Just wondering how many other firms charge hourly. I have never worked in a firm that does, until now. It seems to me that charging a fee based on percentage of estimated construction is the best method. I understand the argument that a large floor finished with $5/sq sealed concrete doesn't take much less time to draw than the same floor with $50/sq marble, but I still feel there is more coordination and research involved with higher end products.
My real concern, however, is efficiency. In an office that charges hourly (and for every phone call, fax, copy etc.), where is the incentive for efficiency? I came to my firm from one that was incredibly efficient and now I am finishing my projects in 3/4 the time that the rest of the office does, and the principle is not necessarily impressed.
Does anyone have any good reasons to charge hourly? Understanding that a fixed fee contract would still allows for a number of revisions before additional, hourly fees would be applied.
liberty bell
Oct 5, 06 9:15 am
This is a tough question. My partner and I are currently battling with it ourselves, as we know we are not making enough money and we are trying to figure out a fee structure that will serve us better.
We seem to consistently lose money in CA, and someone else here (myriam?) suggested a fee structure that starts as a flat fee (based on $/SF in some cases, we do houses so it seems reasonable) or a percentage through CD's. Then for CA go to an hourly rate. With a few rules in place - a certain minimum # of site visits will be done, all materials selections get two go-rounds before the hourly kicks in, etc.) this seems like a workable solution. Only problem being that we could lose some control during the construction process.
For our interior furnishings (furniture/rugs/window treatment, not things attached to the architecture) work we charge hourly. Shopping take a lot of time!
I'm eager to hear what others think.
quizzical
Oct 5, 06 9:24 am
in my experience, firms that undertake work where the scope of services (and related effort) is well defined and highly predictable tend to do better with fixed fees ... hourly fees tend to work best when the scope of services (and related effort) cannot be tied down with much clarity in advance.
the worst of both worlds is hourly work, with a "not to exceed" maximum ... in that case, the designer takes 100% of the risk with 0% of the reward ... don't ever do that !
fundamentally, the approach you take is all about how economic risk is to be allocated between the client and the designer ... the client can't expect to have all of the economic protection (in the form of a fixed fee) without taking some of the economic risk (in the form of higher total fees) ... it needs to be fair to both parties ... if it's not, then you should walk away from the deal.
archie
Oct 5, 06 9:31 am
I have many clients who give us constant repeat project, and have over the last 10 years. I charge them an hourly rate for each employee. We prove to them that we are always doing things to improve effeciency, so they like the arrangement. From my standpoint, I know I am going to make about 20% profit on the jobs with no chance of losing money, so its great. THese are clients that we have a very trusting relationship with. It works out because I don't spend any time on proposals, and if a job is cancelled, there is no arguement about what work we have done. And the complicated job gets a higher fee than the striaght forward one, even though they may appear to be equal work- sometimes the building official or the cotnractor is the one that makes the work crazy, and you don't know that until you are in it. For most other jobs, we do fixed fee. Sometimes we lose money, but sometimes we have make 40% profit. You have to get good at predicting fees, and good at writing contracts, but still, sometimes something messes up the project liket he project architect moving out of town in the middle of cd's, and you need more office time to get up to speed, or the contractor from hell who changes project managers 8 tiems on a big project. I like hourly personally- I think it is fair to all parties involved.
3dGraffiti
Oct 5, 06 10:34 am
What I do now is to create my proposal (because the client always wants to see some type of estimate) by using a percentage of construction broken down into phases. The only difference is that the numbers are just that, only estimates to be bill hourly. I use the fee break down to manage my time. I take each monthly invoice, assign the time into phases to judge where I should be in development.
This does work well in that the client knows that the more changes they make or the less decisive they are, the more it will cost them. I still like fees by percentage better, because the more efficiently you produce your CDs the more money you make. Or the more time you can spend in schematics and DD.
crowbert
Oct 5, 06 10:41 am
3D - if you get your job done in 3 quarters the time, that means you can pick up the slack (and hours) on other projects? Its only a problem if you're stuck twiddling you thumbs. Or he can get creative with "padding" - perhaps you could even charge your time for reviewing this thread as "performance research".
