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So, I have been reading a lot about how one of architecture's biggest problems is that architects undercut themselves to get the lowest bid on whatever they are bidding for. Now, I see how this is a problem. My question to you all is, how can this problem be remedied? Are there laws that can be put in place to stop underbidding? Or perhaps more closed bidding options could help prevent this? Let's hear some opinions out there.
Background knowledge on fees across time.
I think it is an ethical problem and can be fixed through ethics. It is unethical to charge other than what you are worth. If you are a $60 an hour architect you should charge that, if you are a $500 an hour architect (Zaha!), then you charge that.
Unless architects are all in agreement to charge what they're worth some will low-ball it. It's like the one kid that does good on a test that's graded by the curve when everyone else did bad on purpose. Also, if one architect in town thinks he's worth $500 an hour and the other thinks he's worth $60 an hour won't they always go for the cheaper buy?
No. Value matters. Reputation, relationships and performance should be what gets you jobs, not price anyways. There are $600 diamond rings and there are $50,000 diamond rings. Not all diamond rings are the same.
Lowballing is tiresome. Let people do it, they can burn themselves out. You can be fresh and ready for the next project while the lowballer is stuck sweating it out on the one he lowballed.
Alright, thanks tint. Good input.
There is laws that prohibits what is called 'dumping' or price dumping. It is anti-trust law violation to do that.
It is also a violation of anti-trust laws to price-fix. (ie. architects consorting into a fixed price... it is unlawful for ALL occupations to have conspire and fix pricing for goods and services).
However, the authorities having jurisdiction over antitrust violations have not done a great effort in enforcing these laws at federal and at state level. Then again, these entities don't enforce unless there is a complaint filed for an investigation and the matters has to reach a nexus for them to invest the budget on the enforcement of such matters. The nexus is lower at the state level typically than at the federal level. I would suspect a county/municipal level nexus would be even lower than the state level provided the county/municipality enforces such laws at the local level.
Usually it is state and/or federal.
Federal agency... US DOJ Antitrust division is one of the key entities.
It's this kind of crap that tint's article was getting at. There are restrictions and liabilities that have cast architects into a state of fear when it comes to pricing.
Price what you feel you are worth tempered with a little bit of business sense of what the clients are willing to pay given the scope of work. It's a give and take.
We just can't come together as a group agreeing to charge a specific price like a specific percentage of construction costs or a specific billed hourly rate. We are to independently derive our prices given the scope of work.
This applies to all businesses in all fields.
it's all a matter of supply and demand, just like everything else. There are too many architects for the amount of work available, particularly in economic downturns. As long as there are architects with trust funds or wealthy spouses, or who have the I-love-architecture-so-much-I-would-do-it-for-nothing mindset (an attitude that it fostered in the typical architecture school), there will be low fees. The rest of the building industry knows it, but for some reason we resist the message. The enemy is us and always will be.
But certainly we can make general guidelines on the minimum costs, time, effort and input necessary for essential architecture services? We could create a scale of what potential fees could look like, adjusting for inflation and the scope of work. They would be a reference, not a mandate.
We could create a scale of what potential fees could look like, adjusting for inflation and the scope of work. They would be a reference, not a mandate
Suggested fee schedules have been shot down in court. This "reference" wouldn't stand up, I don't believe. Face it, when the doctors and lawyers and CPAs were setting high fees and conditioning clients to expect them, we were dressing up as our favorite buildings at the AIA ball and having erotic dreams reading The Fountainhead. The other professions made hay while the sun was shining and we didn't. Now it's too late.
As for supply and demand problems, the answer to that is make yourself rare. Be the one that can do more than the next guy. Know more, deliver more, cause less problems --> get paid more, get more work.
Doctors, lawyers and CPA's don't have fee schedules either, the anti-trust laws impacted all professions, it is in the article above, a must read. They all price according to value and worth. You can hire a lawyer for $200 an hour or $1000 an hour. But the difference is that none go below $200 because below that they are undercutting the profession and therefore themselves. Professions have ethical codes for this reason.
An earlier thread discussed this same topic (more or less) here on Archinect::
AIA fee deregulation? http://archinect.com/forum/thread/29395/aia-fee-deregulation
It's an interesting thread and worth a look through.
