Are architects charging on a base of a percentage of the cost of the project? 5-15% ? Or at least comparing the fee to that percentage?
Does this 5-15% only include the architecture and not the associated engineers and any other consultants?
Say a typical fast food restaurant at 2500 SF is now going for $1.5m. a 5% number is $75k and I assume this should go only to the architect. All other fees are on top of that?
Am I looking at this wrong? I know if can vary from city to city. I am getting into ownership of the form I have been with for a couple decades and I feel the numbers are way low.
% is a silly way to set fees and should only be used as for rough estimates. Fees are set by the required effort/time the job requires plus OH/P. So it varies.
So actual time it takes for a firm to do the work, the experience and value to the firm brings to the project (effort), plus overhead and profit is a bad way to figure out fees?
To the OP's question:
When doing a % based fee that will include all the architects consultants. Typically an architects fee is around 60 - 70% of the total fee. The rest goes to Struct, MEP, Civil, Landscape, AV / IT.
Aug 21, 24 6:28 pm ·
·
gwharton
When I was writing proposals as a consultant, I overwhelmingly preferred to use a fixed-fee/value-pricing model for setting fees. I've been following Ron Baker and implementing his value-pricing model in architecture for decades now. His book is pretty good: https://www.amazon.com/Implementing-Value-Pricing-Business-Professional/dp/0470584610
Aug 21, 24 6:37 pm ·
·
gwharton
Here's an interview with Ron, touching on a lot of key points for how to implement value pricing in professional services.
We ALWAYS consider the value we're adding to the project. Clients hire us because of our expertise in architecture. Our hourly rate reflects that. Determining the number of hours it takes us to do a job plus our overhead and profit is how we typically come to a fee. Knowing the number of hours it will take us to do the work is vital in determining the project schedule.
Aug 21, 24 6:56 pm ·
·
gwharton
That is certainly the conventional answer. I happen to disagree strongly that it's a good idea to do it that way if you want to have a strong business model and good client relationships. Having run a practice which averaged 30% margins without death-marching employees and didn't have high managerial overhead to stay in the black, I'll stick with my methods.
You're going to have to explain things a bit more gwharton.
How do you figure fees?
A simplistic explanation of how our typical fee is determined by:
the complexity of the project
the time it takes to do the work
the schedule of the work
the client
We use an hourly rate for each team member that takes into account our experience and value. Built into that hourly rate is profit and overhead. We then create a fixed fee for the project. We don't work much overtime. Managing partners put in 45-50 hours a week. Almost everyone else does 40.
Can't believe I'm recommending such a mess of a book, but the Architect's Handbook of Professional Practice would give you an idea of the various ways we get paid.
So one of the challenges in answering this question is the issue of "project complexity". Not all renovations are the same; not all new buildings are the same. Each project is unique. So how do you plan for the cost of a project?
There are a few ways, and not all are necessarily required.
Option 1: Use historical data. How much did you charge for a similar project in the past? How much of your logged time actually landed on an invoice? Do you think you can take the time that did not land on an invoice and propose it on top of the fee you actually billed as part of the new proposal for this new similar project? Maybe, maybe not. I won't go into details here about why you may or may not, but among the reasons you may be able to are that you are working with a new client that doesn't have the expectation of getting the same price from you, while a reason you might not be able to is because you may have worked with a very inefficient employee in the past that you parted ways with and now have a better team to work on this new similar project.
Option 2: Work plan the project and determine at a total fee. The work plan generally consists of an hourly fee breakdown (hopefully correlated with a clear understanding of quantity of deliverables), a project schedule, and cartoon set for those deliverables. Any assumptions you make about the amount of work should be spelled out in the proposal contract. Example: how many renderings are you committing to doing in the schematic design phase before you are entitled to a separate contract or additional fees? How many design iterations are you giving the client before charging the client extra? Even with more limiting terms in the proposal and contracts, the client might decide to fire you if they aren't getting what they want/expect, so sometimes you have to add a little cushion in your fees to satisfy the client. Sadly, sometimes you might decide that giving another rendering or two for free to make the client happy is the way to go. Either way, without doing the work plan, you won't really have a basis for a conversation with yourself, your project team, and eventually your client.
