Professional Documents
Culture Documents
Your interview went well, your prospect has moved from a qualified lead to a
new client, ready to hire you to do the job. The designer in you is ready to
design, but you need to establish a framework for your business relationship.
And that means a contract and a discussion about how you’ll be compensated
for the work that lies ahead.
I certainly don’t need to tell you how to do the tasks associated with the
actual work. But there are some parts of delivering the work that new
designers may not have much experience with yet. Let’s review the key steps
between the client’s committing to working with you and the point where you
set off with your pens and trace and begin pushing pixels in CAD.
A contract is designed to protect you and your client and spell out the legal
terms and responsibilities of your relationship. In many locations, a
contract is a legal requirement for offering architectural services. Even if
you practice in an area that doesn’t require one, it makes good business
sense, and it forces you to evaluate the range of possibilities in the
complex (and expensive) process of delivering of a custom home design to a
client.
Owner’s responsibilities
Compensation terms
Termination section
When you’re just starting out, the small-project contracts will probably
serve you well (assuming you’re working on small projects); however, as you
build your practice and pursue larger projects, you’ll need to transition
into more complex agreements.
You can purchase these documents on an as-needed basis on the AIA website.
You may find that they don’t quite describe what you do or how you like to
offer services (if you or your client are always modifying them, that’s a
sure sign), and at some point, you’ll probably develop your own contract that
suits your personal process. Just be sure an attorney specializing in
construction law has studied your contract before you put it in front of a
client. We’re architects and designers, not lawyers, and this isn’t a DIY
project; you need professional help.
If you’re a member of the AIA, you can subscribe to its LegaLine Service,
which offers unlimited legal consultations for a fixed price. Even if you’re
not a member, it may be worth the price if you’re developing your standard
contract and you don’t have access to a local lawyer who specializes in
construction law.
Fees
Buried in the process of drafting your contract is the weighty decision of
how you’ll approach charging for your services. Heading into your interview
with the client, you’ll have a basic idea of how you want to structure this,
but it will be codified in your contract. There are many different methods of
charging for services rendered, but let’s look at a few of the most common
ones:
When everything is known about a project’s scope, and when you have some
experience, it can be feasible to determine the fee required to complete a
project. But how often is everything for a project known up front? Just about
never.
Clients (and architects) don’t know everything they want or need at the
outset of a project, and things change in the design process, revealing new
opportunities and insights. Furthermore, it can be hard to determine your own
fee early on in your practice. You won’t have a good sense for exactly what
it takes to put a project together from start to finish by yourself.
The scope of work changes must be accounted for (up or down) along the way,
as they’ll impact the overall fee. And if there are any changes in the scope
of work, the contract must be renegotiated with the client. Like it or not,
the process of renegotiation is uncomfortable and can breed resentment. Your
goal is to have a happy client at the end of this process, and a constant
renegotiation of your fee is likely to get in the way of that goal.
If you guess at all of these fluid variables and get it right, this structure
rewards efficient work habits by the designer. As your time investment goes
down, your profit margin will go up. Conversely, if you estimate it
incorrectly, it can be financially devastating and could end up shuttering
your business before it gets up and running.
Fixed fees can have a place in your proposal, though, as we’ll see in the
hybrid fee structure that follows.
One of the benefits of this arrangement, though, is that as the scope and
construction cost increase, the fee rises along with it. Having a client who
is open about the actual program and construction budget, as well as an
architect who is knowledgeable in local construction costs, is key to making
this arrangement work. It demands a thorough understanding of the program,
project goals and budget to ensure the designer isn’t working toward an
unrealistic or imaginary budget only to absorb redesign costs down the road.
Competing objectives between owner and architect can also make this outwardly
seem an unfair arrangement. An architect seeking to reduce construction costs
for an owner actually reduces his or her own fee. Equally, drawing and
detailing expensive materials is (generally) no more work than doing so for
less expensive ones. There are exceptions, of course, as some more expensive
systems actually do require more design thinking and drawing. For these
reasons clients and architects alike shy away from constructions costs as the
sole governing fee structure.
