The architectural fee

What is it?

Over recent months, the architectural fee has surfaced as a topic in a number of unrelated conversations, strangely arriving at us from varied directions, in varied circumstances and with varied foci.

Nic Granleese advised that the Australian Institute of Architects (AIA) are investigating the reinstatement of their architectural fee guide. We attended an AIA seminar run by (the awkwardly named) Blue Turtle Management and Consulting exploring the psychology of fee negotiation. Shae Parker-McCashen queried up-front deposits over one dinner. A lawyer friend suggested the division of fees into fixed and hourly components over another. And finally, Andrew Maynard and Justine Clark discussed industry-wide mandatory fees on Twitter.

What do we think?

Or rather, what can we make of this disparate yet complimentary interest in the architectural fee?

It might have something to do with our ages and the ages of our friends and colleagues, many of whom have recently started their own architectural practices. For new business owners, fees and income are inevitably going to feature heavily in conversation. Perhaps it also has something to do with the market shifts that have taken place over the past five years thanks to the global financial crisis, the federal government’s $42b stimulus package and the ongoing aftermath of these events. And finally, it might have something to do with the general consensus that architects get paid relatively little for the work we do.

The truth behind the simultaneous interest in the architectural fee probably owes much to each of these explanations. Be it consciously or subconsciously, we and our colleagues are responding to the most significant question of all: how can we earn a decent living doing what we love? In order to flesh out our feelings on the matter, we’d like to further explore two of the issues raised with us: the psychology of fee negotiation, and the industry-wide mandatory fee.

The psychology of fee negotiation

Blue Turtle Management and Consulting (BTMC) are a consulting firm specialising in architectural fee proposals, contracts and negotiations. Their recent seminar explored these concepts from both practical and theoretical paradigms. The practical discussion was interesting, if a little drawn out, however the theory was deeply fascinating. It introduced ideas like anchoring and mental accounting, and offered remarkably demonstrable observations like; People will make personal financial sacrifices in order to punish those they think have wronged them and; People place different values on identical items based on the way they are presented.

Ultimately, both theoretical and practical sections of the seminar boiled down to a single, central recommendation: fee options. That is, a fee proposal broken down into a handful of options (basic, expanded and premium services) with a checklist of tasks like those favoured by car manufacturers. For example, the basic service may include only one sketch design proposal, while the expanded service provides one design with minor revisions and the premium service allows unlimited changes.

The central purpose of this recommendation is to empower the client to choose between spending a little or spending a lot, thereby increasing the likelihood they sign on the dotted line. Additional benefits include creating a clear link between the fee and the scope of works; providing multiple points of negotiation; and establishing which services are excluded from the fee.

We think all are important considerations for any architectural practice, and without doubt utterly fundamental to a young practice such as our own. However, we remain unconvinced by the method.

Our objections are not many, but they are central to the way we work:

  • We are legally bound by the Architects Act 1991 to provide a competent level of architectural service.
  • We want to work on projects with a full scope of architectural contribution.

We do not run a business that happens to provide architectural services (though could easily provide legal advice or sell flowers). We run a business because it is the only way we can do what we love: make architecture. And our passion for architecture means that the only sort of service we are interested in providing is a full one. We want to offer our clients the opportunity to tweak our designs. We want to make architectural models. We want to attend as many site meetings during constructions as necessary. Only in doing so will our buildings be the best they can be.

We understand and respect that BTMC wish to show that being an architect doesn’t have to exclude also being a businessperson, however we would love to hear how they suggest we can do that without compromising our core service and our core values.

The industry-wide mandatory fee

In short, this idea is a uniform fee schedule nationally implemented across the entire architectural profession. Fees are set, collected and administered by a central authority (for instance the AIA) and redistributed to architects. The intention is to establish an environment in which architects compete on ideas, not fees.

Many countries, including Australia, used to set mandatory architectural fees. By the 1990s they were all abolished for their inherently anti-competitive nature: in a free-market economy, money is the common language, the one constant understood by all. Ideas are not universally negotiable, but what one pays for a service is.

But are mandatory fees really so bad? Competing with other architects based only on our ideas, not our fees, certainly has an alluring ring to it. Then again, our small architecture practice is more likely to thrive in the future if it can complete more projects now. And one of the ways we’re going to achieve that is by not having to compete with established architects and their widespread reputations. The freshness and energy we can bring to a project is one string in our bow; our ability to charge low fees is another. And believe us when we say we need every string we can get.

