Fee assessment is a cross between a dark art, an analytical guestimate and a S.W.A.G. (Silly Wild Ass Guess ). Essentially establishing a fee is a balancing act between what the client will pay and what you need as an architect to cover your costs to develop the project documents and hopefully glean a modest profit when the project is complete.
It’s essential to understand the client type, project type, project budget, scope of work, and required consultants when establishing a fee.
There is no one solution to establishing a fee or any tried and true rule for doing so that covers all situations. Consequently fees will range widely and be subject to a number of variables. In many cases employing several methodologies may prove to be more effective in arriving at the final fee while also providing a sort of back checking to confirm your figures. That old $ / sq. ft or percentage of construction cost can get you into serious financial trouble and set a precedent that those repeat clients will build their future project budgets on and expect you to apply to all their projects. It’s best to look at each project with a critical eye when establishing a fee. This allows you to honestly share your analysis with the client, if confronted for justification.
the client type
The One Time Client - This client is usually inexperienced in dealing with an architect and rarely understands the time and effort required to produce what they see as a set of drawings & specifications. These are nothing more than paperwork they need to get a permit and have the general contractor price the project. As such it is difficult for them to understand the value in the documents since they will be discarded when the project is complete. Consequently it is good to have a discussion with the client prior to submitting a fee where you are able to help them understand what goes into preparing the documents and how those documents protect the client’s interests (as a contractual element) during construction.
The Repeat Client - This client is often a business person, developer, franchise or established government or private sector entity managing and/or growing facilities for the company or service.
Public Sector -
This client is familiar in dealing with an architect and has usually established the architect’s fee as a percentage of the construction budget. In some cases this percentage is negotiable. For this scenario the fee assessment process runs backwards. You have your target fee set now you have to run the analysis backwards to determine what you can afford in consultant fees and labor costs given fixed profit and overhead targets.
Private Sector -
This client is often familiar in dealing with an architect and has established soft costs that your fee needs to fit within. Seasoned developers or clients that have done multiple projects often already understand the value you bring to a project so the bottom line is cost.
Some clients will want only code compliant drawings required to
* get a permit
* establish a budget compliant bid number
* minimize change orders due to missing or incorrect information
Other clients will want to balance the provisions of the proceeding with a design which enhances brand recognition, company identity, attracts clientele or matches the space ambience with the product value. Here the design becomes critical to the business model and is given more value.
Below are three common approaches to determining a fee. An hourly billing approach is not an estimate and clients will shy away from this fee structure since it is an open ended unverifiable cost. The client will be looking for a known fixed fee, but hourly billing rates are always provided should hourly services be required or requested by the client. Be aware that all of these methods need to account for extraneous costs such as consultants that you may need to hire for the project.
Dollars / Square Foot
This approach can be applied to small simple projects and has in the past been more of a rule of thumb that was commonly used for residential projects that were prepared by draftsman. These projects had little or no programming or schematic design and a bare minimum of design development and no construction administration. Most architects would find this approach to be old school and to be more reflective of only a portion of the overall process, more specifically the construction document prep portion.
Essentially you would assign a dollar amount, lets say $3.00 per square foot and them multiply the project square footage by that number. So a 3000 s.f. home would cost 3 x 3000 = $9000.00 to prepare.
After I have prepared my estimate using a more rigorous approach I run this calculation for two reasons, curiosity and it provides a quick baseline number to check against other projects of a similar type/scope of work. Of course there are always variables that will make this number inconsistent.
Percentage of Construction Cost
This approach like the dollars / square foot approach is based on a specific aspect of the project; however, it uses two variables. The percentage set by the architect or client and the construction cost.
The construction cost can be a limit set by the client or established by the architect given historical data for similar projects. Historical data is inherently inaccurate and made more so when construction costs are in dramatic flux as was the case during the building boom of 2005- 08 when labor and materials where in high demand.
Percentages will vary widely from 3% to 12% depending upon the project’s budget for construction and the notoriety of the architect or firm. Many municipalities set the percentage for public work, which will also range. I’ve seen these numbers run from 6.5% to 9% in my state and I’m sure that range will vary from state to state. If you are a Starchitect, I suspect the percentage pushes into the upper range.
Except in cases like public work where the client sets the construction cost and perentage I view this approach like the dollars per square foot and use it as a back check against historical data on other Projects.
Percentage of Construction Cost bears no reflection on the tasks and time to complete the project. As such it is another guestimating approach.
Construction Cost Resources:
I find is a much more exacting approach that can be applied to both small and large projects and accounts for partial and full range of service conditions depending upon the project / client needs. It aligns the estimated hours to the project specifics and allows you to fine tune the estimate based on the billing rates for each member on the team. In developing the hours estimate you simultaneously outline a production schedule for the project with specific target dates for deliverables. The summated hours then provide the basis for calculating a fairly accurate fee estimate.
The example below comes from the "budgeting" portion of this web site and is the first step in establishing the fee estimate.
fee estimator components
The Excel spreadsheet, I've made available through the A.I. Dropbox, contains the following four components to assist you in determining an appropriate fee for your architectural services. It is by no means an end all solution but only a basic starting point. As you become more familiar with the practice of architecture fine tuning the estimator will be expected. The following clips give you an overview of each worksheet within the Excel file.
Download Spreadsheet from A.I. Dropbox
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The A.I. Dropbox Fee Estimating spreadsheet, hereforth referenced as “the spreadsheet” is provided for free, in good faith and 'as is', and while efforts have been made to reduce errors in the spreadsheet there is no guarantee that the spreadsheet is free from defects, consequently there is no guarantee as to its accuracy, functionality, completeness or operational integrity. There is no warranty implied or otherwise. By downloading and using the Fee Estimating spreadsheet you indemnify and hold harmless all Architectural Intelligence owners, staff and contributors from all damages resulting from its use and take full responsibility for: the spreadsheet’s use, for verifying the quality and accuracy of all formulas and conditional statements, modifications you make to the spreadsheet, for any and all consequences resulting from transferring or sharing the spreadsheet. All test values shown in the demo clips have been removed to facilitiate alignment of the spreadsheet with local conditions.
> Where the figures derived from the various worksheets are summated
to arrived at the final architectural fee.
> Where you can set markups for various cost components to cover your
overhead, profit, direct costs, and oversight management of
> Where you can track by phase the available fee verses the fee used for
The Construction Cost Estimator:
> A Basic cost estimator which utilizes site coverage percentages to drive
area breakdowns which are assigned costs / square foot to derive
building / site improvement costs.
> Additional soft costs are added along with the general contractor's
Staff Hours Calculator:
> Assign staff hours for each staff member on the project to each
> Track staff hours for each assigned task.
> staff members are based on their function / billing rate
> common tasks are identified under each phase.
> billing rates are assignable to each staff function.
Consultant Fee Estimator:
> List possible consultants for the project allowing you to put in targeted
percentages based on historical cost trends.
> Input the negotiated fee to establish the consultant cost total and see
what percentage the negotiated fee represents of the architects fee.
> The calculator breaksdown the consultant fee payments by phase when
the client's contract requires percentage payments based on phase.
+ Expanded Consultants List.