prices on, has indicated similar to myself. It becomes even more pronounced when start asking questions and identify two people required for 2 days to install many of the items: based on industrial award rates of pay, there seems a lot of profit in there. But then again there is all the unaccounted for over head of attempting to sell the things, and the sales commission for the sales person who does sell. The point is, that whilst it may be a legitimate cost of doing business, it is not value to the buyer, and it shouldn't be there or it otherwise needs turning into value. For example the house owners most likely wouldn't have thought to build if such wasn't available in the market. Putting the idea in the market does have value. To a certain extent development approval authorities attempt to protect this value, and require each supplier to produce own evidence of suitability and not base their building products on the RD&D of other suppliers. Similarly for owner builders. They all have to get designs done, and that can eliminate the cost saving, since the market suppliers have distributed design costs across the sales of 1000 or more units per year.

It is simonian simplification to assume your costs are the same as everybody elses. To start with most new businesses have lower cost technology than existing players in the market, and so lower startup costs. That technology also makes them faster, and able to do more and with higher quality. Existing business has a multitude of internal politics and history to resolve before they can get full benefit from new technology. That can mean for example that a new start up can charge 80% of the market rate and make significant profit for their actual costs are say only 20% of market rate. They are not working at a loss, they are trying to make the service more accessible to a greater market: their concern the needs of the market, not the status and prestige of a profession. Secondly they probably really like what they are doing, and don't need extra money to pursue the activities they would rather be doing. There are lots of hidden intangibles in prices.

Sun 2012-Jul-01  01:03AM

Brain leak: Price, Product, Promotion and Place : Engineering Services

This week Read this:

http://smbizstoryteller.com/2012/03/06/do-you-think-youre-charging-too-much/

http://buildingmadesimple.blogspot.com.au/2012/03/weekend-challenge-change-worldfor.html

http://www.beamcalcs.com/instant/index.html

http://www.steelbeamcalculator.co.uk/

Which led me to write this brain leak:

One of the first places I worked, the state manager had the view that engineers sold time: I disagree with that view point. My view has generally been that engineers sell solutions, provide risk management and a share in their insurance. I disagree however that engineers, are necessary to maintain the health, safety and welfare of society, and that engineers face grave liabilities. The latter however can be considered a matter of semantics. As I keep harping on about, the currently practicing engineers have failed to understand the defined capabilities of the members of the modern engineering team. Engineers may have originated our modern civilisation, but they are most certainly not necessary to maintaining it. It is a gross exaggeration and the height of arrogance to suggest that if we got rid of all engineers, our civilisation would collapse. It would not: modern professional engineers, did not invent, originate nor build our civilisation.

When Telford built the Conwy Suspension Bridge, he didn't know when scaled up to the Menai Suspension Bridge that it would not collapse. Similarly when Navier did his calculations for his first bridges, he didn't know they were going to collapse. Strangely as a society we have adopted Naviers approach: over reliance on theory and code compliance and lack of prototypes and lack of empirical evidence. Prototypes are important. They not only confirm theory regarding performance of the end-product, but also permit testing the fabrication and construction process, and help train the supervisors for the real project. However, for large structures like buildings and bridges it is not altogether practical to build prototypes. No that cannot be right, that is what Telford and Stephenson did.

The buildings and bridges of the past represent heritage, statistical evidence that the forms of construction are fit-for-function and something against which to calibrate theory. So if all of our available knowledge is put to use then, we expect failure under defined circumstances and with the rare and unpredictable causes being beyond our current knowledge. Society therefore has expectations of success. This is typically represented in the cost of professional indemnity insurance, which is relatively low, and which otherwise increases in proportion to value of projects contributed to and the risk for the type of work.

Insurance and Geotechnical Engineering
So for example a few years back, during the construction of the Lane Cove Tunnel, when the roof of the tunnel collapsed and the corner of an apartment block above collapsed, the cost of insurance for geotechnical projects skyrocketed. This occurred to the extent that many consulting engineers contended they could no longer afford to work, and there was something of an up roar in the engineering community. Insurance costs settled down. In South Australia, the main work of civil engineers has largely been residential footing construction reports (FCR's), basically sizing slabs and footings located on highly reactive soils. In the past a large amount of cracking of brick work, led to some City Councils being sued: since then the development act 1993, removed the councils ability to give advice. There is now a requirement for independent technical check. Note the council is always there, consultants and builders come and go, and council grants approval, so they tend to be the first to be questioned over failures. So in the past failure of footings and cracking of brick work something of a problem, today however footings designed to AS2870 have a low risk of failure. To lump such work in with geotechnical engineering, is unreasonable: the risk is no where near the same as mining and tunneling activity. So a need to rationalise the insurance, if going to have people available to do the work: and the right people to do the work. Noting that in most other Australian states, where do not have the same level of reactive soils as South Australia (SA), footings can be sized directly from AS2870 and no engineer is required: just need soils people who take bore logs to classify the site to AS2870. Even in SA, some 80% of footings can be taken directly from AS2870, without need of blackbox software like Chord and Slog. Such work should be in the capabilities of 2 year qualified civil/structural engineering associates (they are not drafters or technicians), and such is covered in their academic programmes. Problem is getting the opportunity to put their studies to work, they mostly get put on a drawing board, and never get opportunity to progress, except may be with stormwater drainage design: which is heavily biased towards technical drawing.

