I have been thinking about ways of charging for our services for a while now. It seems counter-intuitive to charge a % of construction costs when we have the possibility to create value for the client (hence reducing total costs, in turn reducing our fee). Hourly also seems to limit our incentive to knock one out of the park quickly. How cam we charge for creating value?
anti, this is a great thread. i think we can charge for value only if we start valuing what we do, then understanding what it is the client values. now, part of this could be done through some kind of post-occ evaluation; perhaps tied to a kind of bonus for meeting certain criteria. another way might be producing documentation ahead of schedule and getting a bonus for that, construction companies do it all the time; finish bridge, building ahead of schedule they get x fee, finish it later get less than x fee. we could also create some kind of contract that athletes get; get into all-star game get bonus, finish tops in batting get bonus. with us perhaps our clients value increased productivity through efficient lighting or design - we are all told time and time again natural lighting improves worker productivity. what if we reduce overall utility costs, why not a bonus? if our designs get them significant marketing benefits, why not a bonus?
In construction, when we go through value engineering, we make it clear with the owner that even though we will be finding ways to cut costs, the general conditions and our fee remain tied to the original estimate.
Another way to do it would be to charge a percentage of the money saved in the work you have done to create that savings. For example let's say you switch from a 95% efficient hvac system to a 90% efficient system and that saves $100,000. You then charge the owner 10% and get $10,000 of that savings.
To simplify things, the client, 9 times out of 10 is going to be interested in three things, cost, schedule and quality. I would focus your structure on that.
Just yesterday AIA published a new document entitled On Compensation: Considerations for Teams in a Changing Industry that echos and addresses many of the thoughts expressed above in Beta's post. This is a free download and it can be found at the AIA Integrated Project Delivery page: http://www.aia.org/about/initiatives/AIAS078435
NOTE: before you can download, AIA will ask for your e-mail address and ask for your role in the construction industry. This is just a little market research to see who has an interest in the document. They will not bother you later.
NOTE ALSO: due to antitrust concerns, this document cannot provide specific compensation advice -- for those reasons, it must deal in general principles. Nevertheless, it's an interesting and useful document.
: it puked for me too ... I contacted a friend on staff and they have already fixed the problem ... they did not originally allow enough room for long e-mail addresses ... it now can handle 145 characters.
Blue Goose: What kind of programs and tools are you referring to?
Im working my way through the AIA document but I hate when I see things like:
"non-monetary motivations should be fundamental to team and compensation conversations." and "do the right thing".
We as designers often shortchange our selves by spending the extra time to "do the right thing" and not getting paid for the time. Which may be fine in some situations, except that this type of expectation sets the norm for fees. I have heard developers (I currently work for one) say "pull out some scope and push the bid lower, the architects will do it anyway". This type of reputation is not good for any of us.
The article was ok. We are taking the position that all fees are T&M and if we can build our own projects as contractor on a cost plus fee w/out GMP. The IPD stakeholders would be the Owner and us.
We have been working toward this model for 10 years. we fell into becoming the CM on our first large commercial project 10 years ago. It is a lot of fun and we have learned a lot.
For smaller projects, especially remodel, I still can't get my head around BIM. excel and acad lt have been really close for our prelim estimating. Open book accounting covers most issues in the field regarding our fee.
I still think that most large projects will become contractor led IPD / design build. It just makes too much sense.
Jul 1, 09 9:54 pm ·
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Creating Value & Generating Revenue
I have been thinking about ways of charging for our services for a while now. It seems counter-intuitive to charge a % of construction costs when we have the possibility to create value for the client (hence reducing total costs, in turn reducing our fee). Hourly also seems to limit our incentive to knock one out of the park quickly. How cam we charge for creating value?
We started to talk about this stuff here:
http://www.archinect.com/forum/threads.php?id=88714_0_42_0_C
http://www.archinect.com/forum/threads.php?id=88714_0_42_0_C
Today I ran across this article about how Coke is changing the way it pays advertising agencies:
Economoist - Coke
Again how can we charge for creating value? How do we measure it?
anti, this is a great thread. i think we can charge for value only if we start valuing what we do, then understanding what it is the client values. now, part of this could be done through some kind of post-occ evaluation; perhaps tied to a kind of bonus for meeting certain criteria. another way might be producing documentation ahead of schedule and getting a bonus for that, construction companies do it all the time; finish bridge, building ahead of schedule they get x fee, finish it later get less than x fee. we could also create some kind of contract that athletes get; get into all-star game get bonus, finish tops in batting get bonus. with us perhaps our clients value increased productivity through efficient lighting or design - we are all told time and time again natural lighting improves worker productivity. what if we reduce overall utility costs, why not a bonus? if our designs get them significant marketing benefits, why not a bonus?
this is just a start.
In construction, when we go through value engineering, we make it clear with the owner that even though we will be finding ways to cut costs, the general conditions and our fee remain tied to the original estimate.
Another way to do it would be to charge a percentage of the money saved in the work you have done to create that savings. For example let's say you switch from a 95% efficient hvac system to a 90% efficient system and that saves $100,000. You then charge the owner 10% and get $10,000 of that savings.
To simplify things, the client, 9 times out of 10 is going to be interested in three things, cost, schedule and quality. I would focus your structure on that.
Just yesterday AIA published a new document entitled On Compensation: Considerations for Teams in a Changing Industry that echos and addresses many of the thoughts expressed above in Beta's post. This is a free download and it can be found at the AIA Integrated Project Delivery page: http://www.aia.org/about/initiatives/AIAS078435
NOTE: before you can download, AIA will ask for your e-mail address and ask for your role in the construction industry. This is just a little market research to see who has an interest in the document. They will not bother you later.
NOTE ALSO: due to antitrust concerns, this document cannot provide specific compensation advice -- for those reasons, it must deal in general principles. Nevertheless, it's an interesting and useful document.
it would be nice if the AIA site worked. it puked and said to contact the website administrator.
: it puked for me too ... I contacted a friend on staff and they have already fixed the problem ... they did not originally allow enough room for long e-mail addresses ... it now can handle 145 characters.
try it again.
Got it - Looks like a good read. I may have to begin changing my attitude regarding the do nothing AIA.
well - while it may not always be obvious, we do try to create programs and tools of genuine value to the profession.
Blue Goose: What kind of programs and tools are you referring to?
Im working my way through the AIA document but I hate when I see things like:
"non-monetary motivations should be fundamental to team and compensation conversations." and "do the right thing".
We as designers often shortchange our selves by spending the extra time to "do the right thing" and not getting paid for the time. Which may be fine in some situations, except that this type of expectation sets the norm for fees. I have heard developers (I currently work for one) say "pull out some scope and push the bid lower, the architects will do it anyway". This type of reputation is not good for any of us.
the AIA seems to be pimping the "integrated project delivery" a lot lately...
The article was ok. We are taking the position that all fees are T&M and if we can build our own projects as contractor on a cost plus fee w/out GMP. The IPD stakeholders would be the Owner and us.
We have been working toward this model for 10 years. we fell into becoming the CM on our first large commercial project 10 years ago. It is a lot of fun and we have learned a lot.
For smaller projects, especially remodel, I still can't get my head around BIM. excel and acad lt have been really close for our prelim estimating. Open book accounting covers most issues in the field regarding our fee.
I still think that most large projects will become contractor led IPD / design build. It just makes too much sense.
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