Hourly:
For projects of an unknown or yet-to-be-defined scope, an hourly fee is
appropriate. It’s used by many as a starting point until the scope of work
can be fully described. It can be capped at a not-to-exceed number or tied to
project milestones (for example, hourly until design development is
complete).
To be completely honest, you’ll have to set your hourly rate at a level you
think it will take to get the job. Understand that out of your compensation
will come a host of taxes, both federal and state, as well as insurance and
the cost of keeping the doors of your business open and the lights on. This
all will add up to a big number, and your hourly rate should reflect this
reality.
Hourly compensation can be a hard sell to a client — for good reason. It’s
difficult for a client to budget for, and tensions can arise when a client is
surprised by an unusually large monthly bill. Designers work a lot of hours,
which leads to either large bills for our clients or an internal struggle for
the designer when trying to decide what the invoice should be revised down to
in order to avoid a conflict.
To limit some of the uncertainty for the client of the hourly proposal, one
option is to assign percentages of the overall estimated fee to each phase of
design. For example, if your estimated design fee is 15 percent of the cost
of construction (not including soft costs), take the total fee and assign 20
percent to schematic design, 20 percent to design development, 35 percent to
construction documents, 5 percent to bidding and negotiation, and 20 percent
to construction observation (your percentages may vary). This also helps with
tracking the fee along the way for both you and your client.
Hybrid fee:
Most of the time there isn’t any one structure that is an obvious or optimal
fit, which is why many design professionals opt for a combination that
balances the individual needs of both the client and architect.
For example, you can use an hourly method at the outset, when the project
parameters are undefined and your working relationship with your client is
unknown. It’s an incentive for the client to efficiently establish the
project goals and commit to a schematic design direction. Equally, it allows
the designer flexibility to determine the permitting and code parameters, the
program spaces and the budget, and to set the conceptual framework for the
design based on the client’s feedback. You’ll quickly get a sense for how
timely your clients responds to design iterations, for their desire to
explore options and, perhaps most important, for their ability to make
decisions.
As the project scope and budget come into focus, you’ll have an idea of what
it will take to complete the drawings, specifications and schedules necessary
to deliver the project. This part of the work can be delivered on a fixed-fee
basis, as you’ll control most of the variables pertaining to that portion of
the work. When the project transitions to the construction phase, you might
again transfer back to an hourly rate. This will ensure that you’re
delivering the amount of service necessary based on actual time input, site
meetings, the specific needs of the client and the observation requirements
of the selected contractor and subtrades. It also will protects you from a
project that extends far beyond the promised completion date by compensating
you for the reality of the construction schedule.
Reimbursable expenses: These are items that are typically outside of the fees
listed previously. They vary depending on very specific project requirements,
and it’s an accepted practice to bill separately for items such as prints,
reproduction costs, travel expenses and postage. For small projects nearby,
you may choose to disregard these as incidental and not bill for them. It
takes time and resources to track these expenses, so decide if it’s worth
your time to recoup the costs involved. It’s always a good idea to include a
provision in your agreement to cover them just in case they escalate out of
control - you’ll want the option to bill for them.
Value
It’s important to remember, especially when you’re just beginning to draft
proposals for potential clients, that the real money in the construction
process is in the architecture itself - it’s not in the design fee. It’s easy
to look at your proposed $50,000 fee and think it’s an incredible amount of
money for someone to pay for design services. It certainly is, but if the
entire project costs $500,000, it’s also an incredible value proposition for
your client.
Your turn: Every business has a fee structure that’s a little bit different
and nuanced. What’s working for your business? Please share your thoughts in
the Comments section.
pd-logo
Architectural Proposal Template
Created by [COMPANY]
[LETTER HEAD]
PandaTip: Part 1 is a cover letter which should be printed on the architect’s
letterhead, this serves to introduce your architectural proposal.
[DATE]
[CONTACT NAME]
[CLIENT NAME]
[ADDRESS]
Please find enclosed our detailed proposal for your kind consideration.
We care about each and every client and will work our hardest to design a
safe and exciting home for you and your family. We also follow best practices
in the areas of ergonomic home planning and environmentally-friendly design
to make your home efficient and save you money on the cost of utilities.
PandaTip: This should be changed if you are working on an architectural
proposal which is not for a home. For Example “an attractive and practical
office space,” “an efficient and spacious workshop” etc.
