Lets Talk About Money…

Lets Talk About Money…

Lets Talk About Money… 1280 534 KDA

What you need to know about Architectural Fees

A good architect should ask about your budget in your first interview. Do not dodge this question. While money can be difficult to talk about, you should never be uncomfortable about answering honestly. The Architect works for you, and one of the Architect’s most important responsibilities is to protect your investment. The sooner you and your Architect are on the same page; the more efficient your team will be at delivering a product with the most value.

The other not so subtle reasons an Architect wants to know your budget is to gauge how realistic your expectations are and also because it provides a rough guide to the Architect’s fee.

So how much should an Architect cost? Roughly speaking, Architectural fees range between 10%-20% of the construction cost. Smaller projects tend to be in the higher end, and more significant projects tend to be in the lower end.

There are several ways you can set up your contract with your Architect: percentage of construction, flat fee, hourly (with or without a cap), or some combination of those. Below are the pros and cons of each structure.

Percentage of Construction

This was the most popular contract structure, though we find that it is falling out of fashion as of late. With this contract there is an agreed upon percentage – say 15% – that the architect will be paid based on the construction cost. If the construction cost is $400,000, the architectural fee would be $60,000. If the cost of construction grows to $500,000, the architectural fee will grow to $75,000. Usually then billed at milestones.

The nice thing about this structure is that it allows for a change in scope. Typically in a project of some substance – the scope of the project will change from its conception – usually growing. This phenomenon is known as scope creep. With this structure, the architectural fees do not need to be re-negotiated. If the project grows – the architectural fees grow proportionally. The downside of this is that while construction cost is a good indicator of the effort the Architect will have expended – it is far from perfect. There are many ways the cost of the construction could go up – and when this happens, it can be very painful to receive an invoice from your architect altering you to back pay owed on previous invoices now that the baseline construction cost has risen.

Fixed Fee

While the percentage of construction might be used to calculate the fee, a fixed fee contract requires the architect and client to agree upon a fee at the beginning of the project. This too is usually billed in parts at the completion of milestones. This means if the price of steel goes up, you do not also owe the architect more money. This makes the soft costs of the project predictable. The downside of this is that the architect will be more protective of the agreed upon scope – so in the event of scope creep – the architect will have to claim additional services more readily than if the contract was structured to automatically account for this. This too can be frustrating to a client to be informed that a new request falls outside of the contract and will have to be billed hourly. The initial percentage the architect will use will tend to be higher in a fix fee project to protect against unknowns that would be otherwise covered in a flexible fee structure.

Hourly

This is as straightforward as it sounds. The client pays the architects hourly fee for how many hours it takes to complete the work. This can be coupled with a ‘not to exceed’ clause that caps the contract. The upside of this structure is that the client only pays for the work done, and the architect gets paid for all the work done. It allows the client to shrink, grow, or stop work at any time and only pay for what has actually been done. It does require a fair amount of trust between the client and architect where the client trusts that the architect will report the hours honestly and that the client will pay for hours worked. This type of fee is typically not suitable for an entire project, but will often be coupled with one of the fee structures above to cover a specific design, administrative, or additional service task.

Hourly rates will range inside an office depending on who is working from a low of around 75$/hour for junior staff up to $200+/hour and beyond for senior level staff. The most significant downside can be sticker shock – when a client approves an hourly task – then sees a bill – there are often questions about why it took so long. Sometimes a client will see a simple drawing and wonder how somebody took 12 hours to draw this, often forgetting the design time that went into coming up with what to draw in the first place.

Every project is different, and KDA works with all fee structures. We work with clients to find an arrangement that makes everybody comfortable. We work hard to be transparent, and we never want our clients to feel as they are being taken advantage of. The more open, honest, and collaborative the relationship, the better the outcome!e.

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