In fact, the disparity between our fees and those of an established practice protects the master as much as it does the apprentice. Twenty years from now, when we have two decades of (hopefully) great architectural works behind us, we will be charging significantly more than we do now. One reason will be to cover what are likely to be far higher overheads, another will be because we will want more money – to afford private schooling, to pay off our mortgage, to travel, to save for retirement, to buy beautiful things. As an established practice, we will be in a position to satisfy this desire thanks to a clientele prepared to pay for our good ideas. Say what you like of it, the free-market economy does tend to reward those who have in small supply what others want with great demand.

The free market values great design by paying for it.

There is another, more sinister, reason for avoiding a centrally-administered fee. Orwell may have been remarkably prescient in a number of areas, but thankfully so far we are still able to charge what we can for the work we do. Do we really want to relinquish yet another liberty? It’s bad enough that our federal government decides what to do with our taxes and our local councils decide what to do with our streets, having the AIA decide how much we’re allowed to earn gives us the outright willies.

Author: Warwick Mihaly

I am an architect, writer, teacher and father.

11 thoughts on “The architectural fee”

    1. Neil, Graduate Careers Australia compile some interesting statistics on wages, unemployment, job seeking, industry profiles and gender balances. Check out their GradFiles and GradStats reports here.

  1. Whilst it is pleasing to see the Graduate wage increasing I would be more interested in a further study of architects with a bit more experience. As someone who has been on the job market for a while it is quite an eye opener of what small architectural practices want to pay you compared to the larger firms. Whilst some disparity in salary is to be expected between bigger and smaller firms, the hiring characteristics and wage expectations from smaller firms is quite alarming and in my opinion unsustainable for the industry. Smaller firms can’t just keep hiring graduates and ignoring more experienced architects just because they are cheaper.

    1. Neil, I think your worries reveal a systemic issue facing the architectural profession at large. Smaller architectural practices working on smaller commissions are not able to charge what they should be charging on their projects and are thus not able to afford experienced staff, leading to a dearth of young but skilled architects, possibly leading to a future of even fewer smaller architectural practices, perhaps fighting over a diminishing sector of the construction market.

      It’s not like there are too few homes being built. What can we do to get involved with more projects, to help the general public understand the value of our involvement?

  2. And I can guess with your last comment we are brought back full cycle to your initial piece about fees and my assertion that architects should be paid more for their services and their work.

  3. Hi,
    Just wanted to clarify the opening info about the AIA wanting to re-investigate the fee guide. That’s not actually correct. There are individual members, not the Institute, who would like to examine the notes and information that assisted in the use of the fee guide. That’s because this information doesn’t state a fixed (and uncompetitive ) price, but instead explains the process of calculating a fee based on a practices overheads etc. So it’s really important info which got lost along the way. The return of a fee guide is probably never going to happen, at least with current legislation, but it seems less clear how fee surveys may be used. Lots of other industries publish this type of sales data, why can’t architects?

    1. Thanks for the correction, Nic. Why the difference between individual and official positions within the Institute? If what you’re saying is that the truly valuable part of the guide was the discussion of overheads and fees, what’s stopping them from bringing at least that element back to life?

  4. When you’re dealing with an organisation with over 10,000 members there are always going to be people with different views. Some say bring the notes back, other say this may breach current legislation. Any official Institute position therefore takes many many discussions and debates and legal advice and committees and on it goes until something actually becomes organisational policy.
    Out of interest, I just got an institute email about an upcoming seminar regarding competition and architects behaviour. I didn’t read it in full detail, but it looks like the law has recently changed and become more strict.
    And my 2 cents on this topic. The issue in my mind isn’t the fee guide, the issue is business knowledge for architects. We all get trained on how to design buildings not run businesses. When many architects open a practice (me included) we are under qualified. This not only leads to a lot of hardship and in some cases bankruptcy, but it also affects the profession negatively. Because of this some people are suggesting architects who want to open a practice should need to complete a masters in business so that they are better equipped. Despite the extra time for study i support this idea. Maybe it doesn’t have to be a masters, maybe its a short course in business, but what this does is give young architects the tools to run a business successfully. And what would be really exciting is to see young architects redesigning the way practices work. When we start examining what we do and how we provide skills and services in innovative ways then we get a chance to rethink pricing and wages. Until we change the underlying business model we get trapped into just charging the same as everyone else.

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