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.