Workshop Detailers and Detailing.
Considering another situation, that of work shop detailers. I'm not sure when, but around 1990, most of the contract drafters I met, previously were fulltime employees of fabrication and engineering workshops. There was massive decline in the industry and many people were laid off. I did my work experience at an engineering fabrication company in the late 1980's, all the companies clients I met, described how in the hey day the place was overflowing with activity. This is whilst we were hidden in the dark, deep inside the workshop buildings, with a simple lamp at the workers workstation: during the day time. The workshops were basically kept in the dark, with spots of light here and there where people were working. The skylight windows not providing all that much light. So there was this decline in the industry, and fabricators shifted to employing workshop detailers on an as needs basis, rather than having on staff. Problem is if talk to these workshop detailers, the works not worth the effort. Miss a simple cleat off the drawings, and get hit with the bill for going to site, cutting off incorrect cleat and welding on correct cleat in right place: can end up costing more than got paid for producing the workshop drawings. Workshop detailing is something really need to work on, one project at a time without interruption. Since that time a lot of work shop detailers have retired, and very few people interested in taking up the work. This in turn is increasing the reliance on 3D CADD software and building information models (BIM). If talk to work shop detailers however this software is ok for routine stuff, and also in cases where can generate CNC code for suitable machines, but otherwise produces appalling drawings where parts have to be made by hand. But that is also another problem, many of the people using such software have poor knowledge of technical drawing, engineering graphics and production processes. Its all very well being able to view things in 3D, if know what to look at in the first place. Similarly all very well being able to connect members together in 3D, but it doesn't really help design a connection that is feasible to fabricate. Consequently we have a skill base that has not been sustained, at the same time the educational institutions are teaching how to use the software before teaching the fundamentals of engineering graphics. Being able to use a compass and set square is still important: there are no object snaps on the work shop floor or on a construction site in the Australian outback. The tools and techniques traditionally used on a drawing board were and are the same as those used on workshop floor and the construction site.

With the skills no longer held in house by the fabricators, large national detailing companies have emerged. But it is questionable as to whether they can be called workshop detailers, more like part detailers. The difference is that they no longer know what materials are in stock, what tools available in the workshop, and what labour skills available. Workshop details are meant to be produced for a specific workshop and its capabilities: they are not meant to be simply part drawings. For example engineering details may specify a fabricated angle folded from a flat bar, the steel fabricator may have a preference for welding up from flat plate. If specify welded angle, fabricator likely to complain about expense of complete penetration butt welds (CPBW). The workshop detailer is supposed to resolve such differences and detail for the workshop. Similarly the workshop may have offcuts and steel in stock which is not otherwise readily available, this may be employed on the project at lower cost and get project completed faster. The engineer typically cannot make these decisions, because the fabricator is not known until the project is put out to tender, and a general builder is awarded the contract and the builder appoints a fabricator.

Cost of Workshop Drawings
Now this process works fine for large projects, but poses unwarranted expense for smaller projects. The builders and owners want to know why they have to pay for additional drawings. All that they see is the need for more detailed dimensions on the development approval drawings. In the era of CADD if everything has been drawn correctly to dimension and geometry, adding some extra dimensions not a major problem. But at development approval stage, drawings are not necessarily dimensionally and geometrically correct. The pressures of limited time, result in some last minute changes simply being noted on drawings, and not being fully developed. So the hallway in the building may be dimensioned 1200mm wide, but still drawn its orginal dimension of 1000mm. As a consequence many workshop detailers, generally do not request the CADD drawings for a project. They prefer to work from the printed paper drawings, and build a detailing model from scratch. This becomes a final check on bringing all drawing data together: architectural, civil, structural, mechanical and electrical. Which then becomes a common complaint of workshop detailers, that not all problems have been resolved before they get the drawings, and design still taking place as workshop details being produced. Thus reinforcing the situation that few people want to take up workshop detailing. The workshop detailer is at the end of the line for documentation: from there fabrication takes place.

Engineering
When engineers check workshop details they usually disclaim responsibility for dimension and geometry, they only check member sizes, materials and connection details. That all is inaccordance with the design intent. It is thus workshop detailers and fabricators who experience the defects in design from project to project rather than engineers.

The activity of structural engineers is mostly concerned with strength, and stability for some rare and extreme event: consequently some period of 50 years or more may pass before defects in an engineers assessment and calculations becomes apparent. Though serviceability isues may arise in the day to use of the structure. For example a floor in a house having too much bounce.

