UNDERSTANDING DESIGN FEES

Post 713 -by Gautam Shah

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Designers often help their clients to acquire or dispose off entities in their completely prepared form. When the transaction originates at producers’ end, it is little above the cost, at a price. Price, reflects the value a producer attaches to an entity. Later transactions may not in any manner relate to an entity’s cost.

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For a thing to have a value, it must be transferable. A latent value becomes potent when it is perceived that someone needs the entity in some time and space, for a utilitarian or hypothetical purpose. A demand for a perishable commodity, if it, does not occur within the life span, is irrelevant. Similarly demand for something in a far off place cannot be satisfied, due to transportation hazards and handling problems. Air has a lot of utility but is not scarce. Rotten eggs may be scarce, but hardly have any utility. Friendship is very useful and scarce, but is not transferable or marketable.

Historic cost of creating a painting may be few drops of colour, a canvas and artists’ few moments. But once the fact is accomplished, the painting gains a very high value due to its extra ordinarily high relevance to the society. Relevance of a product in terms of its utility is (more) likely to degenerate over a period of time, but its value may appreciate or depreciate depending on its relevance to the owner or the society.

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Prices are effected in money. Prices go up or down depending on the fall or rise in the (universal) value of the money. Any change in money (monetary value) affects the prices of all things across the board. Value of a thing, however, is specific. There cannot be a general fall or rise in value of all things. Value of a thing goes up, when we can acquire or aspire for more or superior things in exchange. Value of a thing goes down, when we can acquire or hope for less or inferior things in exchange. Value is relative, referred in terms of something else.

Value of a thing, cannot be always measured in money. Value has many different connotations, typically, it has relevance in terms of, emotions, remembrances, associations, ageing, maturity, heritage, rarity, ecological, environmental, social, etc.

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Valuation, in functional sense, is done to determine what one would gain by acquiring, or forgo by disposing the item, but not necessarily doing so. Value of a product means an addition or deduction to wealth, Cost at the moment of transfer may or may not reflect the value of an item, but it helps in a better judgement of the value.

A rare painting or an antique may have an indeterminable cost, but will have a probable value. Value could be several times more or less than the actual cost of the item. Value is considered to be the true worth of an item, more lasting, but not necessarily reliable. Cost and price are very realistic and reliable, but not always representative of the true worth of the item. Both, perhaps, are required to gain a full insight of the situation.

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Monetary versus Non-Monetary Valuations

Valuations are of two types: Monetary and Non-Monetary. Monetary valuations are not very different from costing exercises. Value of a thing, cannot be always measured in money. Though here utility, desirability, scarcity, availability and marketability etc. of an item are assessed in monetary terms rather than market equivalent costs of such items.

Valuations of non-monetary type are made to check adherence to values, customs, traditions, ethos, rules regulations, laws, etc. Greater adherence to these issues results into higher value realization for the product. Often negative or repulsive aspects of an entity, such as Hitler’s memorabilia, black magic tools, due to their rarity, invite a connoisseur’s favour. Non-monetary valuations have a relevance only to people who are concerned with it in some way. Non-monetary valuations based on one aspect or few concerns are not very useful, desirable, or even reliable. Non-monetary valuations based on too many aspects are not comparable, so must be scaled into some economic or monetary component. These makes, a valuation, very complicated process.

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Costing versus Valuation

Costing is a logical (mathematical) process, and any technically proficient person can carry it out. Costing process must always remain justifiable, and requires many exact inputs, including latest market costs etc. Valuations, however, involve many hypothetical judgments, are very subjective, and so may not seem rational. It is the experience of the valuer that imparts some degree of objectivity and also reliability to the valuation. Valuation on the other hand is a subjective judgment, and no explanations may be asked for.

Costing helps a designer in planning, budgeting and auditing the expenditures. Valuation is used to confirm or justify expenditures, indicate non monetary savings, and to convince a client for quandary options.

 

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Design Practice and Cost Determination Methods

Designers choose entities, increase or decrease their usage by predicting the costs. Designers develop their own cost determination methods, appropriate for the jobs they handle, and for types of items specified in their projects. Input data like market rates for materials, parts, components, labour etc. are continuously updated or sought as and when estimates are to be prepared. Updating feedback is also available through the historic estimates conducted on completion of a project.