Erin Williams
Oct 5, 06 10:46 am
The firm I work for now charges percentage, but bills hourly each month so that we get paid an appropriate amount of our fee at each bit of the project. If we run out of fee, we continue to bill with the hourly rate listed as $0. so that if the client feels the need to complain about anything, we point out how many hours of our time he's gotten for free and use it as a leverage point.
I've also worked for a firm that did the more traditional hourly scheme. It was 90% residential work, and the rational for charging hourly was that the owner had gotten screwed on percentage because clients felt they could make whatever changes they wanted, right up to bidding. With hourly, they thought about it more because they understood how much work (money) was involved in making the changes. The owner said that hourly worked out MUCH better with this type of client.
R.A. Rudolph
Oct 6, 06 2:25 am
We've been doing it both ways, and for us we actually make a lot more money when we bill percentage. However, I've been doing hourly for smaller jobs because the clients have balked at paying 12-15% for design fees, and I can usually do them for around 8-10% hourly. The CA for those jobs is rolled in with the construction because we do design build. Apparently that's better for liability as well, since the construction company is a corporation. Those are the less labor intensive not-so-detail oriented projects, and partially I have felt it wasn't fair to bill percentage knowing our profit was so large (you can see why we're not making any money, hmmmm).
However, I just decided today that I'm not going to do hourly anymore unless the client/project is really interesting or the scope is completely unclear. I just can't make enough money on the design fees from small jobs to support the office.
binary
Oct 6, 06 12:34 pm
hmmmm...sounds like my salary/hourly thread
treekiller
Oct 6, 06 1:04 pm
this is a different topic. It's not about how much you take home but how a firm can make a profit.
wintergreen
Oct 6, 06 1:59 pm
With current situation of inflation in construction costs out pacing rise in labor costs, it seems that currently firms should be making more money for same abount of work on a percentage basis. Has anybody found this to be the case, has anyone had a client try to negotiate a smaller percentage fee on this basis.
freq_arch
Oct 6, 06 4:05 pm
If there's a half-baked idea for why my percentage should be lower, I've probably heard it.
At least some clients just cut to the real motivation: 'I just don't want to pay that much'.
Sorry if this is sounding down. It's been a bummer of a week.
And I work both hourly and percentage, though lately more so the hourly route, lately.
evilplatypus
Oct 6, 06 4:25 pm
We work fixed fee. Every job's a gamble, but we're good. So we stay late, weekends, who doesnt? Point is it works and sometimes pays big rewards. No battles with developers or owners. Our philosophy is sort of if your so dam good designer, why did it take 5 tries? It puts the fire under us.
As for hourly Not to Exceed, I was at an international firm where this was the rule. Lost money everywhere. The reason was although Im sure they would like to charge more, the clients are massive corp. that could go anywhere else for services for less.
e
Oct 6, 06 4:33 pm
i do the same evilp.
evilplatypus
Oct 6, 06 4:43 pm
Weve lost money on jobs by getting ahead of our contract but ya know, live and learn. Sometimes the client appreciates the extra effort and comes back later. Our motto is, ...."we'll even walk the dog"
lmdarch
Sep 20, 07 1:51 am
How is hourly-not-to-exceed all that different from having a fixed-fee? I guess if it's an easy, straightforward project and you've got a lot of padding built into the fee, then a fixed fee can work out nicely. I just have never experienced that kind of project. We're notoriously putting in way more hours than we budgeted and would end up just eating those hours anyway... Seems like even the projects that initially *seem* like they'll be simple, always has *something* come up that complicates things...
I guess part of the key is being very clear with what your scope includes and what falls under add-service. As much as I hate asking for add-service, it has saved me on more than one project in the past...
antoniomarine
Sep 15, 22 7:41 pm
As a client researching a project, I found this discussion very interesting - especially this: "We've been doing it both ways, and for us we actually make a lot more money when we bill percentage." Reading this discussion and some other articles on the subject, there seems to be a lot of hemming and hawing about how to charge. My wife is an attorney and she bills by the hour. I don't know why that isn't the simplest solution. It's transparent and fair (unless you're lying and overfilling for work you're not doing). If you're a professional, you should be able to estimate the number of hours to design something. Of course there are always changes and the unforeseeable extras - but that's to be expected and will cost - the hourly rate! I plan on hiring an architect soon and unless I have no other option, I will be hiring one who charges by the hour.