Once had a client who turned up and wanted a floor  designed, and wanted it in timber because steel has too much bounce. Strange situation. It is the Australian institute of steel construction (AISC) or now the Australian Steel Institute (ASI) which produces the guideline publication for floor vibration, not the timber development association (TDA). However the timber framing code AS1684, has span tables which consider stiffness and floor vibration. Hence a timber floor selected from the timber framing code typically does not have too much bounce. But if engineering calculations are required then the floor is outside the scope of the timber framing code, possibly beyond the capabilities of timber. Since manufacturers of glulams and LVL's produce span tables similar to the timber framing code, no engineer is required for a timber floor. Thus a timber floor is likely to have superior performance to that custom designed by an engineer, because the span tables are produced by engineers who in the main know what they are doing. The custom designed steel floor has too much bounce because it has not been fully designed: just assessed for compliance with the codes of practice. There is no mandatory constraint on deflections, there is a requirement for checking serviceability, but no specific performance criteria: codes of practice are not design manuals.There is more to engineering than simply checking code compliance, and more to know than simply the content of codes. It does not require an engineer to get this right. It requires someone highly familar with the technology being considered. A structural engineer highly conversant in the design of concrete water tanks is not necessarily competent enough to design the components of buildings. Similarly someone highly conversant in concrete design not highly familiar with steel design. Whilst they may have the foundational knowledge to understand, their projects do not necessarily permit the time to become adequately proficient, and exercise the desired duty-of-care.

The engineer as defined by WFEO, is more concerned with the frontiers of technology than the established, their formal education is meant to be more directed towards the sciences than established technologies, and technologies viewed in a more abstract and generic sense: highly fluid and adaptable to new circumstances. It is the role of engineering technicians, engineering associates and engineering technologists to deal with the established technologies and adapt them to familiar circumstances. So cranes, storage tanks, silo's, chimneys, buildings, and bridges are all familar technolgies and well established. Graduate engineers are not suitably educated for being job ready to design such things: they are not meant to be, for designing such things is not there job. It is the job of the other members of the engineering team to design these things, and for their education to be specifically directed at such task. The problem with the WFEO definitions is the assumption that an engineer can be educated straight out off school: crazy notion. To be a competent engineer, a person really needs to have spent considerable time in the role of other members of the engineering team before tackling a project at the frontiers of science and technology. Telford and Stephenson could more readily trackle projects at the frontier because so little was known and community expectations of success lower than they are today. We do not tolerate inferior versions of the wheel being released into the market: new products have to exceed the performance of existing. Today it is necessary to be highly familiar with a technology and get it right first time, every time: not altogether practical, but that is the expectation.

In the modern world the majority of people we call professional engineer are not operating in the WFEO role of engineer, they are actually operating in the roles of the other members of the engineering team. They are not push any frontiers, they are not stepping into the unknown, they are not taking major risks. Well actually they are taking a major risk.

That major risk is that they are pushed for time, operating in a competitive business environment, product has to be released to market and buildings and bridges have to get built, and money flow into organisation to cover research, design and development costs. Being pushed for time, the persons involved in a project are not necessarily highly conversant with the technology they are dealing with. Thus a structural engineer, sizes some mechanical anchors for an aluminimum balustrade and specifies welding to a base plate, without reference to the aluminium structures code, and with inadequate knowledge of metals. {eg. they should have stuck with dirt and concrete.}

On Consultants
So have a problem has industry becomes increasingly reliant on outsourcing and using the services of consultants. An aluminium fabricator, knows they need designers of aluminium products, most likely a specofic aluminium product. So such fabricator can take on so many graduates of engineering, across the full engineering team and train them relative to their product and the materials used. Thus they develop expertise in the required area.

Consulting civil/structural engineers spend most of their time dealing with concrete and steel, and designing buildings and bridges and other large structures one at a time. So when a manufacturer comes along and wants their product design updated, the consultants are not up to speed, with either the material or the technology, nor methodology. The approach required for a structural building system or the components of, is different than that for buidlings. It is totally inappropriate to describe the project as multiple one-off projects.

For example one contract engineer described a case he about, regarding a consultant who after a year of work issued a shed manufactured with a bill for $50,000, the case went to court. The contract engineer thought the fee was unreasonable, since one-off shed designs for such manufacturers typically of the order of $550 at the time, I didn't think it unreasonable as a total fee. I thought the fee is unreasonable for what they actually get: a collection of individual shed designs. My preferred approach is more along the lines of industrial product design, and the design of a structural building system: this would take a year or more to do, and cost considerably more than $50 thousand. Such system would simplify selection of components when customising the product to the end-users needs: and so eliminate or at least significantly reduce the number of designs rejected by the regulating authority. My general view is that most of the companies would be better off replacing one of their relatively unskilled sales people of estimators with an engineer or at least engineering associate. Its not likely to happen however: the owners of the business likely to come into conflict with qualified technical personnel.

