Many public projects that are funded by federal and/or state dollars require architecture and engineering (A/E) consultants to follow comprehensive guidelines regarding the treatment of costs along with the determination of the reasonableness of their compensation for their executives. This post will provide a brief history of the development of the national compensation matrix, and how to use the widely adopted tool.
History of the National Compensation Matrix
Prior to the development of the National Compensation Matrix (NCM), A/E firms had to use salary surveys to evaluate the reasonableness of executive compensation. The use of varying surveys created disparities in the way the compensation was evaluated based on the underlying surveys used. Seeing a need and an opportunity to streamline the evaluation process, a development team was created including representatives from the American Association of State Highway and Transportation Officials (AASHTO), the Federal Highway Administration, different states’ Departments of Transportations, the American Council of Engineering Companies (ACEC) and independent CPAs to develop a centralized tool that would bring consistency to the evaluation process. The tool was originally launched around 10 years ago.
How the National Compensation Matrix works
The NCM utilizes the results of popular salary surveys for the A/E industry. In order for the model to be statistically accurate, a significant number of respondents are required for all applicable revenue levels and from all parts of the country. Once enough data is obtained then the model can be inflated based on cost of living and other factors for up to several years. It is imperative that enough salary data is received on an annual basis to allow the members of the development team to analyze and update the model so that it can continue to be used.
The NCM allows you to input the company’s revenue and the tool returns compensation rates for the noted executive positions that is deemed reasonable. It is also important when utilizing the tool to compare the job responsibilities of the executives to those listed on the position description tab of the tool.
The NCM is a valuable tool that achieved its goals of bringing consistency to the evaluation process and also has gained widespread buy-in from parties involved.
Your A/E Firm’s Participation in these surveys is key
We encourage all A/E firms to participate in these annual surveys. If you have questions, our team of A/E industry experts can help. Contact your RKL advisor or use the form below to start a conversation.