Regarding the project schedule that I mentioned above: make sure you understand the difference between project goals, client goals, and firm goals. Often times these are in conflict, but when it comes to running a firm (a business) time is always of the essence. Adequate cashflow to operate the business (keep the lights on and pay everyone) is paramount. You need to design the project schedule in a way that coincides with your invoicing. If you don't do that, you are for sure risking getting into major financial trouble. Billing after every "submittal" will ensure you are doing everything you can to maintain positive cashflow and not run your firm into the ground, and each "submittal" (whether a client presentation package, or a building department submittal) should be a firm goal.
With respect to hourly rates: every firm has different expenses, fringe benefits, and sources of income. Not all rates are the same. A Project Architect in one firm might be billed out at $200 an hour, while a Project Architect in different firm in the same city might be billed out at $250 an hour. These billable rates also greatly vary from state to state and when architecture firms work across different jurisdictions, some might be more affordable to clients than others. And for those who are not familiar with how these rates are derived- I assure you this is a very mathematical calculations that is directly related to the firm's expenses, overhead costs, profit goals, etc. I won't go into details on how this is calculated, but I assure you these rates are not arbitrary.
Option 3: Look at what your competitors charging for a similar project? How badly do you want to get the project? Can you afford doing the project for less than your competitors? Competitors will most likely not tell you what they would charge for that project, but remember that more likely than not, they are looking at one of the two options above.
Option 4: Sometimes it is worth analyzing the fee in multiple ways and seeing where you might be able to trim down on some "fat", or maybe find an opportunity to make more profit. Therefore, arriving at a project fee through different approaches might also inform the type of contract you choose to enter into such as a fixed fee vs. an hourly-not-to-exceed fee structure.
Cost of architecture services by a firm
Are architects charging on a base of a percentage of the cost of the project? 5-15% ? Or at least comparing the fee to that percentage?
Does this 5-15% only include the architecture and not the associated engineers and any other consultants?
Say a typical fast food restaurant at 2500 SF is now going for $1.5m. a 5% number is $75k and I assume this should go only to the architect. All other fees are on top of that?
Am I looking at this wrong? I know if can vary from city to city. I am getting into ownership of the form I have been with for a couple decades and I feel the numbers are way low.
Thanks in advance
% is a silly way to set fees and should only be used as for rough estimates. Fees are set by the required effort/time the job requires plus OH/P. So it varies.
Effort plus overhead/profit is an absolutely terrible way to set fees. No wonder most architects struggle financially.
What methods do you set fees gwharton?
So G, you decrease fees when the budget gets clawed back then if you’re so focused on %? I stand pat on my earlier statement.
So actual time it takes for a firm to do the work, the experience and value to the firm brings to the project (effort), plus overhead and profit is a bad way to figure out fees?
To the OP's question:
When doing a % based fee that will include all the architects consultants. Typically an architects fee is around 60 - 70% of the total fee. The rest goes to Struct, MEP, Civil, Landscape, AV / IT.
When I was writing proposals as a consultant, I overwhelmingly preferred to use a fixed-fee/value-pricing model for setting fees. I've been following Ron Baker and implementing his value-pricing model in architecture for decades now. His book is pretty good: https://www.amazon.com/Implementing-Value-Pricing-Business-Professional/dp/0470584610
Here's an interview with Ron, touching on a lot of key points for how to implement value pricing in professional services.
The 8 Steps to Value Pricing with special guest Ron Baker (youtube.com)
We ALWAYS consider the value we're adding to the project. Clients hire us because of our expertise in architecture. Our hourly rate reflects that. Determining the number of hours it takes us to do a job plus our overhead and profit is how we typically come to a fee. Knowing the number of hours it will take us to do the work is vital in determining the project schedule.
That is certainly the conventional answer. I happen to disagree strongly that it's a good idea to do it that way if you want to have a strong business model and good client relationships. Having run a practice which averaged 30% margins without death-marching employees and didn't have high managerial overhead to stay in the black, I'll stick with my methods.