The other issue is that most of the businesses are small family businesses, and cannot afford large scale up front investment in design, nor can the small consultancy businesses afford to carry the cost of RD&D for them. Hence, they generally get a one-off design, which becomes an envelope for what they do sell, they then get other one-off designs on an as needs basis. The problem of doing this, is that there is no rationale to the designs, the designs do not determine the limitations of structural sections: one design is not necessarily enveloped by another. Consequently their guesstimation based on the standard designs held can be flawed, and way out. They thus look to consultants who can assist them to make estimates of member sizes for quotations. These estimates are needed any where between the next 5 minutes, the next 30 minutes to the next 48 hours. It is something better provided in house rather than by consultants. By relying on consultants they experience delays, not to mention lack of interest. Due to the nature of these manufacturers consultants tend to reach a point where they no longer wish to speak to the manufacturer. So the manufacturer is left with the problem of which consultant will talk to them this week. When talking cold-formed steel that doesn't leave many consultants.

So businesses do not necessarily have the right mix of people. So one thing graduates and consultants could look at is the needs of existing businesses which may benefit from having engineering services more readily available.

On Calculations
Engineers are typically seen as the ones who do the numbers. This is a problem, and an important one to take note off. Engineering is not about calculations, it is about understanding the relationship between the varying characteristics of a system, and using that to design a solution to a problem. A brainless unimaginative block of silicon can crunch numbers but it cannot solve problems. However it has to be noted that it is people who solve problems. The traditional training of many people was dependent on their ability to evaluate mathematical expressions: and a primary part of their careers involved doing so. With the emergence of electronic calculators, the time spent on such calculations reduced, and with electronic digital computers the time reduced further. Hence the fallacy of engineers sell time.

When I started with cold-formed steel design, my view was: there was no way could be done for such fee. But after a few projects, and progressively building spreadsheets in Quattro Pro, I had reduced the time from a week, I no longer had to study and learn cold-formed structures code since done that, and the hand calculations progressively automated. Thus getting closer and closer to getting the answers the client wanted in 5 minutes. Whilst otherwise pushing the standard calculation fee up from $550 to $990. Not only were the calculations done faster, but some 5 times more calculations were carried out to provide significantly more detailed assessment of connections. Not particularly valued, because seems everyone knew some issue with the connections, but not wanting to change. Still an issue trying to resolve. I've had more testing done at the University of South Australia (UniSA) as a student project, but still got to bring about change. The problem is that the available connection design manuals are not readily available (little from the ASI is: commonly out off print very rapidly.), further more such manuals for hotrolled steel and not a national standard. Result an apparently common attitude don't need to use, and not relevant for cold-formed steel. May be so, but the mechanics of the connection is similar: and making some assessment is better than no assessment.

So not just a matter of doing calculations, but the right calculations for the system, and in the right time frame. If can provide calculations faster that has a premium. Calculations which identify problem with current design, and problem that everyone is ignoring, are not wanted. If only skill contributing to a project is calculation, then can be readily replaced by software.

I am aware of one engineer who apparently day after day, hand writes out calculations that a 250 PFC is several times stronger than required. Not once showing that a C25024 cold-formed c-section is also several times stronger than required: for to do so would require considerably greater calculation effort. The physical problem requires something 250mm deep, and something the shape of a channel: so 250 PFC is the off-the-shelf solution. The development act requires evidence-of-suitability, so calculations are churned out. The said engineer is close to retirement, and I suspect provides significantly more to his clients than such calculations. It is just most likely that direct payment is for printed documents, not for conversations with the builder. So the calculation effort can be significantly automated, and more economical solutions possibly sought. But it is a matter of whether the alternative solutions are actually sought, and whether anyone wants to implement. It is also a matter of whether the builder recognises the full service that they actually get from a member of the engineering team.

Consider another situation. A plan drafter or builder draws up plans for a house, draws a big black line and points to it with a note: beam by engineer. They submit to regulating authority and get request to supply calculations for beam-by-engineer. They then seek services of an engineer and get calculations, approval is granted and some weeks later the builder who contracts to build, turns up at engineers office complaining beam is over sized. Argument breaks out and dispute not resolved. The builder then goes else where for engineering: my office for example. They come through office door cursing and swearing, council idiots for approving stuff that's wrong, engineers that don't know what they are doing etc ...

A problem. In all probability the engineers calculations are most likely correct. The problem is the deep beam doesn't fit below ceiling in the available 300mm space, and further more it cannot be man handled through the front door of existing house. If have to take roof off house to crane the beam in there is no point. Its not that the calculations are wrong, it is that the incorrect design problem was solved. The plan drafter wanted a beam, they got a beam. Council wants a code compliant beam, they got a code compliant beam, approval was granted. No real design was carried out. Usually the builder turns up, dumps the drawings down and wants to nick-off. Got to grab the builder back, and explain they are part of the solution process: they have to be willing and able to implement the design-solution: otherwise its not a design-solution. As with the workshop detailers, have to choose between willingness to weld the steel bracket up, or to fold it. This case what is the builder willing to do. As long as engineer only seen as doing the numbers their service is low value.

