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Let's talk money.

Carrera

Just got back, catching up here too. I said earlier “you need to find a vehicle to get there”. You can of course try to solve the problem of fees independently as some suggest, by “just being good”….”doing good work”….”creating value”, that’s what all professionals try to do but that’s not what’s in play here. What if you do that and it isn’t working? Design-Build currently represents 40% of all work in the U.S., and its growing. That rate is 53% on the west coast and 81% in military work. It is within these instances that the GC’s are calling the shots and negotiating architectural fees putting out simple RFP’s for bids. Owners therein love it. “Just don’t bid” isn’t a solution that can be employed independently.

One vehicle can be business collations, discussed earlier, another, I think, is to publish everything like all non-professional businesses. Take gas stations as a wild example. A family member of mine was laid-off and took a managers job at a station to get-by and was told by the owner to drive past all the stations on the pike on his way in and change the price to match or 1 penny less than all others….no regard for what they paid for the gas in the tank or in the pipe-line. That’s price-fixing with nobody talking to anybody. I know there are publications out there but this needs to be employed locally by a local business collation by building-type, vetted and published most particularly to those guys outside the coalition that are breaking-the-bank. They are not stupid just ill-informed and they will raise their prices…maybe a penny less but that’s where “just being good”….”doing good work”….”creating value” comes into play.

Aug 11, 14 8:07 pm  · 
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Snoopy316

To the OP

Don't lawyers do that too? the only profession who don't under cut one another are doctors. Maybe Architects have something to learn there.

Aug 12, 14 12:29 am  · 
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Volunteer

The above example is not "price fixing" in the illegal sense as there was no collusion. it is establishing a price in a manner almost guaranteed to run the station out of business.

Aug 12, 14 8:17 am  · 
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tintt

Yes, Collusion (wikipedia's page, just a start) is what is illegal, not pricing nor talking about compensation. Everyone should just go ahead and read about it, study it, and understand it. Should be taught in architecture school, but isn't, my best guess is because knowledge is power, and you aren't supposed to have it.

More links to get you started.

Collusion on WiseGeek

Sherman antitrust laws on WiseGeek

Aug 12, 14 9:15 am  · 
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Don't lawyers do that too? the only profession who don't under cut one another are doctors. 

Don't kid yourself.

Aug 12, 14 9:41 am  · 
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tint,

Collusion... the act of conspiring to price fix....

and

Price-Fixing - the organized agreement of competitors to agree on a specific price to sell goods or services. Just as a cartel of oligopolies agreeing to sell their goods and services at a specific price. 

Discussion of how to price (ie. to discuss what things one should consider in pricing goods and services. Basically "business school". What you would discuss and factor in to pricing goods and services when taking business courses. That is perfectly legal. Using statistical data gathered through independent research and then comparing that with your costs and conditions for a particular scope of work in delivering services to a client is perfectly legal.

Architects and designers should learn to run a business and derives pricing through that. The statistical data can be useful  to ascertain ballpark figures. However, it is bad practice and foolery to just take the statistical data and price accordingly. You need to take into account what your cost overhead is, work load and so forth. Not doing so can get you into a bit of a problem if you are not careful and that your business conditions are not usual.

If you have an usually low work load and higher than average (for the area) rent and utility costs, you may have serious problems with using statistical average. Then there is also the scope of work and how much is involved.

Aug 12, 14 10:29 am  · 
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tintt

I took Economics and it was the hardest class I took and dinged my grade point but I am thankful for it. Students should take a class in business or economics, just one, just to get you thinking and understanding.

Richard, architects don't want to do that (independently arrive at a price based on market conditions). Look around, everyone is still set on fixing a % fee, which is illegal and is what got them in trouble with the law and then somehow erroneously concluded that talking about money at all is illegal. Because they can't see that it is the % fee that is the problem, a relic from yesteryear. Anti-competitiveness is against the law, so you must compete, so how to better compete? 

Billings are such a mystery, especially to young, unknowledgeable ones like me. So how else can you bill not as % fee? Hourly works for schematics, but maybe not for other phases. Hourly with a max? Can each phase of design have a different price structure? Like hourly for pre-design, schematic design, fixed fee for DD and CD and hourly to a max for CA? Maybe this is already done? I was never privy to billings, I don't know. 

Aug 12, 14 10:47 am  · 
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x-jla

Dovtors don't undercut because they get paid by insurance companies mostly.  They don't have to haggle with the client.  Lawyers under cut all the time.  Actually drug dealers are pretty consistent with pricing.  Probably least undercutting of all.  Maybe architects should start killing each other more...nah...

Aug 12, 14 10:58 am  · 
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tintt

Lawyers under cut all the time. Only the scummy ones (!), and none go below, say $150 an hour. This is a price they do not fix, but a natural and theoretical floor for their service. How do lawyers bill anyways? Hourly? Flat fee? % fee?

Edit to answer my own question: mostly hourly. Think that's why they get paid well? I think it has something to do with it. 

Aug 12, 14 11:05 am  · 
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Snoopy316

The problem about fixed prices with the architectural service is a fix service. No job is the same. Different architects provide different level of services to different clients. If clients chooses to go with the cheapest average Jo then they'll get what they paid for. 

I guess even doctors get undercut too by overseas doctors. People rather pay for a flight to Thailand or Vietnam and still pay half the price for a surgery. They get what they paid for. 

Aug 12, 14 5:59 pm  · 
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Snoopy316

Jla-x, how do you know drug dealers are the lease in terms of undercutting? 

Aug 12, 14 6:05 pm  · 
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Carrera

Guess we’ve gone from bidding to fee structure. The statistical cut-sheets would be guidelines to stabilize prices not to set prices by building type. There are of course variances with doctor and lawyer fees and of course there are a myriad of factors in play with architectural projects. What we were talking about is how to create balance across a given community, preventing the low-balls that pull everything down and stop bidding against each other which precipitates the low-ball. Its stabilization.

As for fee structure and the question: “Can each phase of design have a different price structure? Like hourly for pre-design, schematic design, fixed fee for DD and CD and hourly to a max for CA? Maybe this is already done?” yes all of the above. Many of the projects we did in the private sector came in undefined without any form of program and would start off hourly until defined and then carry a percentage or a fixed fee amount. For the timid clients we would start off with baby-fees of $1k or less and give them jumping-off points along the way and build the fees as the project progressed and as the services needed revealed themselves. No one ever jumped-off. Fixed fees (not fixing fees) are a norm in our business because clients need/want fixed numbers for budgets, Performa’s and lending.

Aug 12, 14 7:32 pm  · 
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tintt

thanks, Carrera. 

Aug 12, 14 8:14 pm  · 
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