My national and provincial institutes publish fairly complex fee guidelines - see here for a draft that is relatively in line with the published numbers. From my experience, most architects charge roughly 1/2 to 2/3 of the fees listed, and practically never use the adjusted figures, instead relying on experience, intuition, and current workload.
Sorry, here are the current published guidelines. See p.11 and 12 for table.
Actually, you can't ever possibly engage in any form of price fixing without is being illegal.
What should be discussed is HOW to derive a fee so that you make a profit and run a stable business not HOW much to charge. How much to charge depends a large part on what it costs you and making sure you establish a stable contribution margin for each project considering your work load.
The first step in getting out of lowballing is to stop engaging this occupation as a gig and start treating it as a real and serious business. Show up to clients in suits (or similar level clothing) in initial meetings with clients to be taken seriously.
The biggest thing is to stop treating the project as a weekend fly by night gig. This isn't a mow the neighbor's lawn for $25 so you can buy a steak dinner. Stop charging your once upon a time ago... intern pay rate for labor when you have full legal responsibility for the project. Charge what you need to commensorate of the scope of work. What's the point of doing it for nothing because you can't run a business (that is what you are when *YOU* have clients) that way.
You love the work does not mean you should whore yourself out for nothing like a slut. At least a whore has the sense to earn money. Okay, we know the illegality of prostitution. However, when it comes to architecture, don't be a slut. Clients love sluts because they get what they want but don't have to pay for it.
Then ask yourself, did you go to college to make less than minimum wage?
re: the earlier thread... If toasteroven is still looking for those old fee schedules, copies of the originals are right in the link I provided above. Let's see if I can put one here, it is the first one.
The antitrust suite hit when I was in full flight and it was crushing. We didn’t use the fee schedules to fix pricing but as something to show clients in fee negotiation. Individuals were then and now cutting-fees. We just taped the AIA schedule to the bottom of our drawers and made up our own to legitimize fee discussions. I think some private clientele feel that you may be gouging but that is because most don’t have a point of reference, or a peek at what you are charging others.
In my area, back then and in history, the big GC’s would meet once a year at a hotel in a neighboring state and divide-up the year’s big projects. Hell I think they still do seems all the big projects in town take turns with each one. I know this because the owner of the oldest and biggest GC’s closed his company and joined me in semiretirement and we were close friends. He knew also that all the highway work was divvied up the same way. The AIA Antitrust was/is bullshit.
Doctors are fixing pricing via insurance companies who make acceptable schedules. Dentists do it at their Wednesday night swarays, lawyers do it, and they all do it. My State has a fixed schedule for state work isn’t that price-fixing? Now of course there are fluctuations in these other professions it’s just that they have the good sense to keep the minimums up to keep all boats afloat.
There will always be mavericks but our profession lacks the balls to rein these guys in at private meetings. Back when there were a lot of small GC’s that could get bonding the big GC’s would apply pressure to these guys by influencing subs to bid those guys higher with guarantee of more guaranteed work and fast weekly pay to squeezes the small guys low balling work.
Lamenting about fees on private work isn’t going to solve the problem. The hell with the antitrust, nothing says you can’t meet at an AIA subcommittee to discuss fees. They have us all scared like little bunnies afraid to even discuss it. Sharing building type fee performa’s can be just based on hours and constantly passed around. We need a vehicle to get there. This may sound a little crazy but I considered starting a consulting firm in my retirement where I would act independently to negotiate all firm contract/fees based on a fixed schedule of mine not theirs, and serve to collect unpaid fees and arbitrate disputes involving fees. It wouldn’t be them doing it; it would be “Mickey” doing it. If you don’t do something we’ll all be still talking about this 10 years from now, then of course I’ll be dead.
why can't we just make an "unofficial" website that posts "recommended" prices that arranges "social" engagements for "club" members who all agree to "go on vacation" when owners and developers get out of align or comically "roast" the low balling architect....
I nominate Carrera as President of this Society of Social Drinking Architects.
We officially drink alcoholic beverages monthly and talk architecture, that's all ;)
Okay, an interesting point you made. Price schedules in themselves is not price fixing. Firms have their own.
