How are Fees Calculated?

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Five Phases of Design

An architect’s compensation can be based on a percentage of the cost of the work, time or a stipulated sum. Less commonly, fees can be based on unit cost (number of rooms/apartments, etc.), the project’s square footage or a royalty (share of the profit).

1) Percentage of Construction Cost

Depending on the building type, fees fall between 5% and 21% including engineering fees or 3% to 12% excluding engineering fees. How do we know how much the construction cost will be? Easy. Ask your local architect to provide basic unit prices, which is basically what the latest building of that type and size in your region cost. Do you have to pay all the fees at once? No. The fees paid to the architect will typically be paid over the length of the project, phase by phase. The fee breakdown will depend on the project and the design method employed, but generally the breakdown is along the following lines: Schematic Design (SD) 15-20%, Design Development (DD) 15-20%, Contract Documents (CD) 30-45%, Bidding (B) 5% and Construction Administration (CA) 20-25%. And of course, you are free to hire someone for the initial phase only.

2) Stipulated Sum (Fixed Fee)

This method provides a fixed fee to the Architect based on a predetermined scope of services. Lump sum compensation is usually arrived at by negotiations with the Architect. The Architect has to factor in salaries, overhead costs, expected profit and reimbursable expenses. Provisions can be made for unforeseeable conditions such as extended contract time, compensation for time delays not caused by the Architect, and changes requested by the Owner after sign-off.

3) Cost-Plus

A cost-plus method is frequently used for projects without a determined scope, or for those projects with a complex scope. Also projects with unique needs work well with this method (short time frames, research-intensive, or requiring special studies. Payments to the Architect will be based on his or her costs for the services plus payroll burden, overhead cost, profit and reimbursable expenses.

4) Time (Hourly)

Hourly fees are well suited when the services are difficult to determine in advance or services are short in duration. Most Architects have standard published schedules of hourly rates for various classifications of technical and non-technical employees. Ask them for their hourly rate.

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