Fees

The appropriate fee for any particular project should be a reflection of the scope of services that are to be provided and the level of innovative design skill that the client expects to be applied to the project.

You can justify your fee on any number of alternative bases. The real issue is what your services for this specific project are worth to a client. Consider these issues:

Value

What characteristic will enable you to achieve a fee at the high end of the range for the type of project? What is truly unique in your organisation that would justify an even higher fee? How much real competition is there?

Fixed or time-based fees

Ensure that the hours presented or allowed are high enough to give an adequate margin of safety, especially in large projects that tend to become more complex than may be assumed initially. Use a salary multiplier that includes a proper margin for overhead costs and profit.

If the client feels that your multiplier is too high, it may be possible to lower it by extracting some items as direct project costs.

Negotiating scope rather than price

If you show up at the checkout counter of your local supermarket with $50 worth of groceries, but you only have $40 in your pocket, the cashier will give you two options:

• come up with a further $10
• put back $10 worth of groceries

You would look long and hard at a checkout cashier who will allow you to take home $50 worth of groceries for $40. Yet, as design professionals, that is precisely how we negotiate many of our contracts. The price goes down immediately there is the mere hint that the client thinks it is too high or more than he or she can afford.

The cardinal rule of negotiation is never reduce your price without receiving some concession in return.

One effective way to gain concessions is to negotiate on scope rather than price. Prepare a list of items that can be deleted from the agreement in order to reduce the cost, while still maintaining the integrity of the project.

These items could include the following:

• limiting the number of design alternatives to be evaluated
• using standard systems instead of custom-designed components
• requiring the client to contract directly for site investigations or other subconsultant work
• specifying that some design activities are done by the contractor, based on performance specifications, with shop drawings submitted for approval.

A careful analysis of each project will usually reveal a number of methods to reduce costs. At the negotiation session you should be prepared to discuss the cost impact of any possible combination of these measures. To present these properly, you must do your homework before negotiations begin.

Fees for transfer of digital data

While CAD data is inherently more valuable to consultants and others, it is also more risky in that once a file is passed on the architect has little control over it. Other parties can also make changes to CAD data and further copies can be passed on.

Whether remitting or receiving CAD data it is important to be aware that preparation time can be significant. It is advisable to arrange for trials of data transfer between all participants at the beginning of a project to enable team members to agree upon file types and methods of data transfer, and to detect and rectify any problems in the process. The agreed procedures should be documented and the relevant personnel advised to help ensure efficient and accurate data exchanges during the life of the project.

For a consultant or contractor, the value of the architect's CAD files lies in the time and money saved by not having to recreate them (by copying from prints). The architect could make an estimate of the time saving to the consultant and structure a charge accordingly. However, there are some implications of this strategy:

• An estimate of a consultant's or contractor's costs is not much better than a guess and, could be subject to argument or dispute.
• Most importantly, client-architect agreements usually treat the transfer of computer information as a cost to be disbursed. Disbursements account for expenses incurred in the provision of the service contracted for. To convert a disbursement category into a separate profit centre based on the saving to the consultant or contractor is a dubious action.

It is preferable for architects, consultants and contractors not to charge each other for the supply of CAD data and this is sensible because one of the benefits of CAD is the greater efficiency and productivity it affords. These efficiencies can be multiplied by sharing electronic data among the entire consultant team and the contractor.

Ensure that you have a system for tracking the costs associated with data transfer and that you understand the variability of those costs. At the commencement of a project, carry out data-transfer tests between the various parties to detect problems and establish procedures appropriate to that project. In addition:

• Ensure that the documented procedures are passed on to those who will be doing the work. Issue a disclaimer with all data distributed to others.
• Charge contractors and their subcontractors at cost and consider the labour required to prepare the data.
• Avoid providing data other than picture files to entities in contract with the contractor.
• Charge ex-clients and other architects a retrieval fee and a cost per sheet for retrieving documents on request.

Fees paid in advance

Contractors are often required to provide deposits to a number of trades in the building industry such as lift manufacturers, joiners and others who need to make significant purchases and carry out bespoke fabrication prior to installation.

Some building contracts allow deposits to be made to contractors at the commencement of a contract to cover initial start-up costs. The ABIC contracts do not currently provide for giving a deposit as a right, and a special condition would be required.

Until recently there appears to have been no legal prohibition that precluded similar payments to architects.

The Institute’s 2019 Client Architect Agreement (CAA2019) includes provision for a Mobilisation Fee (advance payment).

Deposits paid to architects in NSW

Under Clause 9(1) of the Code of Professional Conduct in the NSW Architects Regulation 2004 (the Regulation) under the NSW Architects Act 2003 (the Act) an architect should not seek or request a deposit or retainer of more than 10% of the reasonably expected fee for a project unless expressly agreed otherwise by the client and the architect. The NSW legislation is unique in this. It appears to have similar intent to the limits placed on deposits for house contracts under some state and territory legislation.

The intention of this provision of the Regulation in protecting the public appears to be to ensure that only a reasonable amount is able to be demanded by the architect prior to the provision of services. However, it also appears to expect that the fee is for the so-called full architectural service. Although this is not at all clear in the wording of the clause, similar provisions are made in the NSW Home Building Act for contractors who are required to provide a full estimate of the whole cost of the works.

The key to whether fees in advance are limited in NSW may well lie in the terms used in the code.

Deposit, Retainer, Advance

The difference between the definitions of 'deposit' and 'retainer' are irrelevant as both are mentioned in the NSW legislation. The words 'fees in advance' are not mentioned.

The definitions of the keywords from the Macquarie Dictionary are as follows:

• deposit: to give as security or part payment
• retainer: a fee paid to secure services
• advance: to supply beforehand; furnish on credit or before goods are delivered or work is done.

The word 'deposit' carries added implications of evidence of contract and a short-term, one-off early payment for goods to be delivered within an agreed time frame.

For specific advice on calculating fees, see Fee calculation.