But consider aside from the numbers, there are many other people who can do what an engineer does, and do it much better. It is the mathematics, and the numbers primarily why people approach engineers in the first place. An engineer is thus something of a hindrance and delay to the whole process: especially if the technology is highly established.

On Retired Engineers and Regulations
The South Australian development act requires independent technical check. Independence requires no involvement with design. The building code of Australia (BCA) requires evidence-of-suitability. So whilst the development act permits building surveyors, private certifiers and councils to request calculations, there is no actual requirement for.

On a few forums I have read complaints about retired engineers in various parts of the world, rubber stamping, and accused of under cutting fees. I don't see any such thing. Once again, there is no need for calculations, or the crunching out off numbers. Engineers approaching retirement or in retirement, have crunched the numbers many times before. Sure codes have changed, but the solutions seldom change, for codes are typically calibrated against previous codes to get similar answers. Codes are not typically revised to make changes to the traditional 80%, but for the 20% of cases which is becoming increasingly common and for which the code is no longer adequate. So for the traditional the engineers can simply look at and based on past experience and understanding of relationships know whether additional calculations are required to confirm compliance with current codes, or whether it is ok by inspection. So yes they can just rubber stamp. Their experience, knowing the answer has a premium, and so does supplying an answer rapidly. Who needs the answer, the builder, and building surveyor, who also already know the answer. But there is a regulatory system and ritual to go through. So just because you has an individual haven't had the repetition and the experience to know, and you don't fully understand what you are doing, and simply crunch numbers as a ritual without understanding, doesn't mean others have the same deficiency. However the requirement is for evidence-of-suitability, and anything that approaches ESP to concluding a structure is adequate is not acceptable. That being said it is not necessary to keep generating the evidence on each and every project. Hence we have such things as the timber framing code.

Since my formal education is in industrial, manufacturing and mechanical engineering I seldom solve problems project wise, and seldom design structures project wise. I typically view with respect to future projects and industry wide solutions. Whilst I solve the project specific problem, I also develop design tools to assist with future projects. This may cause delays in getting the first solution, but becomes increasingly faster on future solutions. As a business we do not charge the client directly for the cost of such development, it is distributed across many future clients. I read a statisticians website the other day, he said he didn't charge by the hour because he did the work much faster than everyone else: he charged a fixed fee. As a consulting engineering business we do similarly.

Our fees are something of an intuitive feel for the market: not altogether mathematically worked out. We can check industrial awards for minimum hourly rates for occupational classes, various published statistics indicate whether the market is paying over award wages, and various clients also provide feedback of the fees in the market. Businesses we work closely with, typically suggest we can charge more, they will pass on to their client, private individuals on the other hand typically want lower fees. If people phone up and suggest they can get for lower, we typically recommend they take the offer. For the most part we are not looking for work, dealing with enquires occupies far too much time: limiting our ability to actually do the work. People always wanting to push to the front of the queue: need answer in next week, next 48 hours, by the end off the day. These are not projects we are working on, these are new enquiries, people with problems. They don't want to talk to a receptionist, they want to talk to someone who knows the answer, who can help solve the problem. That is why retired and semi-retired engineers get the work. This is not work pushing the frontiers of technology, it is all estbalished technology, with solutions implemented already, the industry wants to know what those prior solutions are: they want the services of someone who knows.

It is another reason I view problems as industry problems. I can wait until someone asks me to design a 21m clear span cold-formed steel portal frame, or I can detemine the limitations of cold-formed sections and know the solution already. I can use the computer, to gain the knowledge I would otherwise need an entire career to acquire.

Whilst I don't have the required qualifications to act as an independent technical expert and issue certifcate as such, I can act in accordance with the BCA, and issue a certificate of adequacy on basis of suitably qualified. That certificate can be checked by an independent technical expert and approval granted. Whilst the independent technical expert doesn't have calculations to check, it shouldn't matter because they are meant to check compliance of the proposed structure with the BCA. They have a certificate which contends that it is compliant with the structural provisions and gives some simple parameters and outputs which can be validated (eg. maximum moment in structure given, and little else). Do not want the technical expert checking arithmetic, want them checking the specification. If they cannot do a quick check then they probably shouldn't be checking that type of structure. The issue is not mere technical competence but proficiency. I reiterate it is established technology: in mos instances the builder has selected on past experience: they want someone else to confirm and provide required evidence of suitability to get approval. Hence the retired engineer is the one they want. So 50 years ago could have spent and justified the time to calculate the answer on the project, because then no one knew the answer, now many people do: and there is ritual to provide required evidence.

