The engineering skills gap in South Africa is well documented, but what is not necessarily more widely understood is the loss of engineering professionals as a result of the bizarre way the industry has calculated fee income up until now.
Simon Berry, director, Fresh Projects, an online business platform tailor made for South African built environment professionals, says that the industry has, for decades, been at the mercy of an imbalanced playing field with dire consequences: “Built Environment professionals have often under quoted on projects, offering unsustainable discounts, even as much as 70%, to get appointed. The knock-on effect of this is more serious than many realise. With a discount of that magnitude, Berry says that projects then have to try cover costs with as little as 30% of the fee that they should be earning, which is not feasible for any professional team: “This immediately impacts the earning potential for everyone and the long-term viability of a business.”
”In comparison, other professionals such as lawyers, accountants and doctors, charge hourly fees that fundamentally cover their costs, resulting in guaranteed profits for them.
There is a disconnect between built environment fee guidelines and the real costs. The fee guidelines are based on value of construction works whereas the true cost to deliver the services is based on the number hours of professional input. So the issue lies in not knowing what the real cost is from the outset, according to Berry. These teams need a better understanding of the actual cost of a project, and how much leverage they have to offer discounts against tariffs, before it compromises the entire project and industry.
“The sector has, and continues to, lose talent because the earning potential is reduced so significantly. Talented engineers are in great demand in other sectors and can earn more than what is being offered within the built environment sector, despite the skills shortage,” explains Berry.
He says these engineering skills are not only lost to other industries, but also any young talent entering the market lose out on valuable mentoring. “There is a significant gap in the 40 – 50 year-old engineers within the industry. The impact of not having these valuable mentors is significant and implications are long lasting.”
If the fee scale approach is abandoned and project managers use the correct tools to accurately cost a job, many of the issues facing this industry will start being addressed, and retaining skills is top of that list.
He says that some firms, due to low or negative profit margins, end up cutting corners, spending less time on delivering a project than they ought to be spending to deliver a robust solution: “There is a liability issue here for firms and it more than likely adds to the reasons why individual talent decides to move on.”
Not supporters of administration of any kind, Berry says that there are tools such as www.freshprojects.co.za that will assist a professional in the built environment to easily identify and manage the real costs: “If they can get the fees right up front and better manage costs over the entire project then the profit margins will naturally increase. This means you can reward talent appropriately to prevent them seeking greener pastures”
These online tools are not time intensive either and according to Berry, working out a fee and resource plan can take as little as 30 seconds. Aside from overall project management improvement, there is also a business intelligence component, which enables ‘big picture’ thinking after the project is completed.
“You can identify which projects make money and which ones don’t, which clients are profitable and which result in losses. It can even tell you which employees are worth retaining,” says Berry.
The best part is that tools like this are also affordable. A tool like www.freshprojects.co.za was developed because the heavyweight costly enterprise systems are out of reach for majority of small and medium businesses, and they also require significant manpower and several months of implementation.
“The traditional tools are just not suitable for this sector and it is for this exact reason that we developed the www.freshprojects.co.za tool. It is quick and easy, affordable and scalable,” says Berry.
There is a direct impact on profit if you utilise a system like Berry’s and it is easy to track. Maybe this way, technology will save jobs instead of replacing them.