Non Sequitur
Sep 15, 22 8:57 pm
Don't. Not sure why you've dug up this 15 year old discussion when plenty more recent ones are also on the forum... but whatever. Point is, design by hour punishes efficient design offices and rewards the bad ones. Don't get caught up on the mechanics of their billing system and instead, hire someone based on the quality of their output. Quality architects know how long things take and will base their fees on expected time spent however, it is far more efficient to treat the contract as a lump sum (lump per project phase in my case). by hour is good for consultation, it is not good for design and production of such.
atelier nobody
Sep 16, 22 1:15 pm
I believe both parties are always better off with a fixed fee (lump sum). Whether that lump sum is based on a percentage of the construction budget/preliminary estimated construction cost or a preliminary estimate of hours is a matter of preference, but a fixed fee should be agreed to by the time the agreement is signed.
antoniomarine
Sep 15, 22 10:40 pm
"Quality architects know how long things take and will base their fees on expected time spent..." Why pay for "expected" time? Why not just pay for actual time? Some of the comments show that this is a gamble - sometimes they make out real well, and sometimes they lose. Why make it so difficult? Get paid for every hour you work. PERIOD. It's fair for the laborer and fair for the worker. It's of no concern to the "efficient design offices" what the "bad ones" are getting. It's not a system of rewards and punishments - it's about paying someone for the work they do. I will take your advice and hire a quality architect - but it will be one that bills by the hour. And to answer your question, I "dug up" this thread because it came up in a google search.
Non Sequitur
Sep 16, 22 1:22 pm
You're not as well informed as you think you are. I wish you luck, but your attitude will most certainly end in disappointment at best.
I've had similar clients who only focused on cost/hr and it's a pain to deal with because the focus is not on the project or deliverables. Don't be that asshole client. Pro-tip, we all set-up our fees on a cost/hr, you are just not privy to that information because it is proprietary. You don't get to know the salary of the architects and staff nor do you get to know the profit/loss margins. You'd also certainly balk at a $300/hr cost too, I have no doubt... but say, a 50-60k fee for a custom 1mil house design (low end fee, actually) might be easier to swallow than 200hrs at a blended rate of $300 per hour eventhough they are effectively the same thing.
JLC-1
Sep 16, 22 1:57 pm
for a t&m contract our fees are $1200 an hour. (3 people) we design 10+m houses, and those mansions need a lot of detailing.
Non Sequitur
Sep 16, 22 2:04 pm
^Nice. We're not tooled-up for custom homes but we do have a few in progress. They certainly are a pain tho. I just sent out an invoice to a client for 15k for 40.5hr of my time. That's $375/hr when our break-even $/hr is 135. If we were doing the job at a set $/hr, we would make no money.
JLC-1
Sep 16, 22 2:21 pm
from a contractual perspective, these are a nightmare - they start as spec homes and it gets sold while we pour foundations, then the new owner starts adding, changing, modifying and usually from more than 1000 miles away. Some bring their own interior designers, which adds pain to the suffering. Oh, at this level, owners are absolutely incapable of imagining anything, so we have to render every room with every piece of furniture, lighting etc. and they still can't make up their minds. pricey.
Non Sequitur
Sep 16, 22 3:04 pm
wait... are you me? because that's exactly what we're doing too... except ours fly their own private helicopters to the construction site to "survey". Did I mention I despise residential?
antoniomarine
Sep 17, 22 1:33 am
"Pro-tip, we all set-up our fees on a cost/hr, you are just not privy to that information because it is proprietary. You don't get to know the salary of the architects and staff nor do you get to know the profit/loss margins." I'm not asking for or expecting to know any of that. As I said, my wife is an attorney. People call and ask what she charges - she gives them an hourly rate - very simple. She only gets paid for the work she does. No reason architects can't do the same, and I've yet to see one good reason why they don't. This is just a way for people to price gouge.
"You'd also certainly balk at a $300/hr cost too, I have no doubt..." Would I?
Non Sequitur
Sep 17, 22 8:02 am
We’ve clearly explained why your view on this issue is wrong. Now go away. Not our fault you’re too dim to understand.
