Experience Area A - Project Initiation and Predesign Flashcards
What Acts apply to “Project Inititation and Predesign”?
- CGA 1993
- Copyrights Act 1994
- FTA 1986
- RAA 2005 and RAR 2006
What were the NZIA Guide to Architects Charges 2007 and why should they be no longer used?
A guide to the fees a client can expect to pay for core services provided by an NZIA architect member, once the project scope and related architect’s services are adequately defined.
benchmark for NZIA architect members when calculating their fees
Beucase it is seen as ‘cartel’ or insider trading, and can be used to fee cut (although fee cutting is dangerous)
How should you treat the fee if it is a complex project or includes additons/alterations.
Where the Client’s project is highly complex, or calls for specialist skills, or includes alterations and additions, your architect may need to allow for extra fees, typically in the order of** 1.5% to 5.0% **over the usual percentage rate.
How are fees broken up for the different stages (as percentages)?
The portion of the Architect’s fee that may be reasonably assigned to each stage may fall within the following ranges :
Predesign : 2% to 10% median 5%
Concept and Prelim : 4% to 18% median 12%
Developed : 5% to 20% median 13%
Detailed : 30% to 50% median 45%
Procurement : 1% to 20% median 4.5%
Admin and Obs : 5% to 33% median 25%
What are the different types of fees for Architect’s Charges?
Lump Sum, Time Charge, or Percentage Fee bases, or a combination
What are LumpSum Fees?
- Lump Sum Fees are determined by pre-estimating and agreeing on the cost of resources for each section of the Architect’s services.
- Establishing Lump Sum fees is challenging at the project’s outset without a clear understanding of the client’s requirements.
- This fee structure may be realistic once the design is developed and agreed upon, for example, after completing sketch plans.
What are Time Charge Fees?
- Time Charge Fees are applied when the extent of services cannot be easily determined beforehand.
- These fees are calculated by multiplying hours of service by the agreed hourly rate for each service provider, with expenses added.
- The Architect should provide an estimate of the total cost of agreed services calculated this way, but it should not be considered a cap if services are extended beyond the estimate due to circumstances beyond the Architect’s control.
- The Architect must keep full records of time spent
What are Percentage Fees?
- Percentage Fees are calculated by multiplying the adjusted Cost of the Contract Works by the agreed percentage fee rate.
- The adjusted Cost of the Contract Works includes the cost of everything designed, selected, or laid out by the Architect and others, carried out by the contractor as stated in the contract.
- For fee calculation, the cost of old materials is considered as if new, and the cost of goods/services provided by the Client is calculated as if provided by the contractor.
- If the final Cost of the Contract Works is undetermined, the most recent estimate approved by the Client is used for fee calculation.
When should Lump Sums be used? When should they not be used?
Dont use when unsure of the scope.
Can be based on previous expierience of similar projects
When should Time Charge be used? When should they not be used?
When the extent of services cannot be easily determined beforehand.
Typical for early and late stages of the project - because of uncertainty in these projects
Can always use Time Charge
When should Percentage Fees used? When should they not be used?
Generally percentage can always be used.
More useful when there is some certainty to the project scope
There should be right to revise this fee basis if the construction value changes
Why should you always have a written contract?
Terms of Engagement are part of the Architects Code of Ethics
Prevents disputes from arising
Record of what was agreed
Clauses to limit your liability
General clarity
WHAT ELSE
If a client changes the AAS with their lawyer what should you do?
Client generated conditions can pose liability and insurability issues for the
architect.
Check with your lawyer
What are the differences between the 6 year contractual liability and the 10 year long stop.
the contractual liability of the architect is limited in time to 6 years after the breach of contract or contract completion
For claims to which the Building Act 2004 applies the long-step period is 10 years (if in negligence)
In other words:
Limited to 6 years from discovery (but extended to) Ten year-long stop for “reasonable discoverability” (under Building Act)
Contract vs Tort vs Legislation
In contract it is six years from the date of the act or omission.
In tort it is six years from the date the damage is discovered or ought to reasonably have been discovered.
The Building Act 2004 (legislation) provides that no civil action may be commenced more than 10 years after the date of the act or omission, referred to as a “long stop”.
Members should not accept any extension to the time limit beyond the 6 year duration required for contract claims. Any more may mean that claims arising in the extended period are uninsured.
If the client agrees to the 6 years in contract then that is binding, however
Limitations Act 2010 – for building related matters the time scales generally are:
Limited to 6 years from discovery (but extended to)
Ten year-long stop for “reasonable discoverability” (under Building Act)
https://smithpartners.co.nz/litigation/limitation-periods/
6 years and 10 years run in parallel
How long should you keep your doucments for?
