4.2 Fees Flashcards
Architects appointment
-Is a contract
-Offer of doing work
-Consideration of amount of money you will get paid to do work
-Agreement from both parties
-Appointment because you are being appointed by client
-What you will do
-When will you do it and how long will it take?
-How will you do it?
-What will you charge?
-Satisfied about clients legitimacy?
Securing work
-Direct appointment
-Fee tendering/submissions
-Limited or open competitions
Assessing the query
-Do you wish to work for this client?
-How likely is the project?
-Does this fit with the business plan?
-If competitive, how likely is a win?
-Do you have the required expertise?
-Do you wish to gain experience in this sector?
-Will it enhance your portfolio?
-Can you make money from it?
-Do you have the necessary skills and resources to undertake this work?
Fees:
Consider:
-Staff proposed, hours required, impact on other projects
-Cost/charge out rates
-Services to be provided
-Proposed procurement method-only if known
-Timescale
-Required profit margin
-Added value
Fees can be expressed in a number of ways:
-Charges based upon agreed hourly rates-used when?
-Percentage of the construction cost-used when?
-Lump sum per stage for the whole project-used when?
-Combinations
Consider benchmarking
How will extra work be charged
How will hourly rates be established
3 main ways to calculate a fee
01 Determine an hourly rate and apply it for all the work hour by hour until complete
02 Determine how many things need to be done, apply a price to each, add them up and charge one price-a resource based lump sum
03 Decide on a percentage of the construction value to charge
Fee proposal
-Proposal should set out clear program of when fees will be charged ‘drawn down’ throughout the project, including provision to amend
-Milestones eg by work stage or task grouping-care to obtain sign-off
-Monthly-clarity and convenience
-Hourly rate-lump sums, pieces of work to be agreed
Hourly rates
-Establish salary cost, overheads, NI contributions, productivity factor and profit desired
-National insurance is currently 13.8%
-Profit can be whatever the practice desires for that particular project but use 20% as a rule of thumb
Assume:
-Overhead is twice salary
-Working year is 1700 hours
-Productivity factor accounts for holidays, illness, training and admin time ie is fee earning only
-Certain amount of flexibility in these calculations which is why benchmarking is so important
What is overhead?
The costs of running a business that are not directly related to producing a good or service
May include:
-Marketing/PR
-Admin staff
-Graphics
-Library services
-Staff benefits
-Insurance
When to use hourly rates
Whenever you want bud usually…
-Additional works
-Site inspections especially if additional
-A small piece of work
-A feasibility
Why?
-Hard for client to predict cost, time should be agreed before work undertaken, usually with a cap (not to exceed)
Resource based fee proposal
-Hourly rates can now be used to calculate lump sum fees for staged/pieces of work, used for client guidance for hourly work with an estimate of number of hours
-Also used to cross check resource plan against construction sum percentage
-Essential to record fee proposal & method of calculation to client in writing as per the codes
Resource based fee proposal 2
Invoicing expressed by:
-monthly draw down
-completion of work stages or
-specific tasks or deliverables
-How and when you charge will impact your business cash flow
-Benchmark against projects with same team or staff, same sector, same client etc and monitor against expectations, as required
Resource plan
-A programme-tasks & time
-Using hours/days against tasks and programme to give a price
03 Percentage Fee
-Based upon a defined % of the construction cost
-Many architects agree to a variance of up to 10% of the construction budget before adjusting the fee
-Be aware: if significant changes are made to the design of the project, the construction costs will increase and the architects fees may need to be renegotiated
Construction cost
You need:
-A floor area x A square meterage cost (gross internal floor area)
-Be aware clients budget and construction cost may not be the same thing
-Project cost-whole project; fees, application fees, surveys, construction, VAT etc
-Construction cost is the cost of the construction