Wood Guy
Sep 17, 22 9:27 am
I'm a residential designer and have almost always billed hourly, in part because it seems more fair to the client and also because it's easier in some ways for me to manage. It usually works pretty well for the early stages of design, at least for clients who don't balk at the hourly rate. The problem I keep running into, and the reason I am changing to fixed fees for most projects, is that once the fun stuff (from the client perspective) is done--the conceptual design and details--and we move into the construction details and construction review--clients get tired of paying my hourly fee, complain about the time it takes to make changes (usually ones they request), get irked when the permitting process reveals issues with the design, don't want me spending time visiting the site although those visits ALWAYS end up finding issues that I can solve before they get expensive, etc..
It's a consistent pattern I've observed over hundreds of projects, and one my architect friends discuss regularly. Residential clients rarely understand what it takes to fully design a house. Those who have designed and built a house often do understand the value that full-service design brings to the project and often seem to feel more confident in a fixed fee that they can plan for, rather than wondering whether their architect or designer is "running up the bill."
My attorney charges a fixed fee when the scope of work is fixed.
Non Sequitur
Sep 17, 22 10:14 am
WG, my 3 high end residential clients are billed hourly and we make no profit. Our commercial clients are lump sum and that’s where we can make money. Even with 15-30k/month invoices to our multi-million $ homes…. We break even. Rich people house design is a pain.
x-jla
Sep 17, 22 10:36 am
I always charge flat fees. I don’t want to be questioned at every turn as to what I spent time on. I don’t want to have to justify why I spent 3 hours reading stuff. A flat fee removes uncertainty on the clients end, and frees you up to spend your time as you need to. As long as your contract clearly sets parameters of what the fee does and doesn’t cover, it works good. I’ve never had a problem.
x-jla
Sep 17, 22 10:38 am
btw, my sister is a lawyer, and charges flat fees. She has 12 other lawyers working for her, and she’s always done flat fees. They are doing just fine.
Wood Guy
Sep 17, 22 10:42 am
Non, I understand the advantages to the design firm. Do you think fixed fees are advantageous to the client as well? That's what I was trying to articulate. And why isn't your hourly fee high enough to generate a profit on residential jobs?
Non Sequitur
Sep 17, 22 11:02 am
Wg, we do residential as favours to our corporate client’s friends. There is a bit more to it, but I won’t go into details on a public forum. Point is, lump sum means we can set internal accounting goals and control deadlines. Hourly just keeps the project going and going and going. Eats away staff time that could be better used.
ivanmillya
Sep 19, 22 8:59 am
^ Potential billing time lost to other work can be the biggest shortcoming of hourly work... you can still run into cost over-runs with fixed fee, but when your client knows your billing hourly in custom residential, they can feel entitled to take as many of those hours as they want, regardless of how that may impact your work schedule outside of their project. When you have one project eating up 3 staff members' 40-hour weeks, it starts to outweigh any billing rate you may have set initially.
antoniomarine
Sep 17, 22 9:39 pm
"We’ve clearly explained why your view on this issue is wrong. Now go away. Not our fault you’re too dim to understand." Your version of an explanation is that it's none of my business how you bill a project. And it's not "wrong" - because plenty of architects bill by the hour. "lump sum means we can set internal accounting goals..." a.k.a., price gouging. I can see why you use an alias Mr. Sequitur. I'm guessing your employer doesn't let you speak directly with the clientele. lol
bowling_ball
Sep 17, 22 10:50 pm
I love it when people with literally zero experience in our industry lecture us on business practices. I'm sure you'll convince all of us, so keep going.
Non Sequitur
Sep 18, 22 8:05 am
Wommmmp womp.
antoniomarine
Sep 18, 22 1:57 am
I need “industry experience” to know how billing works? Ok. Lol. Maybe you need to step outside your bubble.
Non Sequitur
Sep 18, 22 8:05 am
Maybe we should talk with your wife instead. Sounds like she’s a more reasonable adult.
bowling_ball
Sep 18, 22 3:09 pm
Yes. Yes you do. Not sure why anybody needs to explain that to you. It's obvious you're a troll so I'm disengaging.
antoniomarine
Sep 18, 22 12:40 pm
“Blah, blah, blah” - Non Squirter
proto
Sep 18, 22 4:43 pm
We bill hourly & do residential primarily.
