In a webinar hosted by Consulting Engineers South Africa on January 26, consulting engineering industry professionals have called for the organisation, together with the Engineering Council of South Africa (ECSA), the Construction Industry Development Board and the National Treasury to address the “damaging” practice of discounted professional fees in the consulting engineering space. 

The argument made by Stellenbosch University civil engineering Professor Jan Wium and Triple 3 Engineering researcher and contractor Dr Patrick Okonkwo, among other speakers, was that there is sufficient evidence to conclude that discounted consulting engineering professional fees are having a negative impact on not only industry professionals but on all project participants, including clients, contractors, their employees and, most importantly, society at large – particularly in the case of large public infrastructure projects. 

“We know that by reducing a consultant’s fee, more risk is placed on the consultant and ultimately on the project. So, the client pays for it elsewhere – perhaps in the final project cost or in operational costs and maintenance cost,” Wium said. 

He argued that the discounting of professional fees led to compromised design services owing to budget-induced constraints. This, in turn, had a negative impact on a range of construction activities, increasing the risk involved in demolition, electrical works, excavation, working at height, plant and equipment, manual handling and steelwork erection, besides others. 

“Clients need to realise that risk and cost cannot be removed from a project, and if they save on professional fees, they will ultimately pay the price during execution, operation or maintenance,” Wium said. 

In 2016, the Competition Commission ruled that the fee guidelines used in the built environment industry in South Africa were non-competitive and that they effectively resulted in price fixing. Preceding this, ECSA applied to have the practice of fee guidelines exempted from the Competition Act. However, this application was rejected. Therefore, following the Competition Commission’s 2016 ruling, a new era of discounted fees emerged in the industry. 

Even though the fee scale was abolished, consultants continued to use it as a guideline from which to calculate discounts, with clients following suit by requesting discounts. 

According to Okonkwo, quality- and cost-based selection criteria in terms of tenders has led to tender prices plummeting to “all-time lows”, a situation which has become even worse in the private sector, where market pressure has clients allegedly demanding “ridiculously low rates” that leave consulting engineers in a compromised position.

He said the consulting engineering sector struggled to adequately communicate the value of its services to clients in terms of risk and return on investment. 

Some of the problems that arise as a result of fee discounting practices, which have a negative knock-on impact on society and the South African economy, include staff demotivation and fatigue resulting from increased workload for engineers, inability to afford competitive salaries, the devaluation and deterioration of the engineering profession,  firms' inability to hire and retain qualified staff or to provide adequate training. 

“As a profession, we need to resist discounting professional fees and capture evidence of the impact to convince our peers and our clients,” Wium implored. 

Okonkwo, reiterating these concerns, noted that the building of a capable State required the calculation and payment of reasonable professional fees.  

He pointed that, on average, the discounted rates were about 20% to 30% less than the pre-2016 fee guidelines. However, he said that as much as 70% was discounted in extreme cases. 

“Excessive discounting compromises quality of service in terms of resources and time dedicated to projects,” Okonkwo noted, adding that such excessive discounting was unethical. 

He warned that such practices would lead to the loss of skilled and experienced engineers as they sought higher paying jobs abroad, while also negatively affecting South Africa’s ability to recruit and train up young engineers. 

Ultimately, it was the economy and society that would suffer from inferior work on projects, leading to growth and development being stunted. 

“You get what you pay for,” Okonkwo quipped. 

Together with Wium, he said a consulting engineering reporting framework requirement – similar in nature to Occupational Health and Safety Assessment Series reporting requirements – would be instrumental in collecting data that would demonstrate the value of the consulting engineering industry to South Africa.