If the intent is to formulate an agreed price as a profession then we may have an issue. I am not concerned about discussing how we derive frees and the factors considering. However, I would recommend any discussion intentionaly designed to set a specific price to charge.
I suppose something similar to a "Kelly blue book" can be develop but under no circumstances should it be mandatory or official. We would be open and free to make our prices.
The thing that got AIA in hot water was when they published the fee tables.... AIA members was REQUIRED to charge according to the price table. Sure, we can have perhaps multiple competing "kelly bluebooks" (unofficial recommended prices) that is entirely optional leaving each practitioner to decide what to charge.
You can google a wikipedia of Kelley blue book as well.
We can use a statistical data collection similar to RS Means which as it is is statistically based. We can use statistical data collection of prices. Local/regional medians.
That is an option perhaps.
As long as the principle elements are flexible to allow people to make personal adjustments as they see fit. We need to be able to compete but also derive prices as we see fit.
Society of Social Drinking Architects - Phi Pho Chapter
Meeting Agenda September 1, 2014
Meeting Orated by the Analogy Poet Frank in the high court of Honorable Philip
Analogy Poet Frank "Hear Yea, Hear Year architects we convene to drink the domestic light beer. Domestic! Absorb the single family detached dwelling and light of wood frame in a 6 Pack as a standard size of consumption and has an alcohol content of 5 PERCENT%."
Honorable Philip "Fee! Phi Pho dumb, lets us now discuss Rum!"
Analogy Poet Frank "Rum is recreational, gyms, sweating lockers, showers and dumbells - I smell my Yoga instructors breath at an alcohol content of 12 PERCENT% "
Honorable Philip "Fee! Phi Pho urban, lets us now discuss Bourbon!"
Analogy Poet Frank "Bourbon is not suburban! Its a ladies and gentlemen's museum space of painting, lighting, and engineered class - I'll have that on the rocks, the top shelf one with an alcohol content of 30 PERCENT%"
Honorable Philip "Fee! Phi Pho Russia, let us now discuss Vodka!"
Analogy Poet Frank "Russians drink as much Vodka as Americans drink milk! If the government is illegal take a shot of the hardest stuff, throw half over the shoulder, the other under the table, share a drink with a builder because too much is the alcohol content of 40 PERCENT%"
Analogy Poet Frank and Honorable Philip - "Drink Friends Drink, nothing we say can we be accountable for so says David Hume our forefathers thought father!"
carerra: "...nothing says you can’t meet at an AIA subcommittee to discuss fees"I expect the AIA's General Counsel - with whom I've discussed this matter several times - probably would disagree with that statement. The AIA is hypersensitive about such discussions, for the reason explained below:From the article link tint provided above: "In 1984, to help its members deal with their financial difficulties, the AIA's Chicago Chapter issued a compensation and fee policy statement. The AIA's general counsel immediately asked the Chicago Chapter to rescind the statement after distribution, because it violated the 1972 decree. But it was too late. In 1986, the Chicago Chapter was notified that the Justice Department's Antitrust Division was investigating alleged violations of the decree. According to Dixon, ''during this second investigation, the Justice Department essentially terrorized the AIA. Documents were confiscated and members were subpoenaed and required to testify before a grand jury. There was a threat of criminal prosecution.''
The "Chicago problem" referenced above was resolved with the 2nd Consent Decree. That second Consent Decree - among other results - led the AIA to publish an earlier version of this document:
One excerpt from this document provides guidelines for the conduct of all AIA meetings and reads: "Do not discuss any subjects that might raise antitrust concerns (including prices, market allocations, refusals to deal, and the like) unless you have received specific clearance from counsel in advance. If somebody begins discussing a sensitive subject, do not allow the discussion to continue. If the discussion does continue, do not allow the meeting to continue."
While the sorts of discussions carerra mentions above may not necessarily lead to "policy decisions" or even suggest "mandatory schedules" the AIA has been burned so badly in the past that they tend to discourage such discussions whenever they become aware of any taking place.
However, if a group of individual architects chose to meet - independent of the AIA - for the purpose of discussing fees, that is - of course - their own business. To the extent such discussions precipitate "price fixing" and such price fixing is uncovered, then those individuals would be subject - personally - to whatever legal actions the Antitrust Division of the Department of Justice might choose to pursue against such individuals.