Works for us: sort of rightsizes everything. Not everyone needs the same time to understand, react & provide feeback.
Sort of interesting to hear from the client side that that is desirable, usually we see people asking for a solid budget number (we do provide an estimate up front for the scope, but it isn't guarantee)
There have been projects where we would have taken a bath & it wouldn't have been pretty. Scope doesn't change, but the owner isn't satisfied with the design so it iterates forever. I can't control that & I can't be on the hook for owner revisions that seem purely emotional (not a criticism, just a neutral observation of the the effect of designs on the owner..."i like this, but not that...")
proto
Sep 18, 22 4:52 pm
More often, we see clients who expect a package price because that's how most of retail society works. We have to explain that their specific house has never been built before, no matter how much alike it is to some other building (it's a craftsman/modern/whatever). It has a unique place in the world; a unique owner; unique intentions for using the space; unique feelings about finishes; unique timing; unique jurisdictional issues; etc. Nothing about it is cookie cutter or repeatable despite the similar arc/critical path of the work phases. And these are not multi-million dollar projects...tho if you have some leads...we'd like to do more of those
Just wondering how many other firms charge hourly. I have never worked in a firm that does, until now. It seems to me that charging a fee based on percentage of estimated construction is the best method. I understand the argument that a large floor finished with $5/sq sealed concrete doesn't take much less time to draw than the same floor with $50/sq marble, but I still feel there is more coordination and research involved with higher end products.
My real concern, however, is efficiency. In an office that charges hourly (and for every phone call, fax, copy etc.), where is the incentive for efficiency? I came to my firm from one that was incredibly efficient and now I am finishing my projects in 3/4 the time that the rest of the office does, and the principle is not necessarily impressed.
Does anyone have any good reasons to charge hourly? Understanding that a fixed fee contract would still allows for a number of revisions before additional, hourly fees would be applied.
This is a tough question. My partner and I are currently battling with it ourselves, as we know we are not making enough money and we are trying to figure out a fee structure that will serve us better.
We seem to consistently lose money in CA, and someone else here (myriam?) suggested a fee structure that starts as a flat fee (based on $/SF in some cases, we do houses so it seems reasonable) or a percentage through CD's. Then for CA go to an hourly rate. With a few rules in place - a certain minimum # of site visits will be done, all materials selections get two go-rounds before the hourly kicks in, etc.) this seems like a workable solution. Only problem being that we could lose some control during the construction process.
For our interior furnishings (furniture/rugs/window treatment, not things attached to the architecture) work we charge hourly. Shopping take a lot of time!
I'm eager to hear what others think.
in my experience, firms that undertake work where the scope of services (and related effort) is well defined and highly predictable tend to do better with fixed fees ... hourly fees tend to work best when the scope of services (and related effort) cannot be tied down with much clarity in advance.
the worst of both worlds is hourly work, with a "not to exceed" maximum ... in that case, the designer takes 100% of the risk with 0% of the reward ... don't ever do that !
fundamentally, the approach you take is all about how economic risk is to be allocated between the client and the designer ... the client can't expect to have all of the economic protection (in the form of a fixed fee) without taking some of the economic risk (in the form of higher total fees) ... it needs to be fair to both parties ... if it's not, then you should walk away from the deal.
I have many clients who give us constant repeat project, and have over the last 10 years. I charge them an hourly rate for each employee. We prove to them that we are always doing things to improve effeciency, so they like the arrangement. From my standpoint, I know I am going to make about 20% profit on the jobs with no chance of losing money, so its great. THese are clients that we have a very trusting relationship with. It works out because I don't spend any time on proposals, and if a job is cancelled, there is no arguement about what work we have done. And the complicated job gets a higher fee than the striaght forward one, even though they may appear to be equal work- sometimes the building official or the cotnractor is the one that makes the work crazy, and you don't know that until you are in it. For most other jobs, we do fixed fee. Sometimes we lose money, but sometimes we have make 40% profit. You have to get good at predicting fees, and good at writing contracts, but still, sometimes something messes up the project liket he project architect moving out of town in the middle of cd's, and you need more office time to get up to speed, or the contractor from hell who changes project managers 8 tiems on a big project. I like hourly personally- I think it is fair to all parties involved.