Case law between BNZ,Wellington City Council and BECA as a third party- NZACS recommends for 12 years’
Would say 15 years because of Limitations Act 15 year long stop
What are the three legislations in relation to most construction related liability limtations?
Building Act 2004
Limitations Act 2010
Weathertight Homes Resolution Services Act 2006 (WHRS)
What is the limitations of liability (in regards to quantum/money) in the AAS?
$250,000
WHat is the minimum professsional indemnity insurance you should carry under the AAS?
Not less than $250,000
If the client requires longer than six years of PI and more than $250K what should you do?
Where a client wants a longer period than six years, or a greater amount than $250k, the
client has to request that, and the architect agree, and the specific terms need to be
inserted in Section E7 Special Conditions.
This will also change your professional indemnity (typically 6 years after project completition). So Architect will immeditely need to talk to insuer (NZACS)
The AAS notes that “If a greater amount of insurance indemnity is required by the Client, the cost of the additional amount will be at the Client’s expense”
What “late knowledge extension period” for the limitation period of 6 years?
+ 3 years from date of discovery (doesnt need to be next to the 6 year period)
All claims will expire 15 years after the date of the act or omission. This is known as the long stop.
READ THIS AGAIN!!! (last section)
https://smithpartners.co.nz/litigation/limitation-periods/
What is the difference between Torts, Crimes and Contracts?
Torts - Civil Wrong (common law presidence-based)
Crimes - Criminal wrong, legislation based (police are often involved)
Contracts - agreements, mix of common law and legislation
Does NZACS Cover you for more than 6 years? (regarding “late knowledge extension period)
yes
For as long as you are in architectural practice, professional indemnity insurance should be maintained.
Once you cease practice you will need to need to consider continuing with a “run-off “PI Insurance policy. This can extend your previous cover, but with an ever-reducing annual premium which recognises your lessened risk exposure.
I am an architect working for a non-architectural firm. Does my firm need Professional Indemnity Insurance that specifically covers architects/architecture?
Yes; Professional Indemnity Insurance would still be required. If you are an NZIA member you are eligible to apply for the NZACS insurance cover in your name. It won’t include your employer, but it will provide cover to you and any legal liability that you may have in your role as the architect.
Should you tell your clients how much PI insurace you have?
The PI cover you actually have in force – and the terms of that cover – is a confidential matter between you and your insurers: clients have no right to access that information, and you have no obligation to disclose it unless required to do so by the discovery processes as part of court proceedings. Indeed, insurers will be VERY UPSET if you divulge those terms to others!
Will NZACS cover past projects?
Yes Professional Indemnity Insurance covers your past work, although restrictions can apply to past work before you first took out a Professional Indemnity policy – refer retroactive date.
Provided you maintain current professional indemnity insurance, claims notified under the current insurance can be in relation to services you provided years before.
What is a retroactive date?
This is a condition under ‘claims made’ policies and is applied by insurers to restrict cover for past work. The insurance cover provides indemnity for services provided from the ‘retroactive date’ onwards. If there are no restrictions on past services, the retroactive date will be shown as being ‘unlimited’.
How long do I need to maintain Professional Indemnity Insurance cover?
For as long as you are in architectural practice, professional indemnity insurance should be maintained.
Once you cease practice you will need to need to consider continuing with a “run-off “PI Insurance policy. This can extend your previous cover, but with an ever-reducing annual premium which recognises your lessened risk exposure.
If you have limited your liability for 6 years in the AAS do you need to worry about the 10 year long stop?
Yes because of the “late knowledge discovery period” might fall outside the 6 year period
AAS notes if there are specific time limitations imposed by law, those would still be applicable (ie 10 year long stop and the 3 year late knoeledge period)
In case of any loop holes a plantiff brings forward to the 6 year period noted in the contract - case law
If you are engaged for limited services (without administration and observation) what should you put in your contract cover letter? NZACS recommendation
You should have a note saying what you are not liable for or what the extent of your work is (what you are doing and what you arent)
(check Oratia AAS)
Eg:
You have commissioned us to prepare only drawings sufficient to obtain a building consent and not to observe the contractor carrying out and completing the project. As a consequence we will not be liable to you (in contract, tort or otherwise) for any claim, damage, liability, loss or expense incurred by you arising in any way in relation to the Contractor not carrying out or completing the contract works as required by you or stated in your projects construction contract.
OR
As you have commissioned us to only:
prepare drawings sufficient to obtaining a building consent, and
attend the site as requested to clarify construction details and to check the quality of finish, we will not be observing the contract or carrying out or completion inspections.
As a consequence of this limited service we will not be liable to you (in contract, tort or otherwise) for any claim, damage, liability, loss or expense incurred by you arising in any way in relation to the Contractor not carrying out or completing the contract works as required by you or stated in your projects construction contract.
What is Limited Services/Partial Services?