Personally, I consider such discussions to be "playing with fire" both because of the potential risk and because they're unlikely to lead to any lasting solutions. The only real solution is for individual firms to charge fairly for the services they are asked to provide and resist the temptation to compete on the basis of price.
Richard Balkins: "Sure, we can have perhaps multiple competing "kelly bluebooks" (unofficial recommended prices) that is entirely optional leaving each practitioner to decide what to charge."
There is nothing in the Consent Decree -- or the law -- that prevents private companies from conducting fee research and then publishing the results. Both PSMJ Resources and ZweigWhite compile and sell annual surveys of A/E fees, generally organized by building type. Anyone can purchase these surveys and make whatever use they want of the data.
Exactly. As long as each architect/designer/firm is free to decide what they want to charge.... it's okay. What nailed AIA those years ago was those prices were mandated on AIA members and therefore caused unfair influence.
I agree with your response to carerra. In the same light, AIBD (American Institute of Building Design) has a similar guideline about not discussing prices in a manner that would or could lead to antitrust violation and they take extra care in official activity of the AIBD including continuing education to avoid such discussions and moderate those matters.
I'm a Professional member of the AIBD in addition to being an Associate member of the AIA.
I'm with you on the independent fee research and statistical data collection and publishing.
Let me withdraw AIA from the discussion. Just remember though that AIA is a professional organization not governance of law. I was in error; meeting under AIA would be a mistake. I was in the AIA my whole career and I love AIA, but since this antitrust thing they don’t want us to meet and talk about anything least being fees.
I’m painting a picture on how naive some are on this issue. Practicing architecture is a business too and business practices must be employed. I’m not advocating meeting in motels in Pennsylvania or meeting in back-rooms scheming against anybody or “roasting” some guy, I’m just saying that other professionals have found ways of keeping things in balance, legally, somehow and you should too.
As for bidding as an example, just don’t bid. Doctors don’t bid, lawyers don’t bid. Why? Because they agreed not to bid. Whether to bid is a business practice based on professional courtesy and many other professional reasons. That does control prices to the consumer but it’s not illegal.
Once I got beyond private work into doing work for government and foundations the air was cleared of this. It’s the guys struggling to get to 30,000 feet that are hit hardest with this. If they try to get a meeting (privately) to discuss the situation they will find the bigger firms that could carry some weight won’t participate, not because they are afraid, because they don’t have the problem. Despite that a group of small firm owners in my community once formed a collation to combat other problems they were having and it worked, outside AIA. Don’t look to AIA to lead you out of this problem; it’s a business problem and forming a business coalition to meet and talk of ways to solve business problems is perfectly legal and justified.
Exactly. As long as we don't formulate a group to establish a defacto agreement to a specific price to charge our clients such as what percentage of construction cost to charge or anything nefarious that runs afoul of antitrust laws... I think it is okay to discuss business matters including subjects involving prices. Intellectual dialogue vs. conspiring to price fix is two different matters. Having business coalitions to find ways to solve business problems is perfectly legal and justified as you said.
Richard, yes of course, glad I straighten that out. Leaving for a few days, have a meeting in Pennsylvania to attend, check in with you upon return to see how things are progressing.
As architecture becomes ever-more developer driven - who else can afford to design and build? - the pressure to reduce costs that detract from profit will continue to grow. Developers don't give a shit if the building collapses after they sell it, the check has already cleared.
It's the American way. Where I live they are building disposable multi-million dollar spec houses by the hundreds. Two years later the roofs leak, pipes freeze, basements flood, cheap materials delaminate, etc., etc., etc.
Fast, cheap or nice: pick one.
I was always told fast, cheap, or nice: pick two. But I can see where you think that with the way things work these days.
Carerra you have a lot of good stuff - this is great - granted we're part of an industry where bidding is traditional at least on the execution of construction end -
"As for bidding as an example, just don’t bid. Doctors don’t bid, lawyers don’t bid. Why? Because they agreed not to bid. Whether to bid is a business practice based on professional courtesy and many other professional reasons. That does control prices to the consumer but it’s not illegal."
on another note:
I would like to point out in this modern age you can say what you really mean on Comedy Central News Shows. If the Onion published AIA price fixing fees or some tabloid we could assume it is fiction and untrue.