Please let us know if you have any questions, suggestions or changes (however
small) to the proposal; we really want to hear from you!
Finally, we realize that you are very busy and wanted to thank you in advance
for your time spent reviewing our proposal. We hope that you will give us
this opportunity to deliver you an on-time and on-budget dream-home.
Yours Truly,
field-signature
Signature
Enclosed
Executive Summary
[EXECUTIVE SUMMARY]
Contents
Sketches
Pages 4-5
Plans
Pages 6-7
Contact details
Page 9
Detailed Proposal
The Brief
PandaTip: Outline the brief here, be as specific as possible. Remember to
draft this with the client and mind and, if possible, to see it from their
point of view i.e. “To design and build Family Jones’ dream-home.” is likely
to be better received than “The design and construction of a 140-square-yard
one-storey timber-frame residence on vacant lot 555100.” You should also make
reference to any drawings or plans which are relevant to the brief.
Our Approach
The Proposal
PandaTip: Outline the brief here, do not mention timescales or fees, as they
are covered later. Make reference to any drawings or plans which are relevant
to the points you are making in this proposal.
Project Milestones
Milestone8: Roofing.
Milestone13: Landscaping.
Firm’s Profile
Key Staff
PandaTip: Include the bios of some key figures from the firm, especially the
owner and the person in charge of this project. Include photographs as well
since people like to have a face to put to a name on the phone or by email.
If you have a standard bio (perhaps from the website) you can use this,
otherwise you can create one around 50-150 words detailing their experience,
the date of their qualifications and any other similar projects which the
architect has worked on.
Pricing
Our fee for seeing the project through from start to completion will be
[FEE]. In addition to this you should also budget approximately [BUDGET] for
additional materials and outsourcing of labour.
Payment Terms
PandaTip: This depends on your relationship with the client and to a certain
extent the type of project you are contemplating but we include a complex
example here. In most cases this page will be simpler.
10% (10%)
20% (30%)
30% (60%)
Paid at Milestone 4, planning permission being granted.
10% (70%)
Paid at Milestone 6, basement level completion.
20% (90%)
Paid at Milestone 8, roofing complete.
10% (100%)
Paid on completion of project.
Contact Us
By Phone
By Email
[EMAIL ADDRESS]
By Fax
[FAX NUMBER]
On our website
[WEB URL]
By post:
[ADDRESS]
If you would like to proceed with our proposal then you can sign the Terms
and Conditions page (below) and return it to us by fax, email or post.
In any case please feel free to call us to discuss the quote, request more
information or for any other reason.
The following terms and conditions shall form the basis of a contract between
the client (“Client”) and [FIRM NAME] (“Firm”) in the event that the client
decides to proceed and accepts this proposal:
1. The Firm agrees to provide the services outlined in this proposal for the
fee outlined above.
2. The Client undertakes to pay the fee set out above in accordance with the
agreed payment milestones.
3. The Firm undertakes to consult with the Client in order to facilitate the
completion of the agreed milestones above as well as the completion of the
project as a whole.
4. The Client undertakes to provide the Firm with clear instructions and
guidance when required.
5. The Firm will ensure compliance with all relevant laws and regulations.
6. The Firm shall undertake all of its work with professionalism and due
care.
9. Any subsequent agreement, whether written or oral, between the Firm and
the Client shall override the terms of this architectural proposal.
10. The Firm is not responsible for delays due to outside agencies such as
planning or government authorities, builders’ merchants, shipping and transit
companies and third-party contractors.
11. The Firm is not responsible for delays due to unforeseen eventualities or
acts of God such as poor weather, flooding, natural disaster etc.
12. The Firm is not responsible for increases in costs caused by a future
rise in the costs of materials (including outside contractors) or by a later
lack of availability of those materials used as a basis for calculated
costing in our proposal.
13. The Client undertakes to insure and keep insured the site against injury
to third-parties and contractors.
14. Although every care has been taken in the preparation of this proposal it
is not possible to predict with complete certainty the cost and timescale of
any architectural project and the Client should allow at least a 10% margin
on costs and timescales.
field-signature
Signature
field-name
Name
field-date
Date