You're going to have to explain things a bit more gwharton.
How do you figure fees?
A simplistic explanation of how our typical fee is determined by:
We use an hourly rate for each team member that takes into account our experience and value. Built into that hourly rate is profit and overhead. We then create a fixed fee for the project. We don't work much overtime. Managing partners put in 45-50 hours a week. Almost everyone else does 40.
This is a whole ARE exam... are you not licensed?
Can't believe I'm recommending such a mess of a book, but the Architect's Handbook of Professional Practice would give you an idea of the various ways we get paid.
We tend to do a wide range of project sizes and complexity so we often use a combination of methods to 'verify' our fees.
Past project data:
Percentage of construction cost (only for large projects)
So one of the challenges in answering this question is the issue of "project complexity". Not all renovations are the same; not all new buildings are the same. Each project is unique. So how do you plan for the cost of a project?
There are a few ways, and not all are necessarily required.
Option 1: Use historical data. How much did you charge for a similar project in the past? How much of your logged time actually landed on an invoice? Do you think you can take the time that did not land on an invoice and propose it on top of the fee you actually billed as part of the new proposal for this new similar project? Maybe, maybe not. I won't go into details here about why you may or may not, but among the reasons you may be able to are that you are working with a new client that doesn't have the expectation of getting the same price from you, while a reason you might not be able to is because you may have worked with a very inefficient employee in the past that you parted ways with and now have a better team to work on this new similar project.
Option 2: Work plan the project and determine at a total fee. The work plan generally consists of an hourly fee breakdown (hopefully correlated with a clear understanding of quantity of deliverables), a project schedule, and cartoon set for those deliverables. Any assumptions you make about the amount of work should be spelled out in the proposal contract. Example: how many renderings are you committing to doing in the schematic design phase before you are entitled to a separate contract or additional fees? How many design iterations are you giving the client before charging the client extra? Even with more limiting terms in the proposal and contracts, the client might decide to fire you if they aren't getting what they want/expect, so sometimes you have to add a little cushion in your fees to satisfy the client. Sadly, sometimes you might decide that giving another rendering or two for free to make the client happy is the way to go. Either way, without doing the work plan, you won't really have a basis for a conversation with yourself, your project team, and eventually your client.
Regarding the project schedule that I mentioned above: make sure you understand the difference between project goals, client goals, and firm goals. Often times these are in conflict, but when it comes to running a firm (a business) time is always of the essence. Adequate cashflow to operate the business (keep the lights on and pay everyone) is paramount. You need to design the project schedule in a way that coincides with your invoicing. If you don't do that, you are for sure risking getting into major financial trouble. Billing after every "submittal" will ensure you are doing everything you can to maintain positive cashflow and not run your firm into the ground, and each "submittal" (whether a client presentation package, or a building department submittal) should be a firm goal.
With respect to hourly rates: every firm has different expenses, fringe benefits, and sources of income. Not all rates are the same. A Project Architect in one firm might be billed out at $200 an hour, while a Project Architect in different firm in the same city might be billed out at $250 an hour. These billable rates also greatly vary from state to state and when architecture firms work across different jurisdictions, some might be more affordable to clients than others. And for those who are not familiar with how these rates are derived- I assure you this is a very mathematical calculations that is directly related to the firm's expenses, overhead costs, profit goals, etc. I won't go into details on how this is calculated, but I assure you these rates are not arbitrary.
Option 3: Look at what your competitors charging for a similar project? How badly do you want to get the project? Can you afford doing the project for less than your competitors? Competitors will most likely not tell you what they would charge for that project, but remember that more likely than not, they are looking at one of the two options above.
Option 4: Sometimes it is worth analyzing the fee in multiple ways and seeing where you might be able to trim down on some "fat", or maybe find an opportunity to make more profit. Therefore, arriving at a project fee through different approaches might also inform the type of contract you choose to enter into such as a fixed fee vs. an hourly-not-to-exceed fee structure.
Block this user
Are you sure you want to block this user and hide all related comments throughout the site?
Archinect
This is your first comment on Archinect. Your comment will be visible once approved.