Before bringing you this month’s “Surveyor’s Footsteps” column, POB would like to stress the importance of being aware of antitrust laws as they refer to pricing. If in doubt, consult your local or state professional surveyor’s society. With a view to “It can happen here,” POB offers the following quotes from a University of Maine article referring to a case against surveyors in the 1990s. The link for the article is included:
Recently, the Department of Justice Antitrust Division entered an agreement with the Northwest Chapter of the Arkansas Society of Professional Surveyors where the Chapter agreed to pay a fine of $60,000 for violation of the United States Code. The indictment charged five surveyors and the Chapter with a conspiracy “to raise, fix and maintain the price of lot and block surveys in northwest Arkansas.” The indictment went on to charge that the defendants met, discussed, reached a price agreement, raised the price to a minimum of $300 per survey, received compensation in that amount, and generally affected interstate commerce. They were charged under 15 U.S.C.A. § 1, known as the Sherman Antitrust Act…
There are also some safety guidelines that surveyors can adhere to in order to prevent price fixing. First, understand how to determine a fair and reasonable fee for services. Professional practice is not for the sake of making a killing at the expense of the public, rather the purpose is to provide a quality service for a reasonable price. Determine and be prepared to justify your fee based on an accurate and reasonable analysis of costs, overhead, profit and demand within a free marketplace environment. Do not base a fee solely on a competitor’s fee. Bargain and reach an agreement with the client to determine the fee and not with the competitor. Fair competition is healthy among knowledgeable and ethical professionals.
Beware of Price Fixing! http://tinyurl.com/ycytw5hf
What are you worth?
Surveyors have in-house fees for their services. Some work will be charged using hourly rates while others may be charged according to task. We cannot discuss or create standard fees within the profession. Apparently, surveyors are too tempted toward racketeering so we cannot compare price lists. Engineers have related to me by word of mouth some of the fees surveyors quoted them for hourly work. When I am bidding, I may ask a client what another surveyor quoted so I can get a grasp of the current market costs. There have been times I was sure a person called at the request of another surveyor to see what my fees were, but I have never used such an approach.
I read that the average national auto repair rate is about $100 per hour. The mechanic may get $25 to $33 of that fee. I know of a local surveyor who charges far less than that for experienced people, and for himself. When I was shown his rates by a homebuilder, for whom I no longer work due to my “high costs,” I had to wonder if he had insurance. What did he pay his employees? What are their operating costs? Do they plan to survive their first year? How long will it take to realize they could have increased their profits by simply being fair to themselves? If you are your own boss, why shortchange yourself? As a licensed person, are you worth as much as a mechanic?
Will the contractor thank them for leaving their fair earnings in his pocket? Can the surveyor survive business losses? Will that person be one of those names that, when a surveyor working the long haul sees their name on a plan or deed, asks themselves “Who was that?”
My accountant will sometimes refer to my silent partner. His name is Uncle Sam and he always gets his share. We prepare a topographic survey plan, charge the fee, and then the proceeds begin to undergo the process of being carved up and our wealth is redistributed. We have operating costs such as fuel, supplies, equipment payments, repairs, software license fees, workman’s compensation costs, insurance, to name a few. Hopefully, we will all charge enough to pay our people a fair wage. Otherwise, like the contractor, we are looking for the cheapest employees and those will cost us dearly in other ways.
On occasion and usually when I have worked a lot of overtime, the thought will cross my mind that I have been selling hours of my life. Do you ever think about that? If you charge $100 an hour and work an eight-hour day, you can sell one of your 52 yearly Saturdays for $800. In a summer, you get about 12 weekends. What price do you put on a weekend? If you are like me, once the income is reduced by taxes and such, you will walk away with half. While that sounds good to some people, more money will usually sound better. To get more, you have to charge more.
A week ago, the wife and I took a trip south to Charleston, S.C. I would rather drive the 11 hours (without stopping) than fly, but this time we flew. This past trip took 6.5 hours. We business owners have to calculate all sorts of costs to decide what we can buy and how much to charge for services. I thought I would break down my travel costs and time.
First, we had to drive 1.75 hours to Newark Liberty Airport, be there two hours early, fly two hours south and take a half-hour cab ride to our final destination. Total is 6.25 hours. When doubled, it’s 12.5 hours round trip. That’s the time we spent getting to there and back again.
The round trip cost is $800 for tickets, $50 for two bags, $95 for the value of my vehicle at $0.50 a mile, and $100 for taxi service from and to the airport, plus the economy airport parking cost of $120. Total of my actual travel costs is $1,165.00 for the last visit.
Had I driven the 700 miles, it would have taken me 11 hours with no stops along the way. Doubled, the drive time totals 22 hours. The value of my vehicle would be $700 figuring 1,400 total miles at 0.50 per mile. So I saved 9.5 hours but comparatively that actually cost me $465. My wife appreciated flying and that’s the most important item in the breakdown. I still would rather have driven. The example I laid out for you is a trip for pleasure purposes.
