why does the customer even allow that?! they're paying $165/hr for an expert.
if u can get one at $40/hr, then why arent they screaming for a refund in the price difference???
My billable rate is what it costs for an hour of my time once you add up all the overhead. We don't charge our external customers any more than we would charge an internally funded project.
The cost of overhead for engineers is pretty darn high.
1. The cost of benefits for engineers isn't cheap, health, retirement, etc.
2. The cost of paying for the building I work in,
3. The cost of the facilities and labs I have access to
4. The cost of the chief engineers who I can go to for advice (they don't bill for their time, they're just there to support the other engineers)
5. The cost of the software I use. Many of the software packages can cost upwards of $10k per seat.
6. The cost of the support staff who don't bill their time. Secretaries, HR, managers, etc.
7. The time I spend training or doing overhead work that I don't bill a customer for.
When you add it all up there's not really any profit left in my billable rate, that's just my cost. We typically don't make money off billing for engineer's time in my division, we make money selling products we design during that time. It really does take that much money to keep an engineer working.