Architectural Fee Schedules
Up until 1972 architectural fee schedules were very common, in fact members of the American Institute of Architects were required to follow a fee schedule. The Department of Justice put an end to that "price fixing". It was probably something Howard Roark bragged about at a cocktail party that screwed everything up. I think it is time to bring back the percent of construction cost fee schedule. Nothing mandatory, just a really helpful too.
THE BEAUTY OF THE FEE AS A PERCENTAGE OF CONSTRUCTION COST
One of the great features of a percentage of construction cost fee schedule is that it stays current with inflation. If you are still providing the same service as you were in 1972, then you can charge the same percent of construction cost for your fee. As the value of the cost of the construction changes, so does the amount you earn for your work. There's more...
There are probably thousands of ways to estimate design fees. My method has evolved over 30 years into this approach that I am sharing with you.
Estimating design fees is part science and part art (OK...it’s math and guessing). The approach that I use is dictated by the size/complexity of the project, who the competition is, and who the client is.
Before we get into the nuts and bolts, let's dispense with 'competition' and 'client' considerations. These two issues affect what you do about the number that you have arrived at as 'the fee'.
Are you spending too much time on accounting?
One of the late realizations that I had after 20 years of using a powerful accounting program is that it was costing much more per year than it should. It wasn't the $1,000 per year subscription that cost too much; it was the time required to USE the accounting program. A true accounting program, like we were using, is very fussy. If it were a person, it would be considered “high maintenance”. In our case, the time spent on accounting was time that could have been spent on billable tasks. We could have easily afforded to farm out every accounting chore for what we were “spending” in lost opportunity.
Here is how I look at time allocation for accounting now.