When fees no longer matter

It is fairly common, when starting a new project to review the fees with the project team and how they work out by phase and by discipline.  Why do we do that?  It's good to know how many hours the fee equates to in order to pace ourselves and help ensure we make a profit.  After all, we don't want the fee consumed in the Design phases or if the job goes on hold or is cancelled, we don't want to have exceeded the fees we're able to bill for.

And for many projects there is no issue.

Some  common assumptions that may prove incorrect:

  • Fees are sufficient for the project.

RESPONSE:  Not necessarily so.  It is not uncommon for firms to take on new work for a low fee to win a new client in the hope of future work or to keep another firm out of the running.  Clients can create inefficiencies for us or we may manage ourselves poorly. Sometimes firms just need the cash flow for operations.

  • The fee as budgeted by phase is adequate.

RESPONSE:  Again, not necessarily so.  Traditional fee breakdowns by phase are still largely based on how we worked decades ago.  BIM and changing project requirements sometimes require a greater effort up front, early in the design.  When submitting proposals and working through contracts, consider billing a higher percentage for design phases and less for the documenting effort later.

  • Each phase should be profitable by itself and that is an indicator of good PM practices and a healthy job.

RESPONSE: While it may serve a goal for the team, the mathematics of fees can be somewhat arbitrary when applied to the realities of design and project management.

 Photo by  Oli Dale  on  Unsplash

Photo by Oli Dale on Unsplash

There are many reasons why there may not be enough fee to support the effort and hours needed to get the work done properly.  In those situations, what options do we have?  We can continue to work on the project but put the additional hours on other projects and initiatives or just not report them (i.e., work overtime).  We might defer aspects of work from one phase until later, when the fees allows more time or shift work to use less experienced / lower cost staff.  Another approach is to reduce the "deliverables" we produce and hope we can get by.  We can also do the work regardless, anticipating the client will make project changes we can bill for later and perhaps make up some of the difference.  Perhaps the most difficult, is to shift fees around the disciplines or ask the client for more money.

Regardless of staff, time or fee every project must:

  • Address the client’s program

  • Resolve all design issues

  • Meet budget

  • Deliver on schedule

  • Documents that are sufficient for bidding and construction

  • Meet the Standard of Care

Unresolved issues and corner cutting cost more $$ to fix later - and we will have to remedy the problems.

The AIA defines the Standard of Care as follows - "What an architect or engineer can reasonably be expected to do in the similar project in a similar area and circumstance."

…and also -

"The Architect shall perform its services consistent with the professional skill and care ordinarily provided by architects practicing in the same or similar locality under the same or similar circumstances. The Architect shall perform its services as expeditiously as is consistent with such professional skill and care and the orderly progress of the Project."

You'll notice the word "fee" is not in the description.

SUMMARY

It can be a challenge to balance the needs of a client and project with the available fees and staff.  However, once a contract is signed, do the fees really matter?  They don't in the sense that we must meet the Standard of Care.  This requires consideration to ensure the progress of the work within a phase in order to advance the design and resolve the connected issues concurrently.  Do not allow problems to accumulate as they will be more costly to resolve later.

This is where it can pay to be inventive.  Many project issues can be addressed in simple, non-traditional ways that get the job done with less effort.  Difficult situations can become great learning opportunities and the catalyst that forces us to think outside the box.  We will talk more about this another time…

 Photo by  rawpixel  on  Unsplash

Photo by rawpixel on Unsplash

A number of years ago our firm did a replacement hospital facility for a rural client.  There were issues initially funding the project; the construction budget and design fees were tight, our staffing was minimal.  The project was fast tracked with early packages issued.  The design team was in a stressful situation and in quiet desperation ended up questioning and then modifying how they documented the work by considering what the contractor needed in order to estimate, to prepare shop drawings and finally, to construct.  Their approach worked so well that it became the office standard.  After all, if it worked for a low fee job it could surely work for one with a better fee too.

Moral of the story:  look for the Leanest, smartest way to work that meets the Standard of Care and make it the rule for day-to-day practice.  Adjust as needed for the project's scope of work, building type and client requirements.