Architectural Fees (part 1)

Bob Borson —  February 25, 2010 — 13 Comments

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Determining architectural fees are a mystery to most, and that includes architects. As a group, architects are terrible at charging for professional services – as though it’s bad taste to send a bill to a client. In addition, architects are especially bad at keeping a handle on scope creep and recognizing when items should be billed as additional services. I attribute this to the fact that part of the by-product of designing a home for someone, you become very friendly with them and you don’t want to upset your new friend for additional fees because they wanted to change a door location during construction documents.

There are many different ways architects charge for their professional services; hourly, percentage of construction, some combination of the two, a la carte based on specific phase of service (i.e. schematic design, design development, construction documentation, bidding and negotiation, and construction administration), or a cost per square foot of construction. To make things really interesting, a mixture of several of these fee structures could feasibly be combined. Everything clear so far? No? Good, keep reading, it gets worse.

In my office, we typically use either the hourly or percentage of construction methods. For us, this represents the most direct path for our clients in understanding our fees but as straight forward as that seems, there are always complications and misunderstandings. I will clarify a few things that always seem to create problems and hopefully along the way, things will become less confusing.

Hourly
Just like it sounds – there will be an hourly chart for different level positions (administration, drafting, project architect, partner, etc.) and you are charged that rate for the time spent. The only time we use this format is when the scope of the work is not very comprehensive, unknown, or an existing client who prefers this method of billing. Generally speaking, most people don’t like being charged an hourly fee for fear of getting a surprise when the bill comes. As a result, when the work is charged hourly, we try and reduce concerns for the client by capping the amount or identifying financial milestones that indicate progress along the way. There are some significant advantages to selecting this as part of the billing method but it is when you have a combination of billing types within one contract. I’ll get into this in more detail tomorrow.

Percentage of Construction Costs
These percentages vary by firm but generally fall in the 8% to 15% range. This is our preferred method of determining our fee but one of the things that can always cause confusion is what exactly counts as part of the cost of construction. A good rule of thumb is to consider any scope where architectural coordination is required as part of the cost of construction. Seems pretty clear right? Well, we are just getting started; give me a chance to muddy the waters. We do not charge for coordinating other consultants scope of work, i.e. interior designers, landscape architects, pool design, exterior hardscape, etc. even though we spend a considerable amount of time and energy pulling their information into our documents and coordinating the design intent and construction requirements. We also do not charge for high cost specialty items (like chandeliers) because the cost of the fixture is irrelevant to the amount of effort we spent to make sure that a junction box is provided for it in a specific location. It might as well be a surface mounted fixture from Home Depot. However, this is not true when it comes to kitchen appliances even though on the surface, they may seem no different to you than my chandelier analogy. A considerable amount of time is spent detailing and reviewing the cabinetry that surrounds the appliances and the specific trim out options and conditions they present. We also spend time selecting and presenting, or evaluating the appliance packages with clients so there is coordination energy spent. Just read my post on the amount of time I have spent talking about the shape of ice cubes (here) and maybe you will get a better feel for it.

The Myth of Price Gouging
This is an understandable area of confusion and new clients routinely ask about the potential for us to increase our fees because we can specify expensive materials and drive the cost of construction up. There is an easy way for clients to quell these concerns; have a budget and tell your architect what it is up front. If we ever blow a stated budget when the construction bids come in, we will not charge the clients to redesign and redraw the project to get it back within the parameters established at the beginning. Where this area can get messy is when clients blow their own budgets, disregard our advice and continue moving forward with the documentation. I am constantly amazed at the successful and seemingly intelligent people who are surprised that the bid numbers are higher than the original budget when the house is 1,000 square feet larger than the original program. Did they think that there was a sale on square feet once you got over the 4,000? We might tell someone that the style and finish out of the house they want is tracking at $225 a square foot; therefore, if their budget is $1,000,000, that means approximately 4,450 square feet of house. When the program they present is 5,000 square feet (I bet you know what’s coming next don’t you?), they will be over budget. Seems pretty obvious doesn’t it? Apparently not.

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I will continue the conversation in the next post when I discuss:

Hourly Fees

Fees based on building size (Per Square Foot)

Combination Fee Structures

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Click here for Architectural Fees Part 2

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  • JM

    If you are getting clients to pay fees of 8% to 15%, no wonder you have time to write this blog. I would be run out of town if I paid this.

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  • Bob

    Thanks for the input Bob. That’s a big help. We’re planning to build a vacation home on a lake in Eastern Washington. I love your “skin-in-the-game/menu of services” concept, but don’t think the two firms on our short-list will go for it. On one end, our builder says all he needs is the standard set of drawings, we would like some detail of key interior and exterior features, and on the other end the firms are presenting a 3D walk-through plus a 200 page project book with the wall of every room detailed. They want a 12 – 15% percentage of construction costs and they’re using “low-end” estimates of $200 – 250/sq./ft.. Our builder thinks he can build a nice home for $150 – 200/sq./ft.. We have some negotiating to do.

    Your blog has been enlightening. Thank you. Bob

  • Bob

    Hi, You stated in Architectural Fees (part 1), Percentage of construction costs

    “We do not charge for coordinating other consultants scope of work, i.e.
    interior designers, landscape architects, pool design, exterior
    hardscape, etc. even though we spend a considerable amount of time and
    energy pulling their information into our documents and coordinating the
    design intent and construction requirements.”

    Would you include either of following items in the Construction Cost on which you apply your percentage: the Contractors Profit & Overhead charged by the General Contractor? Construction Contingency?

    • http://www.lifeofanarchitect.com Bob Borson

      The easiest way to put this (considering what all the variables are) is whatever the homeowner pays for the construction of the house is what our fee is based upon. Contingency – if it’s spent – then yes. Contractor Profit and Overhead – yes – it’s part of the cost of building the house. Our fees aren’t based on what the materials cost – it’s the whole enchilada.

  • Alonso

    Thanks for your post!

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  • Becky Fromm

    You hit the 10d nail on the head!! Thanks for the post!

  • http://mowerymarsh.blogspot.com/ Jennifer Marsh

    Great post… Did you write the second part of this discussion? I can’t find it. I’m interested in hearing the rest. Proposals, invoicing, additional services… it’s all so important in running a successful architecture business…it’s great to hear someone talking about it!

    • http://www.lifeofanarchitect.com Bob

      What a funny response – the house depressing you item is so true for so many younger aarchitects (which is how I consider myself thank you very much). That’s another follow-up post that I am deliquent on writting! I will have to send you a real email – maybe you can help me come up with some ideas…you’ve already pulled two out of me tonight!

  • http://mowerymarsh.blogspot.com/ Jennifer Marsh

    Great post… Did you write the second part of this discussion? I can’t find it. I’m interested in hearing the rest. Proposals, invoicing, additional services… it’s all so important in running a successful architecture business…it’s great to hear someone talking about it!

    • http://www.lifeofanarchitect.com/ Bob

      What a funny response – the house depressing you item is so true for so many younger aarchitects (which is how I consider myself thank you very much). That’s another follow-up post that I am deliquent on writting! I will have to send you a real email – maybe you can help me come up with some ideas…you’ve already pulled two out of me tonight!