For someone who doesn’t actually handle any of the billing in the office, I spend a lot of time thinking about billing.
I have written two previous posts on the subject of architectural fees:
Architectural Fees- Part One: this posts talks about the different ways architects can develop their fees (hourly, percentage of construction costs, etc.)
Architectural Fees – Part Two: this posts elaborates a bit more on Part One (more on hourly rates, per square foot fees, and combination fee structures) but I introduce the concept of “Skin in the Game.” I like to tell clients that everyone needs to have skin in the game, that both architect and client are accountable to one another and while we both have something to gain, we both also have something to lose.
That’s what I was thinking about as I sat down to flesh out this post. Alternate ways of setting up a fee structure that helps the client feel like they have more control over the architectural fees that could be generated while giving the architect the opportunity to plan for and cover their expenses for the services they are providing.
One of the issues that we come up against all the time is that during the interview process, most clients have just a few things to base their selection criteria – design style, personality, and professional fees. More times than not, we don’t struggle with the design style and personality portions, people are generally familiar with our design style and as an office, we are a fairly likable bunch. That just leaves the last bit – the architectural fees.
In our office, almost all of our contracts are based on a percentage of construction costs. Most architectural firms who subscribe to this way of determining their professional services fee fall into the 8% to 15% range. This means on a $100,000 dollar construction cost project, the architectural fees would fall in the range of $8,000 to $15,000 range – pretty simple really but one of the things that can always cause confusion is what exactly counts as part of the cost of construction. The other issue is the level of service that Firm ‘A’ at 8% charges and the level of service that Firm ‘B’ at 15% charges … and for these new potential clients, they can’t always tell (or even understand) why they would hire Firm ‘B’ when they like Firm ‘A’ and they are so much cheaper!?! Since I am more of a Firm ‘B’ service provider (and our professional fees reflect that) we lose out on a number of project to less costly architectural firms. This drives me crazy for the simple reason that the additional services I generally provide are worth far more than the delta of fees between the two firms might suggest.
That’s where my idea of skin in the game is evolving.
What I have been thinking about is how I can create a menu of services that allows the potential new client to more readily recognize the value of the service they are receiving. If I am going to provide less service, then my fee should reflect that right? The problem with this model is that most people think they don’t want these “extra” services but in the end, almost always see their value … but at this point, it’s too late and some other firm is working on their project. So by creating a menu of services, we can get down to a more competitive fee – again, seems pretty straight-forward to me.
One of the projects I have been highlighting here on the blog is the Cottonwood Modern house and pool pavilion. These clients signed up for full services and I’d like to say that they are pretty happy with their decision. The drawings package we prepared for them was significant - I get asked some times about our drawings and what sort of effort do we put in to document these sorts of projects. To say “a lot” probably isn’t a very satisfying answer. On this particular project, here is some of the metrics on what the construction drawings package included:
- 53 – pages of construction drawings at 30″ x 42″ sheets – the breakdown = 31 architectural, 14 structural, 4 landscape, 4 lighting design. That’s 463.75 square feet of drawings or 61.83 yards if the sheets were laid end to end
- 62 – interior and exterior doors
- 34 – window types
- 19 – wall sections
- 71 – door and window details
- 105 – interior elevations
- 14 – exterior elevations
- 299 – individual architectural drawings
- unknown – sodas and cups of coffee consumed during the drawing of these documents
There are about 95% more drawings here than are necessary to secure a permit for construction. It is a complicated house but we probably didn’t need to draw 71 door and window details – but we did because it produced a more thorough set of drawings, enabled more accurate pricing, and has led to far fewer construction related issues in the field. But not all clients want to pay for all this additional service … what to do?
The idea is that for an architectural fee totaling 8% of the construction cost, you get a standard set of drawings: plans, exterior elevations, door and window schedule - basic stuff. If you want interior elevations, millwork details, that will be an additional 1.5%. Coordinate interior finishes? Sure, that will be 2% …
I think you get the picture. The client comes in for the interview, understands that our fees are competitive with everyone else, thinks that they don’t need these additional services, and we get the project. As the project goes on, they learn more about the process, come to understand and value our input and guidance, and start to select some of the additional services items because … well, because they have real value to them. The flip side to this is that is the client chose to retain our services up front for these “additional” items, the percentages associated would be reduced.
Like I said in the beginning, I don’t have anything to do with billing in our office – that task is relegated to those whose names are on the door. I know I don’t have the kinks worked out – I’ve only just started to identify the kinks. One really apparent one is “Construction Observation” which we make a requirement on all our projects. We will occasionally get potential clients ask to have this portion of scope removed from our basic services but we always say no. I have all sorts of reasons why this is the worst area to remove your architect but that’s a different post on a different day.
I would be curious to know if any of the readers here either have a menu of services contract like I describe in place for residential projects or if you are a a client who has worked with an architect who had a contract like this in place. What are your thoughts?