Analysis of Cost Estimation and Payment Systems for Consultant Contracts in the US, Japan, China and the UK
Determining reasonable fees is the main objective of designing the cost estimation and payment systems for consultant contracts. However, project clients utilize different cost estimation and payment systems because of their varying views on the reasonableness of consultant fees. This study reviews the cost estimation and payment systems of consultant contracts for five countries, including the US (Washington State Department of Transportation), Japan (Ministry of Land, Infrastructure, Transport and Tourism), China (Engineering Design Charging Standard) and UK (Her Majesty's Treasure). Specifically, this work investigates the budgeting process, contractor selection method, contractual price negotiation process, cost review, and cost-control concept of the systems used in these countries. The main finding indicates that that project client-s view on whether the fee is high will affect the way he controls it. In the US, the fee is commonly considered to be high. As a result, stringent auditing system (low flexibility given to the consultant) is then applied. In the UK, the fee is viewed to be low by comparing it to the total life-cycle project cost. Thus, a system that has high flexibility in budgeting and cost reviewing is given to the consultant. In terms of the flexibility allowed for the consultant, the systems applied in Japan and China fall between those of the US and UK. Both the US and UK systems are helpful in determining a reasonable fee. However, in the US system, rigid auditing standards must be established and additional cost-audit manpower is required. In the UK system, sufficient historical cost data should be needed to evaluate the reasonableness of the consultant-s proposed fee
[1] Administrative Measures for Design Bidding of Construction Project
Schemes, 2008. In Chinese.
[2] Bubshait, A. A., Al-Said, F. A., and Abolnour, M. M., 1998, "Design Fee
versus Design Deficiency, Journal of Architectural Engineering," Vol. 4,
No. 2, pp. 44-46.
[3] Canterbury City Council, 2011, http://www. canterbury .gov.uk/
main.cfm?objectid=623
[4] Carr, P. G., and Beyor, P. S., 2005, "Design Fees, the State of the
Profession, and a Time for Corrective Action," Journal of Management in
Engineering, Vol. 21, No. 3, pp. 110-117.
[5] Farr, J. V., 2001, "Commodities and Value-Based Pricing of Engineering
Services," Journal of Management in Engineering, Vol. 17, No. 4, pp.
225-228.
[6] Feldmann, M. L., Chrusciel, D., Pohlmann, A., Shelley, M. C., McCool,
K., Morton, A. D., and Ahoy, C. K., 2008, "Architectural and Engineering
Fees from the Public Institutional Perspective," Journal of Management in
Engineering, Vol. 24, No. 1, pp. 1-11.
[7] Financial Thresholds and Procedures, 2011, Thanet District Council,
accessed 12 August, 2011, <
http://www.thanet.gov.uk/council__democracy/tenders__contracts/thane
t_purchasing_guide/financial_thresholds.aspx >
[8] Flyvbjerg, B., Holm, M., and Buhl, S., 2002, "Underestimating costs in
public works projects: Error or lie?" Journal of the American Planning
Association, Vol. 68, No. 3, pp. 279-295.
[9] Gransberg D. D., Puerto, C. L., and Humphrey D., 2007, "Relating Cost
Growth from the Initial Estimate to Design Fee for Transportation
Projects," Journal of Construction Engineering and Management, Vol.
133, No. 6, pp. 404-408.
[10] HM Treasury, 1997, Procurement Guidance 3: Appointment of
Consultants and Contractors, Her Majesty's Treasury.
[11] Hoxley, M., 2000, "'Are competitive fee tendering and construction
professional service quality mutually exclusive?'' Construction
Management and Economics, Vol. 18, pp. 599-605.
[12] Japan Association of Architectural Firms, 2007, General Conditions of
Design/ Supervision Basic Contract. In Japanese.
[13] Ling, Y. Y., 2004, "Consultancy Fees: Dichotomy between A/E's Need to
Maximize Profit and Employers' Need to Minimize Cost", Journal of
Professional Issues in Engineering Education and Practice, Vol. 130, No.
2, pp.120-123.
[14] Ministry of Land, Infrastructure, Transport and Tourism (MLITT) No. 1
of April 1, 2009. In Japanese.