In design offices predictive cost analysis is made through Rate analysis. Average prices of all commonly used materials, operations, etc., are collected routinely, reformatted and stored. These are presumed as standard rates, and form the basis for the cost analysis. To simplify the process of cost analysis, number of items and their individual rates or prices are reduced by approximation (through definition of a factor for variation) in quantity and quality.

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Routine jobs and jobs with substantial intellectual effort

Routine jobs have a determinable cost (and by adding a customary margin of profit, etc. one can derive the price). However, jobs with substantial intellectual effort accomplish more than the cost of implementation. So, dilemmas occur, should one charge a professional fee on the total cost of the job, or value accruing out of the job? Authors of creative efforts must know how to value their accomplishments, and thereby demand a fair compensation for it. Designers need to know both the cost and value of their professional services.

Cost versus Value for Designers

The understanding of Cost versus Value of an entity helps a designer at TWO distinct levels:

1 Determination of Fees: Cost-based and Value-based

2 Helping a client for the value-assessment of their possessions.

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Cost-based Fees

Design practice follows age-old traditions of Architectural practice. Jobs are generally executed by appointed contractors or selected vendors. These third party (away from the Architect and the Client) business entities present an invoice, which reflects the nearly true cost of the job. Architects base their fees on this foundation after adding certain percentage amount to account for miscellaneous expenses, (such as on power, water, etc.). Substantial part of Designer’s work follows a similar path.

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Value-based Fees

Value-based Fees are charged for jobs like renovation, extension, addition, conservation, etc. that make substantial change to the existing environment, upgrading the commercial value, or advantages deriving out of it. A unique concept that costs very little to implement, provides a substantial benefit to the client. Should one charge a fee on the cost of a job or on the value of the completed job? Here determining an appropriate cost base for fees is very difficult.

Value Assessment of Possessions

On some sites there are pre-existing structures which are to be only reformed or reused. The design cost of continuing or protecting such structures is difficult to compute, and so must be value-based. Cost of works or supplies by third party vendors and contractors are accountable, but items supplied by the Clients from the existing stock are difficult to document. Cost of Retained Structures, Antiques, Curios, used in a project are often indeterminable, instead their values, if available need to be used. On sites where several Professionals operate simultaneously, exclusive authorship to a creation is disputable, so cost of a patent idea is disputable.

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Cost Plus Fees

Fees for very complex jobs, or jobs that are unique, and without any precedents are very difficult to predefine. A Client wishes to see the job properly done, and the Professional wants a guaranteed, but a fair amount of income. Such jobs are executed on Cost Plus Basis.

The office work of the professional and the site work of the project, both are executed in a very transparent setup. All the expenses at the Processional’s Office (salaries, stationary, conveyance, rents, service charges for equipments, etc.) and at the Project Site (on raw materials (stationary), wages, and salaries, rents for equipments, conveyance, postal and telecommunication charges, taxes, etc.) are well monitored, documented and audited. The Professional is then allowed a percentage over the Audited Costs.

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BUILDING PROJECT MANAGEMENT -through history

Post 309 –by Gautam Shah

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First ever human endeavours of unprecedented size and complexity, such as construction of buildings, forts, cities, or palaces, civic facilities like aqueducts, bridges, gates, fighting wars and calamities, writing epics, creating works of art, all have been executed as projects. These projects require strategic planning, research, innovations, procuring and transporting the supplies, storage, human resources, tools and equipment’s deployment. Such projects often lasted for several generations, or were conducted by different people taking over the controls. The three important elements of conducting a project are, namely: Documentation, supervision and feedback system helped the ‘timeless’ continuity by managing the changed circumstances.

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Historically large projects were initiated by the powerful coterie of rulers who could command large number of workers as believers or slaves. The armed forces were the most organised of groups, and were preferred executioners. Post 14th C Europe and India saw rise of business men, who patronized construction of large projects like palaces, temples, cathedrals. Early 19th C. saw emergence of different class of entrepreneurs who began to build very large Industrial units, warehouses, wharf and rail roads. These industrial age projects, in comparison to any other project in the history, were conceived, executed and made operational in a very compact time frame. The time compression necessitated new methods of project management. The building had to be an economic entity. The style was not shackled by architectural isms, materials or technology. The new breed of industrial project initiators, were joined by new Governments that were turning more democratic. The Government sponsored economic activities were constructions of bus and railway depots, ports, canals, dams, bridges and roads, etc. These Government projects were often designed executed and managed by private agencies.

