Consultants risk : an investigation into the impact of discounted professional fees on the risk exposure of civil and structural engineering services consultants in South Africa

Okonkwo, Patrick Nwabueze (2014-12)

Thesis (MEng)--Stellenbosch University, 2014.

Thesis

ENGLISH ABSTRACT: Since the intervention of the Competition Commission and the abolition of the mandatory use of the government gazetted Engineering Council of South Africa (ECSA) fees scale, engineering services consultants in South Africa have been competing based on price for engineering contracts in both the public and private sectors. Discounts benchmarked against ECSA professional fees scale demanded by clients have resulted in declines in professional fees over the years. The capacity to deliver professional services that are of such high quality that it meets the client’s expectation, professional and ethical standards when working at low fees is one of the biggest challenges facing consulting professionals today. This research studied the risks encountered by civil and structural engineering services consultants and the impact of discounted professional fees on their risk exposure. The study included a review of literature, discussions with practicing engineers and a questionnaire based survey. A total of 23 practicing consulting engineers representing small, medium and large consulting engineering firms participated as respondents in the questionnaire survey. The literature review identified project and organisational level risks particular to civil and structural engineering services consultants. The study compiled information on the discounting practices of civil and structural engineering services consultants in South Africa. It is found that the practice of discounting is widespread, affecting small, medium and large consulting firms. The range of discounts offered in the industry results in a significant decrease in the fee scale recommended by ECSA for various engineering project types. Respondents identified the primary reasons why they are forced to offer discounts and identified project and organisational risks most impacted by discounted fees in an order of perceived importance to them. Financial loss on the project, inadequate supervision and quality control on site and inability to perform value engineering were identified as project risks with the most impact on respondents’ organisation. At the organisational level human resource issues such as training and mentoring of young engineers, ability to attract and retain quality/experienced staff and overall business sustenance were identified as risks most impacted by discounted fees. Measures adopted by respondents to mitigate risk associated with discounted fees on project were also identified and recommended.

AFRIKAANSE OPSOMMING: Sedert die ingryping van die Kompetisie Kommissie en die afskaffing van verpligte fooie soos gepubliseer deur die regerings koerant en Ingenieurs Raad van Suid Afrika (IRSA), het ingenieurs konsultante in Suid Afrika meegeding gebaseer op die prys van ingenieurs kontrakte in beide die publieke en private sektore. Afslag wat gemeet word teen professionele skale van ECSA word vereis deur kliënte. Onetiese tender gedrag deur kliënte en raadgewers het gelei tot ʼn daling in professionele fooie oor die jare. Die kapasiteit om professionele dienste te verskaf, wat van ʼn hoë kwaliteit is, kliënte se verwagtinge bereik en professionele en etiese standaarde bereik teen lae koste is een van die grootste uitdagings vir professionele raadgewende ingenieurs in vandag se mark. Hierdie tesis bestudeer die risiko’s wat siviele en strukturele raadgewende ingenieurs ondervind, asook die impak wat afslag van professionele fooie het in terme van die blootstelling van risiko’s. Hierdie studie behels ʼn literatuur studie, gesprekke met ingenieurs in die praktyk en ʼn vraelys opname. ʼn Totaal van 23 raadgewende ingenieurs wat klein, medium en groot raadgewende ingenieurs instansies verteenwoordig het deelgeneem aan die vraelys opname. Die literatuur studie het projek risiko’s en risiko’s op die organisasie vlak geïdentifiseer wat veral verband hou met siviele en strukturele raadgewende dienste. Die studie het informasie gegenereer oor die dalende uitvoering van siviele en strukturele raadgewende dienste in Suid-Afrika. Dit is bevind dat die beginsel van afslag in die algemeen klein, medium en groot raadgewende firmas beïnvloed. Die omvang van die afslag wat aangebied word in die ingenieurs bedryf het gelei tot ʼn beduidende afname in die fooi skaal wat aanbeveel word deur ECSA vir die verskeie ingenieurs projek tipes. Die verskeie deelnemers van die studie het gedui dat die primêre rede hoekom hulle gedwing word om afslag aan te bied en projek en organisasie risiko’s identifiseer, is omdat afslag fooie ʼn voorafgestelde belang is vir hulle. Finansiële verliese op ʼn projek, onvoldoende toesig, kwaliteitsbeheer en die onvermoë om hoë gehalte ingenieurswese toe te pas was geïdentifiseer as die projek risiko’s wat die meeste invloed het op die deelnemers se organisasies. By die organisasie vlak was menslike hulpbronne, soos opleiding en die mentorskap van jong ingenieurs, die vermoë om kwaliteit of ervare personeel te trek en te behou, en die algehele besigheid lewensmiddele geïdentifiseer as risiko’s wat die meeste beïnvloed word deur afslag fooie. Maatreëls wat aangeneem is deur deelnemers aan die studie om risiko’s wat verband hou met afslag fooie van ʼn projek te versag is geïdentifiseer en aanbeveel.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/95865
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