What I do now is to create my proposal (because the client always wants to see some type of estimate) by using a percentage of construction broken down into phases. The only difference is that the numbers are just that, only estimates to be bill hourly. I use the fee break down to manage my time. I take each monthly invoice, assign the time into phases to judge where I should be in development.
This does work well in that the client knows that the more changes they make or the less decisive they are, the more it will cost them. I still like fees by percentage better, because the more efficiently you produce your CDs the more money you make. Or the more time you can spend in schematics and DD.
3D - if you get your job done in 3 quarters the time, that means you can pick up the slack (and hours) on other projects? Its only a problem if you're stuck twiddling you thumbs. Or he can get creative with "padding" - perhaps you could even charge your time for reviewing this thread as "performance research".
The firm I work for now charges percentage, but bills hourly each month so that we get paid an appropriate amount of our fee at each bit of the project. If we run out of fee, we continue to bill with the hourly rate listed as $0. so that if the client feels the need to complain about anything, we point out how many hours of our time he's gotten for free and use it as a leverage point.
I've also worked for a firm that did the more traditional hourly scheme. It was 90% residential work, and the rational for charging hourly was that the owner had gotten screwed on percentage because clients felt they could make whatever changes they wanted, right up to bidding. With hourly, they thought about it more because they understood how much work (money) was involved in making the changes. The owner said that hourly worked out MUCH better with this type of client.
We've been doing it both ways, and for us we actually make a lot more money when we bill percentage. However, I've been doing hourly for smaller jobs because the clients have balked at paying 12-15% for design fees, and I can usually do them for around 8-10% hourly. The CA for those jobs is rolled in with the construction because we do design build. Apparently that's better for liability as well, since the construction company is a corporation. Those are the less labor intensive not-so-detail oriented projects, and partially I have felt it wasn't fair to bill percentage knowing our profit was so large (you can see why we're not making any money, hmmmm).
However, I just decided today that I'm not going to do hourly anymore unless the client/project is really interesting or the scope is completely unclear. I just can't make enough money on the design fees from small jobs to support the office.
hmmmm...sounds like my salary/hourly thread
this is a different topic. It's not about how much you take home but how a firm can make a profit.
With current situation of inflation in construction costs out pacing rise in labor costs, it seems that currently firms should be making more money for same abount of work on a percentage basis. Has anybody found this to be the case, has anyone had a client try to negotiate a smaller percentage fee on this basis.
If there's a half-baked idea for why my percentage should be lower, I've probably heard it.
At least some clients just cut to the real motivation: 'I just don't want to pay that much'.
Sorry if this is sounding down. It's been a bummer of a week.
And I work both hourly and percentage, though lately more so the hourly route, lately.
We work fixed fee. Every job's a gamble, but we're good. So we stay late, weekends, who doesnt? Point is it works and sometimes pays big rewards. No battles with developers or owners. Our philosophy is sort of if your so dam good designer, why did it take 5 tries? It puts the fire under us.
As for hourly Not to Exceed, I was at an international firm where this was the rule. Lost money everywhere. The reason was although Im sure they would like to charge more, the clients are massive corp. that could go anywhere else for services for less.
i do the same evilp.
Weve lost money on jobs by getting ahead of our contract but ya know, live and learn. Sometimes the client appreciates the extra effort and comes back later. Our motto is, ...."we'll even walk the dog"
How is hourly-not-to-exceed all that different from having a fixed-fee? I guess if it's an easy, straightforward project and you've got a lot of padding built into the fee, then a fixed fee can work out nicely. I just have never experienced that kind of project. We're notoriously putting in way more hours than we budgeted and would end up just eating those hours anyway... Seems like even the projects that initially *seem* like they'll be simple, always has *something* come up that complicates things...
I guess part of the key is being very clear with what your scope includes and what falls under add-service. As much as I hate asking for add-service, it has saved me on more than one project in the past...
