The Initial Four Architectural Fee Types In MyCorbu
I have written about Architectural Fee Types before. I used that post to organize my thinking about fees for my work on MyCorbu. You can see that post here. I came up with eight fee types that architects use.
I am revisiting the issue of Architectural Fee Types. The focus this time is to see which fee types are the most valuable, which fee types would cover the most situations for users of MyCorbu.
What I have determined is that half of the eight fee types aren’t worth pursuing at this point. Maybe later. I am eliminating two questionable Hourly Rate types: Hourly by type of work, and Hourly by role. In my career neither of these fee types were ever used. Maybe user of MyCorbu will convince me that they are needed.
Unit Costs is another of the fee types that seems ‘lightly’ used. It is quite similar to a Lump Sum fee type, so it could be added without too much effort.
The final fee type that I am setting aside for now is the Percent of Construction Cost fee type. This fee type is a bit redundant. It is very similar to the Lump Sum Percent fee type except that there is a changeable calculation for the amount in question. One of the criticisms of the Percent of Construction Cost fee type is that is gives the architect an incentive to make the project expensive. If in spite of this incentive, the architect brings the project in under budget, then they are penalized for their effort.
Some clients wanted the Percent of Construction Cost fee type. Where I could, I substituted a Lump Sum fee based on the original calculation of the Percent of Construction Cost fee.
So that leaves us with four Architectural Fee Types: Lump Sum Amount, Lump Sum Percent, Hourly Rates Estimated Total, Hourly Rates Maximum Total.
Lump Sum Amount
The Lump Sum Amount fee type is about as simple as you can get. You quote a fee and bill periodically based on what you have earned. If you just have one phase or if you have a dozen, it the same. This fee type is suitable for all types of projects - large, small, simple, complex, short, or long. Everybody understands how this fee type works. Changes in scope or additional services are simple, too, usually resulting in another phase being added.
When you update you fees with the amounts earned, you learn two things - how much is ready to be invoiced, and how much fee is remaining to be invoiced. This second thing translates into the size of your backlog of work.
Lump Sum Percent
The Lump Sum Percent fee type is similar to the Lump Sum Amount fee type. The difference is in how the total fee is handled. In the Lump Sum Amount fee type the total fee is the sum of the parts of phases of the project. For the Lump Sum Percent fee type each of the parts (phases) is a percent of the total fee amount. This is similar to the Percent of Construction Cost fee type, which makes the Lump Sum Percent fee type a good substitute for the Percent of Construction Cost fee type. The Lump Sum Percent fee type is appropriate for all but complex project types. where phases that are part of the project may come and go. However phases with other fee types could be added, but they would need to remain outside the calculation of the main fee.
Hourly Rates Estimated Total
The Hourly Rates Estimated Total fee type is your standard Hourly Rates fee type. Specifying an Estimated Total fee is optional. Adding the Estimated Total puts your Hourly Rates fee data on a par with the Lump Sum fees as far as seeing how much of your fee is yet to be earned. This piece of information, when added up, can tell you the size of your backlog of work. Because you are entering the time spent on this type of fee, the amount of fee that you have earned is calculated for you. For now this uses the Standard Billing Rate stored in your table of staff members. Individual Project Billing Rates is a high priority.
Hourly Rates Maximum Total
The Hourly Rates Maximum Total fee type is identical to the other Hourly Rate fee type except that the Maximum Total that you enter, when reached, prevents the earned fee amount from increasing. The Maximum Total may be edited so this is not a completely “locked in” limit.
Because MyCorbu is keyed into Project-Phases, you can use a different fee type for each phase of a project. This is especially helpful when additional services are required using a different fee type than the main project.
The Hourly Rate fee types become more valuable when you can assign different Hourly Rates to different Projects. Currently when you enter hours the value of those hours is calculated with just two pieces of information: the number of hours, and the Standard Billing Rate. Using custom Project Billing Rates requires a “lookup” feature to find the rate assigned to the staff member for this project. This is proving remarkably elusive. My Plan B is to hire a consultant to develop and embed custom code to perform the lookup feature.
Developing a way of handling Fees is a prerequisite to developing a way to invoice for those fees. The tools in Knack, the software I am using to build MyCorbu, are not ready for invoicing but it is coming. In the meantime, you need a way to track your fees for bookkeeping purposes.