FEES; WHAT YOU GET FOR YOUR MONEY (YOU GET WHAT YOU PAY FOR)

Derek Maschek
MASCHEK design and fabrication
www.maschekdf.com

This has come up a lot recently, and frankly, comes up all the time. However, it’s the topic we (architects) least like to talk about but most NEED to get comfortable with. Architecture is a professional service, and it’s a business. What Architects (and Interior Designers, Landscape Architects, Planners, etc.) charge for is their time, with values for that time being directly related to resources, experience, skill, and talent. In school, many are never taught the money side of architecture and even when it is, there is no experiential reference so “in one ear and out the other”. It’s when our first potential client comes along and asks, “Hey, how much to design my house?” that we sit back and start to panic in a fog of ignorance. The answer we give; “well, it depends”. Coincidentally, this is exactly right, but without more information it doesn’t seem to help the conversation much.

Before I proceed, let me say that there are bad architects out there just like there are bad doctors, bad lawyers, and bad everything. And just like there are bad service providers, there are bad clients too. Unknowingly or knowingly, it is possible for either party involved to be less than ideal partners in a services arrangement. So, keep in mind that everything I say below assumes qualified, forthright, and honest partners are involved.

Another caveat; this is just about Architectural Services. There are no engineering fees or other design fees included with any numbers I give. Those can just as easy to be collectively equal to or considerably less than the architectural fees, it just depends.

Lastly, architects (I won’t speak for other design professionals) have several basic approaches to calculating fees, several approaches to charging for services, and lots of customizations they offer depending on project specifics or client needs. To be comprehensive about all this would be a college course in itself.
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Historically, architects look at the project from three basic perspectives to determine a fee; hours of work, percentage of construction, and cost per square foot. These are estimated and referenced against each other, compared to other similar past projects, and tweaked until the three seem to jive with one another.

When we look at the project from an hour’s perspective, we literally consider every part of a project including administration, communication, and documentation. Tally it all up and multiply it by what we call a “blended” rate (an average of the billing rates of all those working on the project), and you have a fee estimate. Specific hourly rates can be used if known, such as with repeat or cut-and-dry projects. The more technically involved the project (hospital, laboratory, etc.), the higher the blended rate and thus higher the total fee. The opposite is true as well.

Looking at the fee from a percentage of cost of construction perspective is really useful for repeat projects or with very familiar project types. In commercial construction, architectural fees can range from less than 3% on large or simple projects, to over 15% for very custom residential, highly technical commercial, or projects with heavy hourly involvement. For a commercial project, I’d assume at least 6% of construction cost would go for architectural fees. For custom residential, 10% is more appropriate.

Using a cost per square foot methodology again should be used only for repeat projects or with very familiar project types. Given the variability of project requirements, it’s hard to even provide suggested guidelines, but consider $2.50/sf a starting point for common Tenant Interiors (office and retail that involves essentially interior walls and no exterior/shell work). While it can go down from there on really simple projects, this base number will go up quickly with architectural/exterior work, so only use this as a rough guideline. It behooves any architect to keep track of projects, their fees, and some of the usual parameters (such as square footage) for reference later as a check against future estimates using this methodology.
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We’ve discussed how we estimate our fees, but it may or may not be how we charge for our services. Contracts are typically drawn up as Hourly, Fixed Fee, or Percentage of Construction. However, final contracts for all available design services are typically a blending of these approaches. How an architect handles fees for Design could easily be different from those for Specification and Documentation.