So we start a club that isn't seriously considering price fixing, just talking about it as if it were aliens and comedy - it's all one big joke about comparing alcohol content to percentage fees or whatever.
Don't leave a trail of crumbs for the feds to figure out the real intent. They can pierce a veil of b.s. to get to the real facts. Smoke screen and b.s. isn't going to fool a truly dedicated federal investigator.
A relation of mine, a former lawyer and FBI agent, asked me about my architecture career once and in our conversation I brought up the anti-trust scares that the profession suffered through and the supposed ties to diminishing fees (he asked why we didn't make more). I would tell you what he told me, but I don't know if I can repeat it.
But this is why it would be helpful to have at least one law class, taught by a lawyer, so we can learn to think like lawyers just a little bit. I'm not sure that the AIA counsel's advice on the anti-trust problem is working for anyone but that's just me. back to painting the bathroom.
Richard, what is the intent of a joke or fiction? or even blind faith in religion, you can't sue someone for believing something and everyone agreeing with them...
let's start with NO BIDDING
Mr. Balkins between your picture and the mention of Feds you reminded me of a kid I took a class with in "Philosophy of Mathematics" in undergrad, he'd wore an FBI jacket to school...
Tint tell it like a story...and I meant you can not prosecute someone or a group for believing something....
That's a rain jacket I was wearing at a historic preservation workshop that I was at. That was taken at a historic church we visited in Washington after we finished a workshop session doing restoration work on a building at the North Head Lighthouse state park. This was after I returned back from the Heritage Barn Conference in Walla Walla, Washington that is connected with the historic preservation organizations in Washington as part of preservation of historic barns. When we got back, it was 1 to 2 AM in the morning of the day of the workshop. Then I had to spend the following 4-5 hours to clean the church as it was a part-time job I had. Then I had the workshop which was 6-1/2 hours. Then we visited the church building after the workshop. Then there was a group photo. I cropped the picture for the 'avatar'.
I wasn't very energetic to smile much.
My point on the anti-trust laws is that you can paint b.s. all you want but if you leave evidence of truth and facts... it doesn't matter what the smokescreen and red herrings. The preponderance of evidence will get through the b.s. veil. If you are going to break the law, don't leave evidence that can be used to hang you.
I can state what I charge but as long as the discussion isn't framed around formulating an agreement to a set a specific price. For example, if I and all or a vast majority of all the building designers and architects in Clatsop County, Oregon and Pacific County, Washington formed an agreement to charge like 10% of construction costs for all residential projects, then we would be guilty of A) Conspiracy to price fix and B) Price-fixing.
That would be illegal. It would be enough to get both Oregon and Washington state authorities of antitrust laws of those states. It maybe enough to get US DOJ and federal courts in a not as well publicized case. That would be stupid for us to do so.
AIA can't get itself involved in those discussions because there was a JUDICIAL SENTENCE of Federal court judge(s) and their stipulated rulings. This is the decrees that was referenced.
AIBD although not bound to the stipulated decree had taken noticed and to protect itself does not permit such discussions in AIBD functions, meetings, etc.
What got AIA in trouble in the first place was the price schedule was mandated by all members of AIA for face AIA sanctions. Yes, AIA has disciplinary sanctions. Because AIA was and still is a significant influence and has the position of great influence. Thinking about the percentage of architects are AIA members and also serving on the licensing boards and NCARB.
So they are watched more closely because they are in such a powerful position in the architecture profession.
Believing something is one thing. It isn't a guaranteed protection.
Lets frame it in a colorful (not serious so don't panic) way, if we on archinect believed that you should be murdered and formed a group to form a lynch mob to beat you and then burn you.... does that "belief" protect us from being sued if not criminal charges.
Does believing we should get rich by robbing the federal reserve, do you really believe that the belief will protect us from imprisonment for stealing all the gold and cash in the federal reserve?
Belief and an agreement to violate law does not protect us from the judical system.
That is why I say care has to be taken to avoid fixing prices. We might all agree we should charge more for our services and raise the price ceiling so we can have a more sustainable business economics, as long as we independently decide how we charge our services including independently deciding how much to increase.... we would be ok and compliant with laws. Where we get into problem, legally, is if we essentially make an organized agreement to increase our fees by _________ % or charge _____________ % of construction cost or so forth.