As a client researching a project, I found this discussion very interesting - especially this: "We've been doing it both ways, and for us we actually make a lot more money when we bill percentage." Reading this discussion and some other articles on the subject, there seems to be a lot of hemming and hawing about how to charge. My wife is an attorney and she bills by the hour. I don't know why that isn't the simplest solution. It's transparent and fair (unless you're lying and overfilling for work you're not doing). If you're a professional, you should be able to estimate the number of hours to design something. Of course there are always changes and the unforeseeable extras - but that's to be expected and will cost - the hourly rate! I plan on hiring an architect soon and unless I have no other option, I will be hiring one who charges by the hour.
Don't. Not sure why you've dug up this 15 year old discussion when plenty more recent ones are also on the forum... but whatever. Point is, design by hour punishes efficient design offices and rewards the bad ones. Don't get caught up on the mechanics of their billing system and instead, hire someone based on the quality of their output. Quality architects know how long things take and will base their fees on expected time spent however, it is far more efficient to treat the contract as a lump sum (lump per project phase in my case). by hour is good for consultation, it is not good for design and production of such.
I believe both parties are always better off with a fixed fee (lump sum). Whether that lump sum is based on a percentage of the construction budget/preliminary estimated construction cost or a preliminary estimate of hours is a matter of preference, but a fixed fee should be agreed to by the time the agreement is signed.
"Quality architects know how long things take and will base their fees on expected time spent..." Why pay for "expected" time? Why not just pay for actual time? Some of the comments show that this is a gamble - sometimes they make out real well, and sometimes they lose. Why make it so difficult? Get paid for every hour you work. PERIOD. It's fair for the laborer and fair for the worker. It's of no concern to the "efficient design offices" what the "bad ones" are getting. It's not a system of rewards and punishments - it's about paying someone for the work they do. I will take your advice and hire a quality architect - but it will be one that bills by the hour. And to answer your question, I "dug up" this thread because it came up in a google search.
You're not as well informed as you think you are. I wish you luck, but your attitude will most certainly end in disappointment at best.
I've had similar clients who only focused on cost/hr and it's a pain to deal with because the focus is not on the project or deliverables. Don't be that asshole client. Pro-tip, we all set-up our fees on a cost/hr, you are just not privy to that information because it is proprietary. You don't get to know the salary of the architects and staff nor do you get to know the profit/loss margins. You'd also certainly balk at a $300/hr cost too, I have no doubt... but say, a 50-60k fee for a custom 1mil house design (low end fee, actually) might be easier to swallow than 200hrs at a blended rate of $300 per hour eventhough they are effectively the same thing.
for a t&m contract our fees are $1200 an hour. (3 people) we design 10+m houses, and those mansions need a lot of detailing.
^Nice. We're not tooled-up for custom homes but we do have a few in progress. They certainly are a pain tho. I just sent out an invoice to a client for 15k for 40.5hr of my time. That's $375/hr when our break-even $/hr is 135. If we were doing the job at a set $/hr, we would make no money.
from a contractual perspective, these are a nightmare - they start as spec homes and it gets sold while we pour foundations, then the new owner starts adding, changing, modifying and usually from more than 1000 miles away. Some bring their own interior designers, which adds pain to the suffering. Oh, at this level, owners are absolutely incapable of imagining anything, so we have to render every room with every piece of furniture, lighting etc. and they still can't make up their minds. pricey.
wait... are you me? because that's exactly what we're doing too... except ours fly their own private helicopters to the construction site to "survey". Did I mention I despise residential?
"Pro-tip, we all set-up our fees on a cost/hr, you are just not privy to that information because it is proprietary. You don't get to know the salary of the architects and staff nor do you get to know the profit/loss margins." I'm not asking for or expecting to know any of that. As I said, my wife is an attorney. People call and ask what she charges - she gives them an hourly rate - very simple. She only gets paid for the work she does. No reason architects can't do the same, and I've yet to see one good reason why they don't. This is just a way for people to price gouge.
"You'd also certainly balk at a $300/hr cost too, I have no doubt..." Would I?
We’ve clearly explained why your view on this issue is wrong. Now go away. Not our fault you’re too dim to understand.
I'm a residential designer and have almost always billed hourly, in part because it seems more fair to the client and also because it's easier in some ways for me to manage. It usually works pretty well for the early stages of design, at least for clients who don't balk at the hourly rate. The problem I keep running into, and the reason I am changing to fixed fees for most projects, is that once the fun stuff (from the client perspective) is done--the conceptual design and details--and we move into the construction details and construction review--clients get tired of paying my hourly fee, complain about the time it takes to make changes (usually ones they request), get irked when the permitting process reveals issues with the design, don't want me spending time visiting the site although those visits ALWAYS end up finding issues that I can solve before they get expensive, etc..