So whilst there is a premium on knowing the answer and supplying the answer quickly. The answer itself has low value, because everyone knows the answer, what is required is rapid supply of evidence-of-suitability. That is where computer software comes in, and online engineering services.

Online Engineering Services.
When engineering is reduced to simply providing required evidence-of-suitability in the form of engineering calculations, then that service has low value. Clearly such is not sustainable as a business year after year, fees are going to decline as the value diminishes. The value diminishes as the design-solutions become a matter of routine applied on a regular basis by everyone and know by everyone.

Additionally it is clear that, end-users typically don't get much involvement in the design process. Engineering services are perceived as expensive, and seldom present options to the right person, or even consider alternatives. So there is a trend for people to be able to make and assess design changes for themselves, relative to what matters to them. Remove a column from a building: how does that affect the size of the beam supported and impact on the cost of the structure? The end-users solution to the problem may be significantly different than that of the structural engineer or builder, but more desirable. But end-users typically do not have the know how to assess the impact of such changes: hence they become dependent on others. This dependency causes delays. The dependency exists because imposed requirements about public safety: if the person was going to build and never sell, and never have guests, and was isolated in a remote location: then probably wouldn't care too much what they did. But that is not the case, and the community wants the built environment regulated. So we are dependent. The desire for self expression and independence acts against this system dependency. Consequently more prescriptive solutions are required, which have already been approved, and more computer based parametric adaptive models are required which permit end-user customisation.

So software like Microstran and Multiframe may meet the needs of structural engineers, but it doesn't meet the needs of end-users who want the structures. End-users are not interested in loading codes and materials codes, they are just interested in their house. Its easy to erase a wall on a piece of paper: but what impact does that have on the structural adequacy of the house? Is it in any way possible for the end-user to assess this change without the services of a structural engineer? The answer is yes. Consider that the products by Sony are all based on the simple concept of timeshift. Cannot attend that once in a life time opera at the end of world war II. But transistor radio brought it into the house without the loss of time to travel, tape recordings made the opera available at a future date.

The same applies to engineering services, they do not need to be provided at the time the end-user needs: that is probably too late any how. The engineering services can be invested at some prior date, as with Sony embodied in the products they manufacture or otherwise supply.

The value of the engineering is not the time spent on a project, that is worthless. The value of the engineering services is the value invested in the product supplied, both goods and services.When it comes to consultants, the real focus by the customer is on the goods supplied: namely the documentation: not really the service. Just as consulting engineers design buildings, they also need to design their business and the product they supply. Instead of complaining about declining fees they need to understand the value of the product they are supplying.

Once again, only members of the engineering team can do the numbers, everything else is typically within the scope of others. Others are no able to do the numbers without the aid of the engineering team. Others will increasingly be empowered to do the numbers with out the aid of members of the engineering team.

So if a person classed as an engineer, has no real creativity, no real problem solving skills, no ingenuity, no talent what so ever which gives them claim to the title engineer: then they will mostly certainly be replaced by a brainless unimaginative block of silicon.

More and more engineering services are going to appear online, and offered for lower and lower fees, permitting end-users to review various design options at a low cost.

Off-Line Engineering Services
Engineering was never about doing the numbers. It is about understanding the nature of the real world, and harnessing this to achieve some objective. This typically resulted in some enterprise being created to produce and supply a physical product. However as indicated the economy changes, and technical personnel of all kinds end up outside the production companies as consultants. Whilst there are benefits to consultants there are also problems.

One of the prime benefits contended of consultants is a certain independence from proposed solution. That is if go to building contractor who specialises in concrete, then building provided will be in concrete. The consultant is supposed to provide a solution from the most appropriate material. This doesn't really occur, engineers become specialised in a particular material, and have biased preferences, so typically for example design concrete structures. A lot of buildings which have collapsed in earthquakes were inappropriately designed in reinforced concrete. This is not because concrete is inappropriate for earthquakes, it is because the method of construction and materials supply was inappropriate for the location of the building. the buildings needed to be designed with far greater consideration of the process of supply. Sure the numbers indicated that reinforced concrete could provide the required performance, but the number crunchings says nothing about the capability of getting the required performance in the location of the building.

So both architects and engineers need to be thinking a lot more about the capability of industry to supply the buildings they have specified. Not just considering the performance of the end-product. Back to workshop detailing example again: welded steel bracket versus folded steel bracket: two different processes which one is available? Further more which process is the more robust and least subject to human error? For a simple angle bracket where should the weld be placed, what form should the weld take? For the folded plate, what radius the bend, and how does that affect its stability? Little things can make a big difference.

Builders replacing multiple nails with a few large bolts: weaken the structure rather than strengthen it. Why? Because they have taken more material out off the member, and placed more force on the individual fasteners. But builders want to make certain changes: one is the large bolts look stronger, the other is it takes less time to install. Once again its not about the numbers but a qualitative appreciation of which way the numbers are going to go, without need to actually evaluate them.

