--- title: "Utilization Rate: Why It Misleads AEC Firms | Your Craft Your Climb" description: "Utilization rate is easy to fake and easy to misuse. Why lump-sum AEC firms should track upstream indicators instead — winning work, healthy fees, full schedules, on-time delivery." lang: en json-ld: | { "@context": "https://schema.org", "@type": "Article", "headline": "Utilization Rate — Faking the Wag", "description": "Why utilization rate misleads lump-sum architecture and engineering firms, and which upstream indicators to track instead.", "author": { "@type": "Person", "name": "Zack Tomlin", "url": "https://yourcraftyourclimb.com" }, "datePublished": "2026-07-23", "mainEntityOfPage": { "@type": "WebPage", "@id": "https://yourcraftyourclimb.com/articles/utilization-rate-in-aec-firms" }, "publisher": { "@type": "Organization", "name": "Your Craft Your Climb", "url": "https://yourcraftyourclimb.com" } } --- [![Your Craft Your Climb - Business and Leadership Growth](/__l5e/assets-v1/25aac360-096f-4a69-bf6f-fb90cf595961/logo-horizontal.png)](/) [All Articles](/articles) High-Agency Leadership # Utilization Rate — Faking the Wag Why a metric anyone can fake makes a poor target for AEC firms Zack Tomlin, PE · July 23, 2026 Utilization Rate. Some know what it means. Many don’t. Anyone can fake it. To start, I want to be fair, it’s a metric that does have its place. In architecture and engineering — businesses built on selling the time of highly trained, highly paid people — knowing what percentage of that time is billable is a reasonable thing to want to know. Too low and you’ve got profitability issues brewing, too high and you’re likely headed towards problems with burnout. And in a law firm or an accounting practice — or any other professional services firm that primarily bills by the hour, where billable hours and revenue are essentially the same line on the P&L — it has a greater utility. But most AEC work is project based, the utilization rate of many staff is not in their direct control, and that’s where things go sideways. ## The Basic Math “Full-Time” for an architect or engineer is commonly defined as 40 hours per week. The majority portion of those hours is charged to a project and other billable work. The rest goes to business development, continuing education, professional development, and a long list of other “general office” items. Utilization rate is simply the billable portion divided by the total available hours. ![Utilization Rate equals Billable Hours divided by Total Available Hours, times 100](/article-images/utilization-rate-formula.png) So in effect, in the eyes of a firm, it becomes: > “For the number of hours we paid this person to work (40/week), what percentage of those hours were revenue producing (Billable Hours)?” And it’s not hard to see why this metric is interesting and there’s an incentive to raise it. But how one goes about getting utilization rates up makes all the difference. ## Option A: Push the Number We tell our teams to up their utilization rate. We harp on it. We make it part of monthly reports. And this is where the wheels come off. The majority of architecture and engineering work for most firms is priced as lump sum, project-based fees. Not hourly. Not time-and-materials. Lump sum. And the economics of this type of work are straightforward: - We win projects with the highest fee the market will bear. - We win enough projects to fill our schedules. - We spend as little time as possible while maintaining our standards of quality and customer service. - We hit the deadlines set by the schedule. That’s it — win work with a healthy fee, pack the schedule, complete work, do it fast. ![Gross Revenue equals Projects Completed times Average Project Fee; Net Profit equals Gross Revenue minus Cost of Production](/article-images/gross-revenue-net-profit-formula.png) So where does utilization rate come in? It’s fine for a high-level health check of a firm or a team within one. It’s fine for general planning and capacity scheduling. It becomes a problem when the aim shifts to making a greater percentage of hours billable. Because now our teams reach for the most obvious lever they can pull: how they spend and report their time. 3 extra hours “spent” on Project A though they’ve been done since last week. 5 extra hours on Project B though it’s on hold. Or worse, they take longer than necessary on projects, skipping “non-billable” opportunities to learn and to grow. I’m all for the idea that those who are light on work should speak up and find something billable to work on. I spent years making that point to my team, but I also spent that same time making another point. Time sheets are the data source for winning future work at healthy fees. If you spent an hour cleaning your desk, put down an hour for cleaning your desk — accuracy will never be penalized. Otherwise we find Goodhart’s law at work: > When a measure becomes a target, it becomes less reliable as a measure. When we use a bad indicator we create bad incentives — and in this case a skewed view as to what’s actually happening in our firms and unreliable data to use when pricing future projects. ## Option B: Watch the Upstream Indicators We focus on upstream indicators, ones our teams can directly act on. - Are we winning work? - Are our fees healthy? - Is our schedule full? - Are we completing jobs on time? If the answers are “Yes”s across the board and profits are healthy, a utilization rate below target is (ironically) welcome news: - Plenty of time for company improvements - Openings in the week for continuing ed - The opportunity to put even more projects on the schedule moving forward - And maybe no need to hire that next expensive, hard to find, employee If there are a few “No”s, now everyone knows where to focus their attention — no more faking the wag. * * * _I’m Zack Tomlin, founder of [Your Craft Your Climb](https://yourcraftyourclimb.com). I help firms develop the senior and emerging leaders they depend on, through peer groups, workshops, and direct advisory support built specifically for the AEC industry._ _For more on the levers that actually move a business, see [The Four Levers That Control Any Business](/articles/four-levers-of-business-control), and on getting decisions out of your own hands, see [How to Stop Being the Bottleneck in Your Own Business](/articles/how-to-stop-being-the-bottleneck-in-your-own-business). Ready to put these ideas to work? [Work with Zack](/)._ Further Reading [ More Articles Browse all writings. ](/articles)[ Home Work with Zack. ](/) Get In Touch ## Contact Us Have a question, want to know more, or just want to say hello? Submit the form below and we'll get back to you. 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