In speaking with a Principal of an established architectural firm that recently entered the Front Range market, I came to find out he and his colleagues were perplexed by firms’ common practice of sometimes using professional fees as a differentiator when submitting on projects. “What’s the deal with professional architectural fees in this market?“ he asked.
Not sure where he was going, I replied, “How do you mean?”
He went on to explain that his firm, established in other geographic markets, is not accustomed to deviations in fees between firms. It appears that in the Front Range market, fees carry weight in owners’ hiring decisions and teams are willing to set their fees to differentiate themselves. While our market has a common industry fee (by project type) and although the standard fee has never been corroborated, it is known by all.
My new colleague was clearly frustrated as he worked to adjust to his new region’s pricing culture. Was he implying fees should be established by region and project type? Should owners dictate what the fee is, or should firms, be it owner’s representatives, architecture firms or general contractors, have an understanding through professional organizations, albeit non-union, to advise on how to establish fees? It seems to me, free market tendencies apply the same to the A/E/C industry as they do any other industry; should that change?
In the recession of 2008, fee adjustment was common as firms worked to survive. It was also common to see — and exciting to witness — younger, independent architects striking out on their own, setting fees they could make a living off and hiring help or forming consortiums if and when needed. This set of professionals (myself and Class of ‘95 colleagues included) had been part of the .com boom and bust; we’re equipped at being flexible entrepreneurs. Now that the economy is growing should we “get in line” and not use fee as a differentiator?
Take it one step further: should fees be published in conjunction with a clearly defined scope? Consider a hypothetical situation where the Owner provides project information, including the detailed budget. When analyzing the budget, it becomes evident that some professional service fees are aligned with the project’s needs and others are not. The onus is on the potentially-submitting firms to decide if the fee would be fair compensation. It’s likely that if the Owner had not included the fee they would receive more proposals from highly qualified firms who were over-priced for the project. This would have been a waste of firms’ and the Owner’s resources — something no one appreciates.
Is having the Owner set the scope and fee a good thing? Should the industry have a gentlemen’s agreement of current rates? I imagine large firms, like the one my new colleague represents, with an overflowing portfolio of work, would prefer this strategy as they would be less threatened by market newcomers. My gut tells me that setting and publishing fees is not the right path to finding the best firm. While I see some benefits, I ask, should the AIA set architects’ fees? Or, should AGC set general contractors’ fees? If not, then neither should anyone else–it’s your business.
~ Paul Wember, Owner’s Representative