[15] Ministry of Land, Infrastructure, Transport and Tourism (MLITT) No. 15
of January 17, 2009. In Japanese.
[16] Ministry of Land, Infrastructure, Transport and Tourism (MLITT) No. 68
of July 1, 2009. In Japanese.
[17] Molenaar, K. R., 2005, "Programmatic Cost Risk Analysis for Highway
Megaprojects," Journal of Construction Engineering and Management,
Vol. 131, No. 3, pp. 343-353.
[18] National Emblem of the People's Republic of China.(NEPRC),
Supervision Contract for Construction Project, 2000. In Chinese.
[19] Office of Financial Management (OFM), 2009, Guidelines for
Determining Architect/Engineer Fees for Public Works Building
Projects, accessed 18 August, 2011, <http://www.ofm.wa.gov/budget/
instructions /capinst/aeguidelines.pdf>
[20] PACE Central Advice Unit, 1998, Guide to the Appointment of
Consultants & Contractors (GACC).
[21] Regulations bidding management of Build and infrastructure supervision
service in FUJIAN Provincial Government, 2010. In Chinese.
[22] Survey and Design Charging Standards Division Procedures Manual, The
Chinese market Press, 2005. In Chinese.
[23] Survey and Design Charging Standards of Supervision, 2007. In Chinese.
[24] Survey and Design Charging Standards, 2002. In Chinese.
[25] The Code of Construction Project Design, 2008. In Chinese.
[26] The Code of Construction Project Management, 2003. In Chinese.
[27] Washington State Department of Transportation (WSDOT), 1999, Audit
Guide for Consultants, Washington State Department of Transportation
Audit Office, pp.5-1~8-4.
[28] Washington State Department of Transportation (WSDOT), 2007,
WSDOT Consultant Programs Division Procedures Manual, Washington
State Department of Transportation.
[29] Young Jiang, Architect's Professional Practice, Tsinghua University
Press, 2005. In Chinese.
[1] Administrative Measures for Design Bidding of Construction Project
Schemes, 2008. In Chinese.
[2] Bubshait, A. A., Al-Said, F. A., and Abolnour, M. M., 1998, "Design Fee
versus Design Deficiency, Journal of Architectural Engineering," Vol. 4,
No. 2, pp. 44-46.
[3] Canterbury City Council, 2011, http://www. canterbury .gov.uk/
main.cfm?objectid=623
[4] Carr, P. G., and Beyor, P. S., 2005, "Design Fees, the State of the
Profession, and a Time for Corrective Action," Journal of Management in
Engineering, Vol. 21, No. 3, pp. 110-117.
[5] Farr, J. V., 2001, "Commodities and Value-Based Pricing of Engineering
Services," Journal of Management in Engineering, Vol. 17, No. 4, pp.
225-228.
[6] Feldmann, M. L., Chrusciel, D., Pohlmann, A., Shelley, M. C., McCool,
K., Morton, A. D., and Ahoy, C. K., 2008, "Architectural and Engineering
Fees from the Public Institutional Perspective," Journal of Management in
Engineering, Vol. 24, No. 1, pp. 1-11.
[7] Financial Thresholds and Procedures, 2011, Thanet District Council,
accessed 12 August, 2011, <
http://www.thanet.gov.uk/council__democracy/tenders__contracts/thane
t_purchasing_guide/financial_thresholds.aspx >
[8] Flyvbjerg, B., Holm, M., and Buhl, S., 2002, "Underestimating costs in
public works projects: Error or lie?" Journal of the American Planning
Association, Vol. 68, No. 3, pp. 279-295.
[9] Gransberg D. D., Puerto, C. L., and Humphrey D., 2007, "Relating Cost
Growth from the Initial Estimate to Design Fee for Transportation
Projects," Journal of Construction Engineering and Management, Vol.
133, No. 6, pp. 404-408.
[10] HM Treasury, 1997, Procurement Guidance 3: Appointment of
Consultants and Contractors, Her Majesty's Treasury.
[11] Hoxley, M., 2000, "'Are competitive fee tendering and construction
professional service quality mutually exclusive?'' Construction
Management and Economics, Vol. 18, pp. 599-605.
