Successful Interior Projects thru Effective Contract Docs - Contract Negotiation

Question 1

Contractual agreements have 3 major inter-related elements. What are they?

Answer 1

Scope, time & price. All 3 must be delicately balanced

Question 2

What is the scope of a project?

Answer 2

It established what is to be accomplished during the project

Question 3

What is the scope of service?

Answer 3

It determines how the designer will execute the documents required to achieve the intended result

Question 4

What 4 things are included in the scope?

Answer 4

The scope of the project, the scope of service, time and price

Question 5

List the 6 general factors that take part in defining the project scope.

Answer 5

The clients stated objectives, construction budget, schedule, design complexity, quality of materials,and existing conditions

Question 6

Energy efficiency, environmental issues , increased productivity, handicap accessibility, code compliance, real estate and financial services, fast track management and facility management are all examples of benefits that your firm can give to the client which would command what?

Answer 6

Higher fees

Question 7

3 ways to deal with a client who has a bottom line number for fee payment and will not budge include:

Answer 7

Advance payment, handling submissions and billing, and negotiating a limitation of liability clause.

Question 8

Being able to negotiate a larger _______ ________ allows you to reserve your working capital

Answer 8

Advance payment

Question 9

How can submissions and billings help you to limit the cost when a client has a bottom line budget number for the fee?

Answer 9

A simple one page invoice once a month with no backup which allows less time for paperwork might be able to lower the cost

Question 10

Typical reimbursible expenses include:

Answer 10

Out of town travel expenses, long distance phone calls, fees paid for secuing approvals by authorities, cost of reporductions, postage, additional insurance coverage required by the client, expense of renderings and models requested by the client, cost of CAD equipment required by the client

Question 11

What does a limitation of liablity clause seek to do?

Answer 11

Limit your potential exposure to a managable fee or some other limit that is more in line with your scope of service

Question 12

What are the 2 contract types typically used in design work?

Answer 12

Cost based contracts and Value based contracts

Question 13

What is a cost based contract?

Answer 13

The designer charges the client on a basis of how much it costs the firm to perform the service

Question 14

What are 3 types of cost based contracts?

Answer 14

Direct labor, Not to Exceed and Percentage of Construction Cost.

Question 15

What is a multiple of direct labor contract?

Answer 15

The designer has billing rates for each classification of employee and the fee is established by multiplying the actual salary rate by a pre-determined multiplier intended to cover overhead cost, indirect expenses and appropriate profit. The designer is simply selling hours, not the value of services

Question 16

What is a Not to Exceed contract?

Answer 16

It is usually tied to some form of cost based arrangement. On the surface it seems to give the client a convenient way to control the ultimate cost, but in reality both parties generally lose.

Question 17

What is a Percentage of Construcgtion contract?

Answer 17

Compensation is not directly tied to the cost of performing the services, but rather to the cost of construction. In times of recession construction costs tend to be artifically low as competition increases and the designer is thereby penalized as a result of conditions he or she does not control

Question 18

What is a Value Based Contract?

Answer 18

It’s a contract that recognizes the value of the design professionals services is not necessarily a function of the time or cost to produce the work

Question 19

What is Unit-Price Contract?

Answer 19

It is based on the SF of space or some other measurable unit

Question 20

What is a Cost + Fixed Fee Contract?

Answer 20

It’s a hybrid arrangement between a cost based and a value based agreement

Question 21

What is a Lump Sum contract?

Answer 21

These are the most value oriented agreements because they are aimed at achieving mutual beneficial results from the designers efforts regardless of the time expended

Question 22

What are 2 things a lump sum contract requries?

Answer 22

A well defined scope of service broken down by tasks, which the designer must have a reasonable assessment of how much time it will take for each one so that the appropriate break-even point can be determined

Question 23

Ownership of the design should be with the client or the designer?

Answer 23

With the designer unless a clause is included that precludes the re-use of your documents on any other project without your permission and the payment of an additional fee or royalties

Question 24

Responsibility for budget and schedule should be ________ with ___________ and _________

Answer 24

Shared with designer and client. If the client insists that the designer take responsibility you should insist on having complete authority to make any decisions that may influence these items. Also, in any requirement for client response insert a statement that time is of the essence

Question 25

Approval of shop drawings and construction work may put you in the position of endorsing the contractors means and methods which are not your responsibility. What should this be changed to?

Answer 25

Review submittals for design conformance only and to take the appropriate action with reasonable promtness with the client

Question 26

Record drawings are the responsibility of which party?

Answer 26

The contractor

Question 27

Compliance with codes and regulations cannot be provided with absolute assurance of compliance, nor can you attest authoritatively that all aspects of the design are in conformance. This should be changed to something like:

Answer 27

The designer will use ordinary standards of care of the profession to design all work to comply with applicable codes, ordinances and regulations.

Question 28

Definition of individual responsibilities is the responsibility of whom to set?

Answer 28

The designer

Question 29

Some typical terms that you should look for in the contract and try to reword are: All, none, every, best highest, complete, adequate, safe, appropriate, satisfactory, ensure, assure, guarantee, warrant, direct, oversee and control. Why?

Answer 29

These words carry a connatation of extremes or imply a promise of performance that is ambiguous or impossible to meet.