Multipliers
The real questions are of what and who are these multipliers for?
The lower range multiplier is usually used by engineering firms or A/E (E/A) with lower marketing costs. Many engineering firms, for example, market to architects. They have a defined market and hence much lower marketing and space costs. Engineers also usually have a higher salary base. Therefore, if one raises the salary cost, then the multiplier automatically can go down.
Architects (or engineers) that market to high end clients and projects (hospitals, research facilities, high- end design competitions, etc.), usually have a higher multiplier. I have seen multipliers of 3.4 to 3.8 for many of these kinds of firms. Also, small, specialty firms may have a higher multiplier due to the nature of their staff and project mix.
Firms with large repeat clients and repeat project types may have multipliers on the lower end of the scale.
Most financial managers suggest that the Multiplier includes all DPE (direct personnel expense) in calculating your multiplier. DPE usually includes all of the expenses associated with an employee (vacation time, sick time, bonuses, insurances, firm portion of any employee taxes, etc.). On the overhead side of the equation, the office's general staff, equipment, accounting, etc, are calculated into the firms overhead.
The exception to this rule has been in doing federal contracts for such groups as the Corps of Engineers. Here the accepted Multiplier has usually been required to be in the 1.25 to 1.50 range. The government allows a firm to calculate clerical time into the fee proposal and marketing only for government projects. They also have profit down as a separate line item. Hence, one has to almost have two sets of accounting standards for calculating Multipliers due to not only the Fee Proposal itself, but also should a government audit be required after the project has been completed.
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David Hauseman AIA
The Hauseman Group, Inc.
Atlanta GA
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