[12] Japan Association of Architectural Firms, 2007, General Conditions of
Design/ Supervision Basic Contract. In Japanese.
[13] Ling, Y. Y., 2004, "Consultancy Fees: Dichotomy between A/E's Need to
Maximize Profit and Employers' Need to Minimize Cost", Journal of
Professional Issues in Engineering Education and Practice, Vol. 130, No.
2, pp.120-123.
[14] Ministry of Land, Infrastructure, Transport and Tourism (MLITT) No. 1
of April 1, 2009. In Japanese.
[15] Ministry of Land, Infrastructure, Transport and Tourism (MLITT) No. 15
of January 17, 2009. In Japanese.
[16] Ministry of Land, Infrastructure, Transport and Tourism (MLITT) No. 68
of July 1, 2009. In Japanese.
[17] Molenaar, K. R., 2005, "Programmatic Cost Risk Analysis for Highway
Megaprojects," Journal of Construction Engineering and Management,
Vol. 131, No. 3, pp. 343-353.
[18] National Emblem of the People's Republic of China.(NEPRC),
Supervision Contract for Construction Project, 2000. In Chinese.
[19] Office of Financial Management (OFM), 2009, Guidelines for
Determining Architect/Engineer Fees for Public Works Building
Projects, accessed 18 August, 2011, <http://www.ofm.wa.gov/budget/
instructions /capinst/aeguidelines.pdf>
[20] PACE Central Advice Unit, 1998, Guide to the Appointment of
Consultants & Contractors (GACC).
[21] Regulations bidding management of Build and infrastructure supervision
service in FUJIAN Provincial Government, 2010. In Chinese.
[22] Survey and Design Charging Standards Division Procedures Manual, The
Chinese market Press, 2005. In Chinese.
[23] Survey and Design Charging Standards of Supervision, 2007. In Chinese.
[24] Survey and Design Charging Standards, 2002. In Chinese.
[25] The Code of Construction Project Design, 2008. In Chinese.
[26] The Code of Construction Project Management, 2003. In Chinese.
[27] Washington State Department of Transportation (WSDOT), 1999, Audit
Guide for Consultants, Washington State Department of Transportation
Audit Office, pp.5-1~8-4.
[28] Washington State Department of Transportation (WSDOT), 2007,
WSDOT Consultant Programs Division Procedures Manual, Washington
State Department of Transportation.
[29] Young Jiang, Architect's Professional Practice, Tsinghua University
Press, 2005. In Chinese.
@article{"International Journal of Business, Human and Social Sciences:61873", author = "Shih-Hsu Wang and Yuan-Yuan Cheng and Ming-Tsung Lee and Wei-Chih Wang", title = "Analysis of Cost Estimation and Payment Systems for Consultant Contracts in the US, Japan, China and the UK", abstract = "Determining reasonable fees is the main objective of designing the cost estimation and payment systems for consultant contracts. However, project clients utilize different cost estimation and payment systems because of their varying views on the reasonableness of consultant fees. This study reviews the cost estimation and payment systems of consultant contracts for five countries, including the US (Washington State Department of Transportation), Japan (Ministry of Land, Infrastructure, Transport and Tourism), China (Engineering Design Charging Standard) and UK (Her Majesty's Treasure). Specifically, this work investigates the budgeting process, contractor selection method, contractual price negotiation process, cost review, and cost-control concept of the systems used in these countries. The main finding indicates that that project client-s view on whether the fee is high will affect the way he controls it. In the US, the fee is commonly considered to be high. As a result, stringent auditing system (low flexibility given to the consultant) is then applied. In the UK, the fee is viewed to be low by comparing it to the total life-cycle project cost. Thus, a system that has high flexibility in budgeting and cost reviewing is given to the consultant. In terms of the flexibility allowed for the consultant, the systems applied in Japan and China fall between those of the US and UK. Both the US and UK systems are helpful in determining a reasonable fee. However, in the US system, rigid auditing standards must be established and additional cost-audit manpower is required. In the UK system, sufficient historical cost data should be needed to evaluate the reasonableness of the consultant-s proposed fee
", keywords = "Consultant Services, Cost Estimation and Payment System, Payment Flexibility, Cost-control Concept", volume = "6", number = "5", pages = "949-10", }
