Are Architects Charging the Right Level of Fees? 3

Monday, August 24th, 2015
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Around Australia, the level of fees charged by architecture practices has been the subject of debate since the Australian Institute of Architects withdrew a guide to fee setting amid concerns about anti-competitive behaviour raised by the Australian Competition and Consumer Commission.

In a 2013 article published on the Association of Consulting Architects’ web site, for example, Sydney-based lawyer and architect Peter Sarlos observed that following the withdrawal of the guide, architects faced challenges in terms of communicating and justifying their the value of their services and fees to clients. Sarlos added that architects were left with little certainty or guidance as to how many hours to allow for completing their responsibilities when making submissions for projects. What’s more, he wrote, architects were being forced to make compromises in their services amid a tendering system which did not in many cases allow for sufficient levels of remuneration to complete the proper practice of their profession.

One area of concern revolves around undercutting and the setting of fees at levels which are not sufficient to be considered viable over the long term – a practice which hopefully will become less common in parts of the country where building activity is picking up. In a case study analysis of a range of projects conducted last year, for example, University of Adelaide Head of School Architecture and Built Environment Professor George Zillante found there were many examples of architects performing work on major projects for less than one per cent of the overall project budget cost – even less if you take out consultant fees. Applying what he refers to as the lowest true break-even hourly rate for architectural offices of $101 plus GST (applicable to a smaller state with a low cost of living), Zillante says this would have allowed for a very low number of hours to complete the architectural component of the work. Indeed, he is familiar with multiple cases of architects simply ‘buying work’ as a strategy to navigate difficult times.

Though he acknowledges that the situation varies according to different regions around the country, Zillante says this is not sustainable.

“It’s just not possible to make money on that (one per cent fees),” he said. “If you assume that the fee is one per cent or thereabouts, and the architect is sharing that with the consultant, then the architect is working for half a per cent. That’s just not realistic.”

Left unchecked, Zillante says undercutting could lead to compromises on service levels and a loss of respect for the profession. While architects always seek to do the right thing, he fears pressures to reduce the number of hours spent on a job can create temptations to cut back in areas such as documentation, which may not be considered essential but would provide the builder with greater clarity. This could lead to issues needing to be resolved during building rather than during design.

Meanwhile, Melbourne-based Di Mase Architects founder and principal Antony Di Mase is concerned about a lack of consistency in methodologies for determining suitable levels of fees. Indeed, in an article published on his firm’s blog, Di Mase argued that one of the most common approaches toward fee-level setting – that of basing fees for a given project on a percentage of the overall construction cost – may result in over or under charging depending upon the level of service involved.

To illustrate his point, Di Mase uses the example of three different briefs for the design of a bicycle shed. While the construction cost of all three might be roughly similar, he argues that the level of design expertise and effort involved would vary according to location (inner urban, outer urban or rural) and the level of speciality design and environmental excellence demanded by each client – differences he says are not accounted for within fee structures based around a percentage of construction costs.

Stressing that he is not necessarily arguing for higher or lower fees, Di Mase says he is concerned about fee levels being appropriate for the project in question and the profession developing consistent methods for arriving at suitable levels of fees for different projects.

“In my view, there’s a difficulty in establishing a methodology for fee setting that was concerning me when I wrote the article,” Di Mase said, referring to the aforementioned blog entry. “I was concerned about how we go about it. There doesn’t seem to be a consensus on this issue as far as I can tell. That concerns me.”

Zillante says it is important when setting fees to allow adequate provision for broader costs associated with items such as overheads, staff training, office upgrades and technology, long term planning initiatives and even items such as involvement in mentorship and community projects.

He says the value of architecture must be fully appreciated and that the profession needs to improve its communication in this regard.

“We’ve got to somehow get the message across that design is really important and that it is a very valuable thing,” Zillante said. “The government and the community at large have got to grab that, and we as a profession need to get respect back from everybody.”

“If community respects the profession, they will pay for it.”

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  1. Andrew Noad

    An interesting article and one quite relevant to the WA situation. Jobs are being 'bought'. Clients know its a buyers market and are screwing everyone on fee price. There is little thought for the value of fully detailed and documented design being passed onto the contractor. Small savings in the design phase, through such shortsightedness, lead to far greater costs when under construction.
    I have known this situation for 40 years, in all economic climates. It won't change.
    Good luck with your next client! I mean it.

  2. Phil Ward

    Thanks for your article..architects fees and how to set them was based on a silly formula that may have been correct some of the time by chance! Complaints by the profession that proper documentation is neither covered by the current market-arrived-at figure of less than one per cent nor valued by clients ignores two critically important elements for architects as consultants; if your work is valuable, convince your client to pay for it, and if you're producing more work than your fee covers, then change something..maybe we over produce..architects are better off thinking like consultants and providing and arguing and being convincing about their value proposition..which will require revisiting what they do, how they do it, and how much time and how many drawings will be needed to get the job done..that's the consistent approach we need.

  3. Gil Arnold

    Timely research and discussion.
    Clients and other participants attempt to shed risk down the line but quality services rely on many inflexible costs for architects. Annual subscriptions to the BCA and Australian Standards, CAD licences including up-grades, etc. plus associated time for training are out of sight costs born by architects. Not to mention professional indemnity insurance premiums.
    Pressure on employees to meet slim targets inevitably results in errors and eventually to the cost of staff turnover with associated loss of project specific knowledge.
    Low fees inflate all these risks for architects. The sensible answer is the 2 letter word ~ NO!