Agreement to provide architectural services less than the full scope outlined in NZIA AAS (usually not procurement, administration and obs)
Does Limited Services mean more risk? Why or why not?
(a) The Client and the Contractor may change critical details and substitute materials without the Architect’s knowledge.
(b) There may then be no certainty that the construction complies with the Architect’s documentation or related consents.
(c) The Architect may be asked to certify works which have not been subject to adequate observation. Do not sign/ certify any works if full scope of services not undertaken.
What are the general steps when approached with Limited Services?
- Promptly confirm the scope of work in writing, adhering to the Registered Architects Code of Ethics. Clearly outline inclusions, exclusions, and limitations of responsibilities and services.
- Use appropriate conditions in the Agreement for Architectural Services (AAS) to restrict liability in limited services contracts. Include NZIA pro-forma disclaimers covering defined services, limited obligations, reduced liability, and outlining risks and client responsibilities.
- Only undertake work for which you are qualified and have secured fees.
- Adhere strictly to the agreed-upon scope of work; clarify and communicate any differences in services to clients.
- Refrain from site visits, certifications, or recommendations unless engaged for a full-service contract.
- Clearly define and charge for additional services; outline any added responsibilities or liabilities in writing.
- Resist pressure to commit to anything beyond your responsibility or commission.
- Do not sign Practical Completion certificates or authorize payment for work not personally verified.
- Provide and explain an agreement with a suitable fee structure, justifying any higher charges.
- Avoid giving instructions to parties not under your engagement.
- Safeguard against risks in documents not prepared by you.
- Foster and maintain professional relationships.
- Stamp documents as ‘LIMITED SERVICES’ for clarity.
When apporached with Partial Services what should you put in your AAS?
In the Special Conditions include a disclaimer
Refer to PN3.107
With Limited/Partial Services what should you explain to the clients?
- Additional workload/ costs/ responsibilities/ risks involved for the clients
- Notify client of their responsibility to ensure contractor compliance with docs/
consents - Advise the client that they have a contractual duty to advise the purchaser of the building
that there was a limited service agreement, and if the client is a limited company, then the
directors will become jointly and severally liable to the architect for any subsequent loss
suffered by the Architect as a consequence of the limited service - Remain available to clients for queries – use a disclaimer to limit liability and obligations
What should you ask yourself when presented with non-standard terms of consultant agreement?
Get a lawyer!!!!
Ask yourself:
“Does this clause require me to contract for a service, risk or liability beyond those in AAS 2008?”
Then ask yourself are there any sneaky words in the contract
Be careful of Seemily innocent words! eg. highest standard etc
Ask yourself is something worded to Indemify the client/ Hold harmless. You should ot accept anything above common law liability
Dont agree to for examples:
“The Architect will indemnify and hold harmless the Client from all claims arising from the architect’s performance or service on the project.”
More preferable wording:
“The Architect shall be liable to the Client for any reasonably foreseeable claims to the extent caused by any negligent act error or omission in the performance of the services by
the Architect”.
Does your professional indeminity insurance include coverage for performance guanrantees or warrenties to clients or other parties?
No!
Many non-standard agreements contain Deeds of Covenant and Deeds of Warranty appended to the contract for services.
Be very wary of such Deeds as they often do not limit your duty of care or your liability.
What should you do right before in intial kick-off meeting?
Do your homework.
Who will be there and who is calling the shots.
Give an agenda to the parties
Gather as much information on the project as possible before the meeting (if the contract is signed)
At the meeting clarify the following: parameters, schedule, budget, and decision chain.
As a metaphor what is a contract and what is PI Insurance?
A good contract is like the fence at the top of a cliff.
Professional indemnity and other forms of liability insurance cover are like the ambulance at the bottom of a cliff.
What should a properly drafted fee prososal include?
- Identify the nature of the Client’s project;
- Record the scope of the services to be provided (usually design and/or observation) and for
further clarification the services that will not be provided. - The timing and/or duration of the various parts of the Service.
- The deliverables for each part of the services – e.g. plans, elevations, sections,
perspectives etc. - The Fee to be rendered for each part of the Service and if appropriate;
- The timing of the payment of the Fee.
Is an oral agreement okay?
No get it in writing. Oral agremetns are enforcable but disputes can arise very easily
What is a “consideration” in contract law?
a mutual exchange of values under the contract
What is the most common reason for disputes of contracts?
what is it that both parties have agreed to do (offer and acceptance)
If there is significant changes to the fee prosoal after negotiations with client, what should you do?
should prepare and forward a fresh fee proposal to the Client for acceptance.
If changes are minor after negotiations about the fee prososal with client, what should you do?
If changes to the original proposal are minor, the Member can and should document them in a supplementary letter, confirming the contract in terms of the original fee proposal, subject to the supplementary letter.
