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Links to Questions Covered
How much should I expect to pay an architect?
What methods of compensation are available?

My project is characterized by repetitive units (apartments, rooms,
.....etc.) Should these units be a basis for compensation?

Percentage of construction cost seems to be a simple method
.....of compensation. Is It recommended?

What does a stipulated sum mean?

When does it make sense to consider hourly billing methods?
What are reimbursable expenses?
What about payment schedules?
What other expenses can the owner expect?
What happens if the owner and the architect cannot agree on
..... compensation?

Experienced clients recognize that adequate compensation for the architect is in their best interest because it ensures the type and level of service needed to fulfill their expectations. You may have questions about how to arrive at the appropriate compensation for your project; some of the most frequently asked questions are answered here.

How much should I expect to pay an architect?

That will relate to the types and levels of professional services provided. The more service you need and the more complex or experimental the project, the more you should budget for architectural services

What methods of compensation are available?

These are the most common:

  • A stipulated sum based on the architect's compensation proposal
  • An hourly rate or multiple based on the architect's labor costs
  • A percentage of the construction cost
  • A stipulated sum per unit of construction
  • A combination of the above

My project is characterized by repetitive units (apartments, rooms, etc.) Should these units be a basis for compensation?

Sometimes. For example, when the probable number of units (or alternatively, the highest and lowest probable numbers) is known. Keep talking, so that each understands the other’s basis for negotiation. Often, differences result from incomplete or inaccurate understandings of project scope or services. Perhaps some project definition services can be performed by the architect on an hourly basis or by the owner. Perhaps coordination of owner forces, special consultants, or other actors mandated by the owner is adding to the architect’s costs. When everything is mutually understood and there still is no closure on compensation level, the owner and the architect have no choice but to end negotiation.

Percentage of construction cost seems to be a simple method of compensation. Is It recommended?

It depends. It is simple in concept, but it requires a rigorous determination of what construction cost includes and does not include. The result may be too high or too low given the complexity of the project and the professional services needed to accomplish it. This method may be unfair to the owner (for example, by allowing inflation in the construction marketplace to drive up costs of professional services) and conversely may penalize the architect for investing extra effort to reduce construction cost on behalf of the owner

What does a stipulated sum mean?

This is matter of negotiation with your architect, but generally it includes the architect's direct personnel expenses (salary and fringe benefits), other expenses chargeable to the project (such as consultant's services), indirect expense or overhead (the architect's costs of doing business not directly chargeable to specific projects), and profit. A stipulated sum typically does not include reimbursable expenses.

When does it make sense to consider hourly billing methods?

Again, this is a matter of negotiation, but it makes special sense when there are many unknowns, Indeed, many projects begin this way, using hourly billing until the Scope of services is determined and it is possible to establish a stipulated um. It may also make sense to use this approach for construction administration (since the level of professional services may vary with the contractors selected and unforseen site problems) and special services such as energy and economic analysis.

What are reimbursable expenses?

These are out-of-pocket expenses incurred by the architect on behalf of the project that usually cannot be predicted at the outset such as long distance travel and communications, printing, authorized overtime premiums, and the cost of additional required insurance. Detailed in the owner-architect agreement, these expenses are usually outside the stipulated sum or hourly billing rate, and they are usually billed as they occur.

What about payment schedules?

Once the method and amount of compensation have been established, ask the architect to provide a schedule of payments. Such a schedule will help you plan cash requirements for the project.

What other expenses can the owner expect?

The owner-architect agreement outlines a number of owner responsibilities, some of which will require financial outlay. These may include site surveys and legal descriptions; soils engineering services (for example test borings or pits), an on-site representative during construction; and the legal, auditing and insurance expenses needed to fulfill the owners responsibilities.

What happens it the owner and the architect cannot agree on compensation?

Keep talking, so that each understands the other’s basis for negotiation. Often, differences result from incomplete or inaccurate understandings of project scope or services. Perhaps some project definition services can be performed by the architect on an hourly basis or by the owner. Perhaps coordination of owner forces, special consultants, or other actors mandated by the owner is adding to the architect’s costs. When everything is mutually understood and there still is no closure on compensation level, the owner and the architect have no choice but to end negotiation.