If you and I just happens to look at the statistical data above and independently designed free of undue influence over each other to raise our prices because you and I happened to see missing opportunity to cash in on how much we can make. If another competitor is able to make 10% of construction cost and we are only making somewhere between 1-3%, and we independently decided to increase our prices by whatever amount independently of each other to whatever each of us feels to cash in on missing cash opportunity. Why would we want to charge too little if our competitors are able to make a lot more. As long as you and I are not conspiring together with our competitors to a specific price, we won't be violating the law.
The point is for each competitor to independently determine the prices he/she wants to charge for goods and/or services. Even if many of us philosophically agree that we are not making enough money and prices are lower than they used to be statistically in the past and with rising costs, we need to charge more to be sustainable as a business. We can discuss that but we can't just form an agreement to increase our prices to an agreed upon price.
Just learn how to say no! Take what you think your worth and double it then negotiate down if you have to.Please people, have a little bit of self-confidence, we are highly educated individuals after all(don't become a cocky a..hole, though ). Oh and one more thing stop complaining and try to so something about it. Perhaps it is time to have an establish minimum fee requirement according to ranks in the profession. Perhaps the board should be adressed with that issue. Keep striving!
This forum appeared in my dream last night (dreams actually usually occur in the waking hours, so this morning), slightly mixed with the Absurdity of Having a license.
A designer (not naming him here) stands up at a banquet to receive his award and complains about why he can not call himself an Architect yet. He hangs a square box with a mirror on it dead center of the yellow cross hairs of the Swedish flag. As he does this the word 'paraprofessional' appears bottom left of flag. The crowd is in an uproar.
The next scene, I'm in a huge floor plate with many courtyard glass lights piercing through the space vertically. Around these glass courtyards are contemporary meeting lounges. I'm meeting a with a Jason Statham look alike who says he can take care of the practicing architecture thing without a license - no problem.
When I ask him about price fixing, he cites some case he started years ago and excuses himself to the bathroom.
then I woke up.
Any architect who low-balls deserves all the unpleasant consequences to their business and reputation that will come with that. If your competitors are stupid enough to do something so suicidal, let them. As Napoleon said, "Never interrupt your enemy when he is making a mistake."
And any client who solicits and hires based on low-ball fees gets exactly what they pay for. Let them learn it the hard way. If they're smart, they won't do it again. If they're not ... well, you don't want to work for them anyway.
Remember, it isn't a problem on one or two low-ballers.
I'm not going to sugar coat it.
It becomes the stick that the prospective clients beats us with to get everything for nothing. We have to be careful because we can't otherwise compete without it taking every single architect/buildin designer and firms down with it. Literally. Race to the bottom equates to lowering the price ceiling across the entire field and then we all get pressured down to the point where none of us can possibly stay in the business.
This suicidal business lunacy will destroy ALL of us because it is like a plague. Stupid breeds stupid. It is contagious. No one is immune.
Clients win because they can get everything for nothing. Then what?
That's the question.
The client will get top quality for nothing because the stupid ones will give it to them because as professionals... we are literally too ball-less to stand up to our real worth. Plain and simple.
Stop running a for-profit architecture business like a non-profit.
Once we grow a set of balls to challenge our clients and uphold our worth and respect ourselves then run our business as a professional commercial business then we can grow and become successful.
If we don't then we ALL will be f-cked.
if you want to make more money, raise your fees.
There should be a vignette on the ARE for running a lemonade stand to prove you can run a business.
every price is to high until there is a potential client is emotionally involved. higher fees mean that you must sell extra value. of course, you may not have extra value. you must sell what architects really should be about which is vision and ideas rather than services. you may have no vision in which case you can charge less. you may have a client who doesn't want vision or ideas. these bottom feeders will be driven away by your higher fees. value is a combination of price, quality and service.
The reason we charge services is because people to pay for vision and dreams because everyone has them including your 2 year olds.
Two many too's...I am hoping that you architects are just working off you Sunday hangovers?
2 year olds... murrh? My vote is too keep hitting the bottle...
that comment made no sense; not even to my two year old.
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