HYP. 14 - Delivery of Services Flashcards
What are three common structures of getting paid?
% of construction
fixed-fee
hourly
Why would an owner dislike % of construction payment structure?
- The traditional method to receive a payment based on construction, fee is typically paid out to the architect at completion of project
- Disliked by owners b/c they think architect is incentivize to increase cost on purpose, like choosing nicer finisher to increase architect’s fee
- Architect like this b/c it increase as construction cost increases, the fee changes as the project becomes more or less complex
Why would owner dislike the fixed fee method?
- also known as stipulated sum
- Clients like this because it’s a fixed fee to include in their budget
- Believe that architect is incentivized to work more quickly
Why do architect like/dislike fixed fee?
Architects may like this because they know the full value of contract early on. There is also some risk if they did not correctly estimate the time it will take to complete the project
- Architects need a defined scope with this method to make sure changes to the scope are added services
Why would an owner dislike/like the hourly structure of payments?
- Clients like this b/c they only pay for what they use, but they might think the architect has no incentive to work quickly.
- Difficult to establish total design fee
Why do architect’s like the hourly fee structure?
- Less risk
- can build in profit margins to the hourly rate
What does the owner like/dislike from the hourly -not - to - exceed payment structure?
Owner like this because it lets the owner pay hourly rate for work actually done and get a mximim cost
What does the architect like/dislike from the Hourly-fixed-fee payment method?
Introduces risk for architect similar to the fixed fee method
“some risk if they did not correctly estimate the time it will take to complete the project”
OVERHEAD RATE
INDIRECT EXPENSES / DIRECT LABOR
- INDIRECT EXPENSES = SALRIES/BENEFITS