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Earlier Designers were Planners of the project, and to many extent were active participants in execution process. These allowed them to detail and improvise the project during the execution. But during Industrial evolution Projects were planned for production strategies, then designed (Buildings) and executed by different agencies, and ultimately made operational. These processes required new methods of project handling or management.

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Just before and during the world war II, it was necessary to ensure that production of war materials of all forms matched the anticipated demand, and was supplied to the right place at the right time. For this purpose new planning and forecasting methods were required. After the world war, these mathematics based planning methods developed into a new discipline known as OR -Operations Research. OR is a discipline concerned with the planning, assessment and control of operating systems, such as industrial production, commerce, etc. or virtually any human effort. Interest in the methods for design and logic of these systems, rather than in their operations, led to another subject, SE -Systems Engineering.

Decision making in design is covered by SE. Decision making in planning of the construction, execution, implementation, operations and the management thereof, is covered by OR. In reality these two disciplines overlap and merge into an overall systematic approach for Project Management.

As a discipline, Project Management has developed from several different fields such as building construction, mechanical engineering, military projects, etc. Two types of mathematical project scheduling models were developed.

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The PERT -Programme Evaluation and Review Technique was developed as part of the United States Navy’s (with Lockheed Corporation) for Polaris missile submarine programme, and the CPM -Critical Path Method was developed (jointly by DuPont Corporation and Remington Rand Corporation) for managing plant maintenance projects. Other such tools were like: work breakdown structure (WBS) and resource allocation methods.

By the 20th C. project managers began to (time) schedule productions for the rapidly changing markets (choices, technologies). In the 1950s and 1960s project planning methods for time management and cost control through inventory, warehousing, transportation management, were developed. Much of this development was based on the concept of determining a precedence relationship (that is, identifying which work activities must be completed before other work activities).

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Business was facing challenges of more complex products and services, demands for better quality products, cost-conscious customers, faster development cycles, stiffer international competition. There was need for joint ventures to share risk and collaboration for leveraging the expertise. Project management was designed to help the business leaders do just that.

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Enormous projects are often called programmes, divisible into multiple projects. The projects, in turn, can be broken down into smaller sets of activities. These are further dissected into tasks, or work packages. Tasks are assignments for a person, equipment or a facility (department). Project management techniques are applied to planning and managing activities at all such levels.

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JOB HANDLING in DESIGN ORGANIZATIONS

Post 279 – by Gautam Shah

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Organizations exploit both, the individual talents and traits of their employees. FIRST, persons with only required qualities are sought. SECOND, better compensations are offered for hiring specific qualities. THIRD, incentives are offered to individuals who show readiness to reformat their talents and traits. FOURTH, employees unable to convert are punished, or shifted out of the organization. Employees of the organization are motivated in different ways to modify or upgrade their expertise.

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Beyond paying out incentives, organizations use Job assignment as the key method, to exploit the human resources. Organizations divide their projects, assignments etc. into manageable lots or jobs of various skill and resources-based specialities. These are then assigned to individuals or teams as distinct roles. Jobs are presented as an opportunity, challenge, and incentive to a person or a team.

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Design creation processes have many stages such as project formulation, concept evolution, planning, detailing, job award processes, execution, client and consultant relationships. In very small offices few individuals take on many of these roles. In very large offices there could be several individuals or departments to handle these functions.

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A leader of the organization or project manager diverts a job from one to another person, to achieve diverse results. Jobs are assigned to remove the tedium of repetitions, or to provide new training or exposures. Jobs are also given out, to infuse new thoughts, work methods, and utilize different resources (plant, equipments, tools, talents). An organization becomes innovative and creative through such shifting of the personnel.

In design organizations personnel are identified in terms of their talent, and experience. In medium to large organizations common pools of human and other resources are formed. Project managers draw from such pools their requirements of human and other resources.

An organization is formed of employees of different talents and personality traits. These manifest in their attitude and conduct. A person may reflect multiple characteristics within a situation, or show a different personality if adequately motivated and conditioned.