If an engineer takes an arrogant stance of being smarter than builders and end-users then in all probability likely to fall flat on their face. It is a matter of perspective. Whilst the engineer is considering that the builder and end-user doesn't understand, they are thinking the same about the engineer. When the engineer thinks they have a great solution, everybody else may think otherwise. No one is really interested in mathematical prowess. People are only interested in the practical solutions which result from the mathematics. As for graduates, well hate to disappoint you, but the answer is in the book over on the office book shelf. No need to spend all day doing algebra we as a society have known the solution for some 50 years already. Some of the more common solutions were part of academic studies, so should have verified the handbook formula already. That is also part of the difference between education of engineering associates and engineers, the engineering associates more likely to have used industry handbooks and be familiar with: engineers have to become familiar with on the job and chances are going to spend all day doing calculus instead of implementing the known solution: chances are they will get the calculus wrong as well.

Consultants need to know what the product is that they have to supply to the market. Get away from those mega infra-structure projects and everything changes. Consultants should not be complaining about the skills of graduate engineers, when graduate engineers are not the people they need for their projects. We seem to have developed a society in which people expect to leave school, get a degree and be at the top. It doesn't work that way. You don't get to the top by only learning and knowing what everybody else knows, you need to know more than that. The title engineer may be the preferred and desired title, but the WFEO engineer is not what industry mostly needs. There is no global shortage of engineers as such.

There are shortages of;

1) Imaginative and ingenious individuals who can come up with innovative products and or solutions to the worlds problems.

2) Technically competent people to assess and evaluate proposed technologies, and take them from concept to implementation.

The innovative solutions sought mostly involve people not physical systems, whilst proposed technologies are variations of established technologies. Buildings are typically variations of established technolgies, no structural engineer required, but competent engineering associates and engineering technologists are required. Instead of wasting 4 to 5 years training a civil engineer, we can train a structural engineering associate in 2 years. Once again I reiterate engineering is not about high end mathematics and crunching numbers. Mathematics and numbers are just a tool, a means to an end,  they are not everything. Some consultants have made the numbers everything and are not really serving their clients. Fancy finite element models take time to make and don't really contribute any real value. Likewise 3D CADD models and BIM do not contribute real value to projects. It is necessary to understand the nature of the projects dealing with.

The custom engineering for a portal frame shed is relatively low value engineering, such as most likely been done a 1000 times already, and can probably go to a supplier who already has a suitable stock standard design. But increase the span of the building, so that there is no longer a single steel section which can be used as a rafter, then it becomes an entirely different problem. The structural form is now no longer known, and some real structural design is starting to take place: it has significantly more value. Further more now starting to move towards experiencing fabrication and construction issues with which the builders are not familiar. The project now starts to move towards being a project in which significant engineering supervision is required throughout the project. But once again still not necessarily requiring an engineer. Note the people currently practicing as engineers, and have been doing so for the past 30 to 50 years have solved many problems which previously had no solution. These solutions can now be passed onto engineering technologists in their education, not engineers. The engineers task is the unsolved problems, not the established solutions hidden in some text some where.

Implementing a solution has lower value than inventing a solution. Inventing an inferior solution to an existing solution available in industry publications, has lower value than the available solution. Consulting engineers are not all that different than engineers working for hitech manufacturers. For example Betamax versus VHS video tape. What matters is what the market wants and what are able to supply. If you've missed the boat then you have missed the boat. Minever Cheevy suffered a terrible fate: born too late. Might like to be an errant knight, and can live in a dream world like Don Quixote, but just going to be lancing at windmills.

So the numbers are going to be increasingly crunched by computers. Manufacturers are going to want this software to allow end-users to customise a relatively generic product to better meet their needs, and this is going to be increasingly done on line. Custom software will need to be written because existing software requires specialists to operate. The availability of manufactured structural product is going to decrease demand for consulting engineers as more of the lower end project work is supplied by the available products. Those manufacturers are likely to employ more engineering personnel on staff to adapt the product to improve manufacturing efficiency: to provide a higher performing product at lower cost and faster.

It should be noted that some consultants already have restrictions in place, they cannot do work for manufacturers similar to their principle client: if they do then they loose future work from that client. To be able to impose such constraint the client has to be able to supply a lot of work.

Also since the 1993 development act came in and brought private certification, some consulting engineers have taken on the role of councils checking development applications for building rules compliance: only the council can grant development approval: but others can do the checking and certification.

One consultancy is not the same as another. Even if they deal with structures each is different. Even if they appear to work in the same market, they should still have noticeable differentiation. I contend that it is wrong to contend that fees were undercut, and jobs bought, just because lost the job due to a lower fee. As technologies become increasingly established the value of the engineering service currently provided diminishes. The fees only rise when the engineering service is in short supply: but there is no real increase in the intrinsic value of the service. People just tolerate paying more until a solution is found to better satisfy the demand.