Hourly is just what is sounds like; billing for every hour spent on the project just like a lawyer would do, charged at whatever rate suits the employee involved. Rates vary from about $50/hr for administrative or inexperienced staff, up to about $250/hour for principals, specialists, or big names. From an architect’s point of view, this method is most appropriate for a time-consuming client (committee clients, indecisiveness or impulsiveness, unavailability, etc.), or where a project is undefined (site unselected, unique construction systems, nebulous program, etc.). It’s advantageous for the client to use this when the project is really clear and simple, client decisions will be quick and conclusive, and client experience suggests the architect’s total time estimates are high. Often, what is best for both client and architect, is to use Hourly for early phases (Site
Selection, Programming, Planning, Schematic Design) as well as later phases (Bidding and Negotiations, Construction Administration) such that an appropriate amount of a professional’s time gets placed where needed but time can be limited where a client wants to assume risk or provide assistance. Even if not asked for, an architect should always provide an estimate of the total hours involved in order to prepare a client for the anticipated end cost, or else expect an angry client later.

Fixed Fee services are derived using the methods I mentioned above, and are a “fixed” number to be paid for the services provided. As always, it is critical that a professional be absolutely clear about what services are being provided for said “fixed” fee. It is likewise critical that a client understand what services are and are not being provided. Talk this all through in person. It is time well spend for all parties involved. Nobody likes getting additional bills above what was agreed upon so both parties need to be clear in the contract and over the course of the project if and when Additional Services are probably going to be, will be, are being, and then have been incurred. As with a construction bid, the low-bidder may is likely saving money by limiting services rather than “doing it for less”, resulting in a client not getting what they expected or needed, but while getting what was contractually agreed to.

Percentage of Construction is a good and fair approach as there is some association between the value of the result relative to the fee incurred. Now, I have heard complaint by a client that asked “why should the design fee go up so much just because gold shingles were chosen over asphalt shingles?”. In this example specifically, the gold roofing would require a higher level of detailing because of its value, longevity, and uniqueness. But generally speaking, there is a greater liability risk should something go wrong, so costs associated with insurance adds in here too. Also of note here, as the initial fee estimate is based on projected rather than actual construction cost, there is the distinct possibility that the final fee will end up higher after all the receipts are added up. Actual construction cost could be less too, reducing the fee, although this situation is rare at best. Finally, it is imperative that the architectural contract define what the construction cost includes, and the contract between the contractor/builder and the client needs to coordinate with this definition. In this situation, the architect should have rights to reviewing the contractor/builder’s “books” in order to avoid relevant expenditures being kept “off the books”. If this method is pursued, only the most professional and thorough contracts (re; American Institute of Architects) should be utilized in order to properly protect all parties involved.
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This is just a quick overview of the subject of fees associated with architectural design services. There are numerous phases in every project, there are a number ways to handle each phase contractually, and there are innumerable project specifics that will impact the final number. I understand that the numbers I’ve outlined here often come as a shock to people that are new to the Architect-Client relationship. Note that this is all just a beginning, a conversation-starter designed to get you (Mr. Client) prepared just enough to have an informed and productive conversation. Just remember that our fees are about our time. Necessary aspects of technology, infrastructure, overhead, and profit are all calculated into our hourly rates and are generally not negotiable. If you want to save money, it’s about saving time. However, know that saving money by reducing an architect’s scope will definitely result in at least one of three things; increased client’s (and even architect’s) risk, reduced quality, or just shifting the expense by paying somebody else to do the necessary work.

For most people, an architect will be employed only once and the investment involved is usually substantial. As a client, do your homework and look at your potential architect’s previous work and ask for some references. Know that often there is still more to the story, so talk with your prospective architect about it all; the good, bad, and ugly. Good planning (which is what architectural services are all about) is critical to a good project and considering the cost of construction relative to design services, worth every additional percentage point. There will always be those that offer up the “same” services for less, but ask yourself and your potential architect(s), “why are you less, more, or different?”. To just pick the low bidder is a recipe for disaster, one that likely will cost you considerably more in construction than you saved in design.

I liken architecture to planning for and executing a battle plan. It’s never a good idea to just charge down hill into enemy territory, nor is it a good idea to spend too much time anticipating every possible contingency. Get a good team, find the balance of wants versus needs, plan well, communicate well, and then execute. While nothing ever goes exactly as planned, in-field adjustments and additional expenses will be minimized, and the overall experience and final project will be something you are happy with and proud of, eager to go out and do it all again.