It's a consistent pattern I've observed over hundreds of projects, and one my architect friends discuss regularly. Residential clients rarely understand what it takes to fully design a house. Those who have designed and built a house often do understand the value that full-service design brings to the project and often seem to feel more confident in a fixed fee that they can plan for, rather than wondering whether their architect or designer is "running up the bill."
My attorney charges a fixed fee when the scope of work is fixed.
WG, my 3 high end residential clients are billed hourly and we make no profit. Our commercial clients are lump sum and that’s where we can make money. Even with 15-30k/month invoices to our multi-million $ homes…. We break even. Rich people house design is a pain.
I always charge flat fees. I don’t want to be questioned at every turn as to what I spent time on. I don’t want to have to justify why I spent 3 hours reading stuff. A flat fee removes uncertainty on the clients end, and frees you up to spend your time as you need to. As long as your contract clearly sets parameters of what the fee does and doesn’t cover, it works good. I’ve never had a problem.
btw, my sister is a lawyer, and charges flat fees. She has 12 other lawyers working for her, and she’s always done flat fees. They are doing just fine.
Non, I understand the advantages to the design firm. Do you think fixed fees are advantageous to the client as well? That's what I was trying to articulate. And why isn't your hourly fee high enough to generate a profit on residential jobs?
Wg, we do residential as favours to our corporate client’s friends. There is a bit more to it, but I won’t go into details on a public forum. Point is, lump sum means we can set internal accounting goals and control deadlines. Hourly just keeps the project going and going and going. Eats away staff time that could be better used.
^ Potential billing time lost to other work can be the biggest shortcoming of hourly work... you can still run into cost over-runs with fixed fee, but when your client knows your billing hourly in custom residential, they can feel entitled to take as many of those hours as they want, regardless of how that may impact your work schedule outside of their project. When you have one project eating up 3 staff members' 40-hour weeks, it starts to outweigh any billing rate you may have set initially.
"We’ve clearly explained why your view on this issue is wrong. Now go away. Not our fault you’re too dim to understand." Your version of an explanation is that it's none of my business how you bill a project. And it's not "wrong" - because plenty of architects bill by the hour. "lump sum means we can set internal accounting goals..." a.k.a., price gouging. I can see why you use an alias Mr. Sequitur. I'm guessing your employer doesn't let you speak directly with the clientele. lol
I love it when people with literally zero experience in our industry lecture us on business practices. I'm sure you'll convince all of us, so keep going.
Wommmmp womp.
I need “industry experience” to know how billing works? Ok. Lol. Maybe you need to step outside your bubble.
Maybe we should talk with your wife instead. Sounds like she’s a more reasonable adult.
Yes. Yes you do. Not sure why anybody needs to explain that to you. It's obvious you're a troll so I'm disengaging.
“Blah, blah, blah” - Non Squirter
We bill hourly & do residential primarily.
Works for us: sort of rightsizes everything. Not everyone needs the same time to understand, react & provide feeback.
Sort of interesting to hear from the client side that that is desirable, usually we see people asking for a solid budget number (we do provide an estimate up front for the scope, but it isn't guarantee)
There have been projects where we would have taken a bath & it wouldn't have been pretty. Scope doesn't change, but the owner isn't satisfied with the design so it iterates forever. I can't control that & I can't be on the hook for owner revisions that seem purely emotional (not a criticism, just a neutral observation of the the effect of designs on the owner..."i like this, but not that...")
More often, we see clients who expect a package price because that's how most of retail society works. We have to explain that their specific house has never been built before, no matter how much alike it is to some other building (it's a craftsman/modern/whatever). It has a unique place in the world; a unique owner; unique intentions for using the space; unique feelings about finishes; unique timing; unique jurisdictional issues; etc. Nothing about it is cookie cutter or repeatable despite the similar arc/critical path of the work phases. And these are not multi-million dollar projects...tho if you have some leads...we'd like to do more of those