If you are wondering why you can’t seem to find an industry standard for establishing an architect’s fee, it’s because there isn’t one (you’re not crazy!). In fact, almost 30 years ago, because of a consent decree with the US Justice Department, the American Institute of Architects agreed not to adopt policies of offering fee recommendations to architecture firms. This means architects must act on their own, or consult with other firms, while deciding a project’s fee.
Calculating fees can then be a bit of a guessing game with such factors as: the project, the client relationship, the competition, the firm’s overhead, and the overall economy. Therefore, compensation methods for architectural services take varied forms.
However, there are some industry standard fee structures that can help when deciding how to hire and pay an architect for a design project.
Hourly Rates
This method is pretty straightforward – clients are billed for the amount of hours the architect works on the project. Prices will differ depending on the project and the project’s locale, but can come in around $150 per hour, or higher, to work with a firm’s principal architect.
This structure can be problematic when the amount of work that goes into architecture projects is not communicated in advance (i.e. a situation where the architect and the client are not on the same page as to the value of project). Sometimes, architects will have to reduce their fees when a client doesn’t understand and/or disagrees with how much time it takes to complete a project. Most clients will then prefer to add a “not to exceed” clause.
We feel that hourly fees are best suited for consultation services or for certain parts of the design process, such as the preliminary stages of the project, with the intention to move forward to a more permanent fee structure for the remainder of the project’s duration. At Prime Architects, we have kicked off a project by charging hourly, as clients are not completely clear on what they want and the scope of the project is not clearly defined. Once we are able to get a better understanding of our client’s wants, needs and desires, we can then come up with a conceptual design that will give both parties a better ideas of the scope of work ahead.
Small and moderate-sized architecture firms tend to be more flexible in working with different fee structures with clients, whereas larger firms may have established protocols that can’t be modified/customized.
Fixed-Fee
A fixed-fee contract with your architect will state a set amount that will be charged for services, and specifies that a predetermined scope of service will be furnished. This method serves to eliminate concerns for both parties. The client does not have to worry about being overcharged, and the architect eliminates the ambiguity surrounding the client’s perception of the work/value and how that affects the hourly fee that is charges.
As an architect, it is challenging to settle on a fixed-price contract until we know exactly what the project entails. Thus, the need to charge hourly for work in the preliminary stages. Additionally, fixed-fee structures can be ideal for small projects as the scope of work is more cut and dry.
In a fixed-fee structure, the amount remains fixed unless there is a change in the scope of services. A fixed fee agreement should include a specified time limit for the performance of the services. For time delays not caused by the architect and/or client changes after document have been approved, a provision should be included for additional compensation to the architect. Should the project be expanded or reduced in scope, provisions should also be made for equitable adjustment in compensation.
Percentage of Construction Costs
A contract that is based on a percentage of construction costs specifies that payment to the architect for a predetermined scope of services will be determined by multiplying a specified percentage times the construction cost of the project. This can be done using the awarded, estimated, or final total construction cost. “Percentage of construction cost” is a method which is used extensively for establishing compensation for professional services. However, in his article “Compensation Methods for Architectural Services”, Thomas R. Gossen, AIA, PE, points out that “Compensation based on this method is not necessarily best suited to professional encouragement and reward, since it penalizes rather than rewards the architect for reducing construction costs through economical design”. While I would agree with Mr. Gossen, Prime Architects will typically choose the method that is of convenience of the client and has completed many projects under this type of fee arrangement.
Local construction markets can also affect the “percentage of construction cost” fee structure as varying construction costs can create inequities in charges for professional services either to the client or to the architect. Again, this method for establishing compensation has been used for many years and is fairly common in our industry. In fact, for most large projects, there’s a good chance the architect’s fee will be calculated as a percentage of the construction costs. As for the percentage charged by the architect? It’s usually a sliding scale affected by how big the firm is and the size of the project…but typically ranging anywhere from 9 to 10 percent for new construction and 10 to 12 percent for renovations, while commercial project fees can be as low as 5 to 7 percent. Renovation projects get higher fees because architects must investigate and document existing conditions that will be preserved, worked around, modified, or added on to.
We recommend bringing on a trusted contractor early in the process, as the enhanced communication between the architect, contractor, and client can benefit all parties. With expectations and budgets addressed upfront, and routinely as the design is being developed, the project has a better chance of getting to the finish line on-time, and on-budget.
At Prime Architects, we work diligently with clients to identify and manage the expectation of their projects, which helps everyone’s understanding of the value of each project. Reach out to our team.
References
Gossen, Thomas R. “Compensation Methods for Architectural Services” (n.d.).