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Dream-weavers are prolific generators of ideas and new concepts, but lack the skill to detail them. The dream-weavers are mercurial and often have a fear of failure. A dream weaver must be an extrovert otherwise never gets acknowledged.

Technocrats have a talent of visualizing structured entities. For them an entity is conceivable, if it is structured and so practicable. Technocrats are fastidious, uncompromising, and hard-headed. A technocrat may get entwined in detailing the parts, and may lose the grasp of the holistic scheme.

Exponents enjoy advocating ideas or schemes, without bothering either its authorship or practicability. They feel that the public attention received through the advocacy is the measure of their skill and success.

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Patrons are not necessarily resourceful people, but are ready to support any new activity that takes them away from their routine chores, provides a novel experience, and keeps them busy. A person may become a sponsor by virtue of the position and powers to allocate resources. Such people are motivated by strategic gains through various sponsorships.

Arrangers are expert manipulators, and keenly look for a chance to jump into any difficult situation to manage it. As a risk taker they collect a lot of benefits, and very fast.

Orthodox are very over careful by personality. Their conservatism is due to a struggle less life or due to old age lethargy. They detest change, but if instrumental of causing even minor innovation, take a great pride.

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EVOLUTION of PROJECTS

Post 201 –by Gautam Shah

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Stages in Project Planning over a period Louvre Palace Wikipedia

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Projects evolve out of circumstances such as: Capital to invest, Land or property requiring a higher return, Experience, or Aspiration to venture out. A person (the ‘client’) often comprehends the potential, when familiar with such circumstances of the project. But the same person, however, finds it extremely difficult to formulate and manage a project (planning + execution + operation aspects of it). Services of experts are required to structure a project.

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New projects more often than not, evolve from the investment vs return studies by a financial expert, who also identifies other resources required for the project. Projects involving building of physical assets cannot be formulated or detailed by a financial expert. Such projects require multi disciplinary engineering contribution of technocrats. Project definition exercises are prompted by the client.

Projects Planning

PROJECT CONSULTANTS

Project consultants are multi disciplinary experts, and have the capacity to check the feasibility and viability of a project from many different considerations. Project consultants, though detail the project more intensively, in areas familiar to their domain.

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Clients sometimes have good comprehension of routine projects, and may directly retain a Design professional. A designer is then required to formulate the project. A good designer must have the multi disciplinary capacity to judge the scale, scope and technicalities of a project, often even before a formal design-scheme can occur. Such proficiency equips a designer to deal with larger and complex situations in future.

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Project consultants, define agencies that can design, supply, fabricate and operate various systems of a project. They specify the nature of various professional services required, modalities for selecting appropriate experts, and create outline for individual assignments. Project consultants, if authorized by their clients may even supervise and coordinate the agencies through the planning, design, construction, and operations phases.

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Project definition exercise starts with formation of a Project’s facts file. It is developed further as a -Project report or Project profile report, and ends as an evaluation of the completed project a -Historic report. The project definition work at all levels is carried out by the same expert, or on each occasion, a new set of experts are called in.

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PROJECT’S FACTS FILE

A project consultant (financial, technocrat, or designer) compiles a file, stating all the facts of the project. The project’s facts file, to be intelligible to a wider section of users like, non-experts, clients etc., is intentionally made very simple. It is concise, though may contain few graphical views or charts. A Multimedia presentation of it is also made to achieve different purposes such as to put forth the nature of the project, entice a client, demonstrate design professionals’ competence to handle such jobs, convince the sanctioning authorities, procure resources, etc.

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ProjectAll design parameters, concepts, etc. start from this facts-file. Once a project is approved, the original creator of the facts file may not have any role, and someone else is asked to create a detailed project report or project profile report.

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ASSIGNMENTS HANDLING in ORGANIZATIONS

 

Organizations get assignments from both, internal and external clients. Large and complex assignments that require distinctive effort are also called Projects. Projects consist of smaller units or jobs that require routine efforts.

Every organization develops its own methods of project handling. A Project is led by a core group of experts or a team leader. In Consultancy Organizations each project requires distinctive human skills. In Manufacturing organizations there is a heavy dependence on tools, equipment and plants, so the jobs are defined for their efficient use. Service organizations are governed by time as the key element, so their jobs are set in time modules.