Travel Time Charges
Back in the ’60s, some surveying companies did not charge for or pay travel time. I hope that today everyone charges and pays for travel time. Where this becomes an issue is with fixed-fee projects. If you bid a property survey for $600 and must drive 45 minutes at 60 miles an hour, do you take into consideration the value of your vehicle? How about the value of your time? At $100 per hour, to keep the calculation simple, you have six hours to research, drive, locate, calculate, stake and then get back to the ranch to write up the bill and notes. Did you give away an hour and a half of your life and $60 dollars worth of your vehicle? If your life as a licensed land surveyor is worth $100 per hour, then you gave someone $210 dollars, unless you can do that job in four and a half hours. I find that when I work far from the office, there is more time involved.
Twenty years ago, one of the most technically proficient land surveyors of his time had a business with four or five crews. He told me that small lot surveys were not worth doing for $500 dollars so he stopped taking that type of work. He felt the risk was too high. Ten years ago, a surveyor told me her company did not perform small lot surveys because they charge by the hour and everything ends up being $1,150 or more and clients get upset at the final cost — and who needs to deal with upset clients. Therefore, she did the wise thing, took other types of survey work and did very well.
I would like to interject that I do not feel like anyone is “the competition” even though we are often bidding against one another. I mention this because it is a good reminder that if any of us finds a new technology where we can do a week’s work in one hour, then that person ought to send an invoice to reflect a week’s earnings. Do not feel guilty. You are a professional and ought not to be selling your life an hour at a time. Instead, sell your knowledge and experience as a value. As a licensed land surveyor, are your hourly fees as high as the architects and engineers? How about the lawyers? And what if you could charge 6 percent of the cost of the property you are surveying? I realize a realtor works hard, but so do we.
Let’s break out some of the costs incurred on a survey to simply set property corners and property line stakes. Did you pay a dollar a page for copies of the 10 deeds you needed? Did you figure the round trip is 90 miles, which equals $45 worth of your vehicle? How about the costs for your line stakes, flagging, mag nails and pins totaling $20? That comes to $75, bringing your $600 to $525. Take out operating costs and the taxmen, and you end up with $262.50. Did you complete every aspect of that survey within the six hours allotted? Is it that you just like to drive? Now your real fee is $43.75 per hour of your life.
I realize that many surveyors feel they have to bid low or the other guy will steal that job. A week ago, I had a phone call emphatically asking me to call back and give a quote because all the other surveyors were charging so much and the caller just wanted a simple survey. I let the message play on speaker while we were driving and my wife and I had a good laugh. Was I really going to call him back and try to work for nothing to save money for a guy I never met? Was this really another surveyor playing a joke on me?
Many times, I heard my old boss answer the phone and a person was calling for a quote on a property survey. It was obvious they thought his price was high. He would say, “What’s it going to cost you to not survey your property?” Just this past week, I surveyed a lot where the neighbor to the rear recently erected a 6 foot wood fence and it was on my client’s land. It was also on two other neighbors’ land. Perhaps this week I will learn about the conversations between the property owners and whether they will allow the overlapping adjoiner to keep the fence in place or move it. During the survey, I was nervous until I found the concrete monument for the neighbor to the rear, which sealed the deal. They would easily see the flagging and stake I put by their monument and not argue the fence was fine. Not having a survey before erecting the fence will probably cost that neighbor the fencing company’s fees for removing and reinstalling the fence. Plus, they lost the good will of neighbors and foil the expression “good fences make good neighbors.”
So I would ask if you meet your clients face-to-face before you give a bid. I feel sure most surveyors want to perform quality work for a fair price. So why would we cut our costs for people we never see? If it’s a time of famine, it makes sense, but if it’s a time of feast and there is work for everyone, then it’s time to push the prices back up where they should be. When you talk with other surveyors, I suggest you share the current prosperity (but not your prices — remember Uncle Sam and his buddy Sherman) so those charging $600 know they could be charging more. We surveyors are all in this together, and helping our fellow professionals to earn a good living is in our best interests.
I love land surveying and feel that the people working in fast food restaurants work harder for their income than I do. Am I looking to pay them more for a sandwich to even things out? No, but I can tip well. After all, they are my temporary employees. Licensed land surveyors put years into education and training while gaining the expertise that warrants our fees. Many of us also work hard physically, as well as mentally.
I do not have error and omissions insurance for my clients (although some of them ask for proof it exists). I do not have workmen’s compensation insurance as a benefit for the employees. I do not mind paying for the costs of those insurances because they protect me. To pay for these items, I need to charge my clients a fair fee (they also get value from the fact I am covered for these risks). What would they think if I dropped my error and omissions coverage and offered a 10-percent discount if I was not held responsible for the work? I believe they would hear that and go elsewhere, even after I had made such a nice cost-saving offer.
I want to close with a fee comparison outlined in the book “Freakonomics.” The author is an economist, and in one chapter compared the hourly fees of prostitutes and architects and determined the architects made far less. I am not encouraging anyone to illegal sources of income, but the comparison is there and the hard truth is we all need to charge more for our time.
Editor’s Note: Steve Levitt, author of “Freakonomics,” returned to the economics of prostitution in a subsequent book. As might be expected, the discussion draws a lot of fire from the anti-prostitution camp. Levitt recounts that when he asked one highly-paid professional how she set her price, she replied that she looked online and used the same price she was seeing there. Speaking strictly from the perspective of economics, he suggested she should be charging more. She apparently had no problem raising her rate from $300 to $400 per hour.