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Determining Flat Fees - NYC Interior Apt Combination/Renovation

M2721

Sole proprietor architect here, focused on luxury & high end residential interior renovations, always faced with client resistance over hourly rates (no matter how much lower than any other professional hrly rate) or fee based on % of construction cost, (which rarely profit much even when construction budget is realistic), I've been trying recently to offer a variety of flat fees (with provisions for Additional Services at hourly rates). When the proposed scope can be clear or close to clear, and involves less in the way of aesthetics and more in the way of plain old code-compliance & administrative work with NYC co-op boards & DoB, but when there's still a lot of leeway as to time to be spent, does anyone have any advice for arriving at a flat fee? Obviously I would start with a projected number of hours but since that ultimately depends on so many factors outside of my control, I am often screwed by the end.  If anyone has any useful equations or methods or industry resources, or even anecdotal experience to offer, I'd be grateful for your advice. Colleagues are often guarded on the subject of fees. Thanks

 
Jun 18, 21 3:41 pm
Wood Guy

I'm curious about this as well. I mainly do full-service residential design, focusing on energy, health and carbon emissions, with construction costs in the $300-400/sf range. I've always worked hourly and find that 6-8% of construction costs is usually plenty, and sometimes less is all I need, but part of that is because I have become pretty efficient and I know I'm leaving money on the table. I have done a few projects that are $600-$1K/sf with 14-15% fees (billing hourly). High-end residential architects I know (at least the ones willing to share cost info) are billing fixed fees at 12-18% of construction costs. 

Jun 21, 21 11:32 am  · 
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Dear gowd. I've NEVER had a project with a budget above $385 / sf, and that was for education projects.

Jun 21, 21 6:22 pm  · 
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Wood Guy

Chad, do you do much residential work? It's pretty hard to build a decent house here in New England for less than $300/sf right now. $350-400/sf includes some fun stuff like more glass than normal, a swim spa, full PV system for net zero energy, etc..

Jun 22, 21 4:16 pm  · 
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I don't do any single family residential work. Some wood framed multi family housing. Mostly steel framed education, retail, and clinics. I'm sure the cost of wood has driven things up. I just finished a wood framed core and shell retail building that was $280 sf and that was before wood prices went up.

The last middle school I did in 2019 was 100,00 sf, LEED silver and came in at $390 sf.

Jun 22, 21 7:35 pm  · 
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@ WG A percentage of construction costs is not a fixed fee, it's a percentage fee.

Fixed fees are suicide. The moment you agree the scope of work and demands for service will increase without restraint - it becomes an all you can eat buffet.

You might consider a flat fee for the portions of the service you are in control of (design?) and an hourly rate to cover those that you are not (administrative).

Jun 21, 21 12:59 pm  · 
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Wood Guy

Miles, I just spent the weekend with three architect friends and we talked about this a lot. They all do fixed fees based on projected construction costs. They all say they make much more money doing fixed fee than hourly. Clients who can't stomach a $200/hr+ hourly rate will accept it as a lump sum.

Jun 21, 21 3:50 pm  · 
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Percentage fee on construction cost is not fixed. Percentage fee on initial construction budget is fixed. If you're fixing the fee on a budget, well, good luck with that.

Jun 21, 21 5:54 pm  · 
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Actually Miles - the fixed fee contracts typically spell out in detail what is included with the fee, including the size, scope, and expected construction cost. They also call out in detail what is considered an add service. If you know what you're doing and how to write the contract you're fine.

Jun 21, 21 6:25 pm  · 
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Not arguing that point, I was responding to ambiguous wording.

Jun 21, 21 7:37 pm  · 
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Ambiguous wording? It was rather clear to me what WG was saying.  If you don't have much experience with fixed fee based on construction costs I suppose you could think that project scope and work will increase without restraint.  Sure scope and budget can change but that's what add services are for.  

Jun 22, 21 9:43 am  · 
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"High-end residential architects I know (at least the ones willing to share cost info) are billing fixed fees at 12-18% of construction costs."

A fixed fee is a specified sum that does not change. A fee based on a percentage of construction costs is a percentage fee, it is not fixed because it changes with construction cost. Do I really have to explain this to you?

Jun 22, 21 10:50 am  · 
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x-jla

Hourly fees are a pain in the ass to manage, and clients want to account for every second of your time. I don’t feel like I’m working off the clock when I’m contemplating designs in the shower with a flat fee like I would if it were an hourly fee.

Jun 22, 21 10:57 am  · 
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x-jla

You just need to clearly define your scope in the contract. Usually I’ll limit my flat fee to xy and stipulate an hourly charge if z is required. xy = things that I’m

Jun 22, 21 11:00 am  · 
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x-jla

comfortable predicting time required. z= things that are more wonky like meeting with neighborhood associations, revisions, etc.

Jun 22, 21 11:01 am  · 
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Wood Guy

I didn't realize my shorthand term would be so confusing. The way my friends do it is to provide a fixed fee (and evenly distributed monthly billing) for a specified scope of work and a reasonably accurate projection of construction costs. We all do moderately high end residential work, and they do mostly new homes, so it's not that hard to know whether it's a $500K project or a $1.5M project. If the scope changes significantly their contracts allow for adjusted fees. If the client wants or needs additional services beyond what is in the fixed fee, those are billed as additional services, either hourly or fixed fee, depending on the situation.

Jun 22, 21 4:12 pm  · 
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Miles -  you are misunderstanding the terms fixed fee and hourly.

A fixed fee is always based on the construction cost and scope as stated in the contract.  If either changes then there are added or reduced services. 

A hourly fee doesn't care what the cost or scope is.  However many hours it takes to finish the project is what it takes.  

Most clients tend to like fixed fee because it gives them something to show to the bank for financing and allows them to budget accordingly.  A fixed fee doesn't allow the owner to increase scope and construction budget without increasing the fee.  

This is standard architectural contract stuff. 

Jun 22, 21 2:31 pm  · 
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Where did I say anything about hourly? I was talking about about the difference between fixed and percentage fees. I even quoted the problematic language.

Go back and read the posts again, and consult a dictionary if you're having trouble understanding the meaning of the words used.

I was building projects before you were born, so save your condescending lecture for someone else.

Jun 22, 21 2:44 pm  · 
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Miles, I generally respect you however you need to knock it off with the condescending tone. 

You're arguing semantics and you dang well know that any fixed fee contract in architecture is based on the scope of work and cost of construction. At lease it has been done that way in my 19 year experience. 

Obviously, some architects will provide a fixed fee based on a set number of drawings required to complete a design package with no changes in fee for a change in scope. This isn't common and typically done for smaller residential work.

I brought up hourly work as an example of the opposite of a fixed fee contract.  

Jun 22, 21 3:12 pm  · 
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