25 Mar 2010
This is the second installment of architectural fees, you can find the first installment where I talk about fees based on percentage of construction and the Myth of Price Gouging … click here for more. Today we are talking about the specifics of fee structures and how important it is that everyone have “some skin in the game”.
I received some questions about hourly fees that I didn’t address the first time around so let’s revisit hourly fees – it’s just like it sounds. There will be a hourly chart for different level positions and you are charged that rate for the time spent. My office has set up hourly rates something along these lines:Principal – $175 Project Architect/ Associate Principal – $135 Project Manager- $95 Intern Architect II – $80 Intern Architect I/ Drafting 1 – $65
The only time we use this format is when the scope of the work is unknown but anticipated to not be very comprehensive but it doesn’t always work out that way. Most people don’t like being charged hourly for fear of getting a surprise when the bill comes but this manner generally benefits people who know what they want and make quick decisions. Even 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. The good part for me is that I am guaranteed to make my profit margin although my expertise is mitigated and I am precluded from working extremely efficiently, getting the work done in a fraction of the time and exceeding the built-in profit margin of my hourly rate.
Per-Square -Foot Fees
I find this method unreliable and unreasonable. There are too many moving parts to assign a per-square-foot fee value to designing and producing documents that could be used for bidding, permitting and construction. Since I mainly work on modern style projects, the amount of coordination I go through to detail a masonry building,\; sizing openings to align with the module of the selected masonry unit, water weeps, expansion joints, brick molds on windows, etc. versus the effort to work with a monolithic material like wood siding, or better yet, stucco. The amount of drawings required to properly coordinate one versus the other would not justify a single value cost. As a result, one of two things would most likely happen; since the fee would not be enough to compensate me for my time and overhead, either the quality of the drawings would diminish to reflect the fee, or I would be forced to work at a loss (which hopefully I would figure this out and either change my fees, cut corners, or go out of business). Everybody losses with this fee structure.
Combination Fee Structures
I have an old boss of mine that loves this particular structure. Basically it’s a combination of the hourly and the per-square foot. The schematic and design development portions of the project are hourly. This gives an incentive to the client to be available, make efficient, timely, and decisive decisions. It also protects the architect because regardless of the client, you know that your going to be compensated appropriately for your time. Some clients need to see iteration after iteration of possibilities, need a lot of counseling and reassurances, endless meeting, etc. and there’s no way to know beforehand.
When you move into construction documents, after having secured sign-offs on the designs along the way, the project has a more definable scope and a fee based per-square-foot cost can be used. Any changes to the design during the construction drawings phase needs to be identified as an additional service and the fee reverts to the hourly rate schedule.
Once you are out of construction documents, the fee goes back to an hourly rate during the construction administration portion of the project. This way, the architect can be as available as the client wishes during this time period for project meetings, site visits, installation coordination’s,etc.
For me personally, I have a problem with the combination fee structure method because it rewards the incompetent architect for doing a bad job, because there is a lack of accountability. Let’s say the client gives good instructions, a clear program and a appropriate budget. If the architect doesn’t listen and has to produce multiple designs to get to where the clients has asked, they get paid their hourly rate. Continuing along (and yet another reason this is a bad system) what happens if the architect prepares a poor set of construction drawings? They will be rewarded, again at their hourly rate, for the extra on-site coordination, preparing additional construction documents ”requested” by the contractor, and for checking shop drawings for design work they didn’t resolve during the initial construction document phase. This is one of those instances where the system works with a competent, ethical architect; but fails miserably when you get something or someone else. If you were the client, how would you know ahead of time which one you were working with?
Skin in the Game
I like 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.1. I am going to treat you fairly with my fees and you’re not going to waste my time. 2. I am going to make myself available to you and you’re going to make yourself available to me. 3. You will tell me your “real” budget and I will be accountable for designing a house that meets that budget. 4. If I design a house that comes in over your budget, I will revise the drawings at my cost. 5. If I tell you that you have changed the program and are at risk for exceeding your budget, and you ignore this advice, you should expect to pay me to revise the drawings 6. If you tell most architects that your budget is $500,000, they will assume that this means your construction budget. Make sure that your budget includes monies for professional fees, landscaping and contingency 7. Make sure that you have a conversation in the beginning what scope your stated budget will cover.
When everybody has something at stake in the process, and this should not be a surprise, the dialog is markedly improved; clearer goals are identified as a by-product of this process.
If you have any particular questions, please feel free to email them to me: email@example.com. There are many ways fees can be charged, we try and make them simple for our clients but occasionally we have to “revisit” some items along the way and they are almost always associated with one of the 6 items listed above.