It is therefore necessary to innovate to increase the value of the service, or otherwise maintain its value.

As I indicated earlier people want to talk to someone who can provide the solution to their problems, not a receptionist. This takes consultants away from the design and documentation task. On mega projects can afford a design team, with people dealing with project enquiries other preparing tenders for new projects, others visting sites and still others doing design and documentation. For small scale projects and small businesses, cannot afford such teams. Employing someone, to start with, does not increase productivity but decreases it, as spend more time supervising and training the new recruit. Put bluntly programming a computer is a more productive exercise: and shows gains a lot more immediately.

The problem with employing people on low end work is that the work does not have high value, but there is a lot of it and it needs to be done quickly. Priorities for the work can change by the minute: the unfortunate few may not get their job for 12 months, even though only a few hours work involved. So the problem is managing the waiting line.  So have a problem: proving that have developed the technology to supply faster and to be able to do so consistently, and therefore charge a higher price. Technology is required because it increases the value whilst additional personnel simply increases the cost beyond the recoverable value. Its a matter of emergent behaviour, or synergy. The value is less than the sum of the costs, therefore sale price cannot recover the cost. Price is not cost plus profit: price is what the market is willing to pay. Get your product wrong then you make a loss.

So can work project fees out on the basis of time taken and hourly labour rate, but for small projects chances are the fee is going to be seen as extortionate by the market: more over beyond their capacity to pay. If the fee is beyond the capacity of the market to pay then do not have a business. A given market will support a given lifestyle with a given approach to that market. Change the approach and can change the lifestyle it can support. So if there is a market for the MacDonalds of engineering or Amazon.com then someone, somewhere will eventually provide it. That someone is unlikely to have traditional engineering skills: could be a drafter, a computer scientist, or steel fabricator: who saw a need and filled it. As I have said before business is a real world experiment: you try something and then respond accordingly to feedback.

So identified a market: know what they want, what price willing to pay, and how fast they want it. The big question is can you design a business and product that meets that need, and then supply it?

Whilst consulting engineers may know a great deal about bridges and buildings that they assist to design and build: they don't necessarily know enough about the product they actually supply: their engineering services. Most who have implemented quality assurance systems have no real idea about quality, simply converted document control systems for contract management into ISO9000 quality accredited system: but they have no real quality system with respect to the product they supply. They have missed the point. Every revised drawing represents defect in design and documentation: defeciency which should not exist, defeciency which should be removed. Some consultants have revision number systems which confuse real revisions with document issues. Either way more effort is required in the design of the design and documentation process. That engineer didn't have adequate knowledge of aluminium design at the start of the project, and still doesn't at the end of the project. Are more projects in aluminium coming this way? That engineer really doesn't have adequate knowledge of storage tank design. That engineer lacks knowledge of bridge design. Does the consultancy tender for projects, or does the work just flow in? Does the consultancy supervise construction or just produce design documents? What is it that the client wants rather than what the consultant wants to supply? The owner of a building may want the architect and engineer to supervise construction and the contract. But the builder client doesn't need or want such supervision: they just want the design documents, they have others to ensure compliance with their specifications.

Supermarket chains for example impose discounts on engineers just like they do on spud farmers: they treat all suppliers the same. Government and large corporate clients get small projects that big city engineers not interested in, or otherwise charge too high a fee for. So they seek out small business, no tendering, they ask for submission of a a fee. But then they start getting into requirements for this and that: like ISO9000 accredited QA systems, evidence of insurance, copies of this document and that document., fill in this form and that form, and comply with this contract. Up shot, hey we are not interested in your work, we do engineering, if you want to keep your administrative staff employed go else where. All of this other stuff is superfluous to the task: fees only cover the actual task not this irrelevant stuff. If really want all this other stuff then go to some consultant that also has administrative staff to keep employed. These businesses don't want what they get for the lower price: they want gift wrapping and a fancy bow to tie it up. They want something more than the generic product. Once again important to know where your market is: not just as supplier but also as buyer. As a buyer you don't go into a used car yard and start demanding features only available on new cars. You go to the right place in the first instance. With service providers its more difficult to select the right supplier because cannot see what you are going to get.

A few years back I criticised Engineers Australia engineering excellence awards: because there was no real evidence of excellence in engineering. For all I know the building contractors could have fixed a multitude of errors in the engineering constribution, and the engineers could have been bumbling about in the dark until they fell over a solution, and produced documentation in constant need of revision. In short the engineering contribution to an otherwise excellent project was rubbish. It is thus difficult to tell as an outsider whether a project turned out well despite the presence of a useless consultant on the project, or because of an excellent consultant.

Its getting beyond the numbers and finding out what the real contribution is. Many consultants talk about supplying more: but don't really walk the talk.

I'm thinking sleep would good: Sat 2012-Mar-10  03:36

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1. Original