 

A Job is a trade, skill or schedule specific work-module. It allows individualised attention and effective use of the available resources. Its efficiency of execution or operation can be examined and upgraded independently of other jobs. Jobs are handled on continuous as well as batch bases.

 

Organizations that repeatedly handle very large and complex assignments develop specific departments. Such specific job handling capacities are universal across that class of organizations. So spare capacities are offered to others, and excess work is outsourced. Jobs of routine nature are handled productively within the organization, but novel needs are better outsourced.

 

Other activities of the organizations

Prime activity of any organization is to earn a gain, but simultaneously many Conventional activities also occur within the organization.

 

● Conventional activities that sustain the organization as a functional entity.

1.1 Determination and Evaluation of aims, policies, goals

1.2 Planning and deployment of financial resources

1.3 Planning and Acquisition of other facilities

1.4 Procurement and Upkeep of assets

1.5 Personnel Management.

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● Peripheral activities that add to the advantages for the organization.

2.1 Public relations

2.2 Client relations

2.3 Other relations (contractors, suppliers, co-professionals, associates, consultants, free lancers, etc.)

2.4 Facilitating the execution of assignments (raw material procurement, materials handling, erection, execution, manufacturing processes, testing)

2.5 Tasks’ evaluation (quality controls, testing, certification)

2.6 Marketing (goods, services), billing, money collection

2.7 Servicing (post execution or delivery, servicing, maintenance).

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● Efficiency and productivity of the organization.

3.1 Determination and definition of procedures

3.2 Standardization of inputs, outputs and procedures

3.3 Information collection, Inquisitions, investigations and surveys,

3.4 Installation and management of information storage, manipulation and retrieval devices

3.5 Publications and dissemination of organization’s output (data, concepts, ideas) material.

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Elements of Jobs or Projects in Organizations

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Design organizations operate with assignments, which have Six basic elements:

1 Person/ s who: assign the task, determine roles, perform the tasks, oversee or supervise the task performers.

2 Task body: physical things like: parts, objects, raw materials, etc., and non physical things like: concepts, ideas, themes, etc.

3 Information, data: external inputs: from clients, organization’s own search, and internal inputs: from archived data, evaluations, judgments, from employees’ knowhow, site reports, feedback, by manipulation of various inputs.

4 Tools, plants, equipments Space, location facilities, methodology, formulations, processes, schedules, acquisition, replacement.

5 Services conveyance, communication, storage, data management, welfare, resources management, public relations, goodwill creation, information dissemination.

6 Time Schedules of delivery, servicing, rate of operation, rate of returns.

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DESIGNERS DILEMMA – RIGHT FEES

Post  -by Gautam Shah

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Each Design Project is set in a different context. In each of the case, Clients, Location, Conditions of work, Design professionals’ Needs and Compulsions are different. A new project by seasoned professional will be handled with wider experience and maturity then the past one, so charged with slightly a higher fee. Whereas a young professional, on the other hand brings in freshness of new and modern ideas, and for that reason may demand a higher price.

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Yet a professional seeks following answers while determining a Right Fees:

# Is one aiming at a reasonable profit?

# Is one striving for a high return to manage a high risk situation?

# Is one striving for a high return for the rare contribution?

# Is one trying to break-even -no loss no profit situation?

# Is one seeking to avoid or provide for residual liabilities?

# Is one looking for hypothetical – future benefit?

# Is one bartering an advantage?

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TO TAKE OR NOT TO TAKE A PROJECT

Professional always face such dilemmas. The reasons could be many: Unknown project, too familiar (repeat) a project, too busy, unsuitable location, lack of resources (staff, equipment, finance), too small or too large a project, non profitable, a doubtful client, etc.

A professional first raises following questions:

          a.       If the project is taken, then. What would be the gains / loses?

          b.       If the project is not taken,then. What would be the gains / loses?

 

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The second question may seem absurd, how can one make a profit or loss, by not doing a job?

For a busy professional an odd project will require reorientation of the firm’s working, additional investments in plant, equipment, retraining or hiring of extra employees, slowing down some current assignments, etc. In such a situation, not taking on an additional project is advisable, unless gains are unusual in quality and quantity.

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On the other hand a normal project with reasonable gain prospects can be carried through the firm, if it fits within the working style, specialization, employees’ capacity etc.

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