In this exclusive extract from Good Practice Guide: Fee Management by Roland Phillips, we look at the golden rules for a healthy fee regime...
As Owen Luder has said: 'Cash is king! If you run out of money – you go bust'.
This is particularly pertinent at this time in the midst of a financial recession – 'the credit crunch' – when getting paid will be a particular priority for architects. The development of sound and effective systems in fee management for any project or any role and for managing time, cost and payments should be encouraged.
However, the client's attitudes will impact on the architect's costs also. Average fees – as in recommended fee scales, now outlawed by competition law – are unlikely to reflect the real cost of a specific project or the resources required. There is no 'quick-fix' method for establishing the right fee for a particular job. Getting the fee right and getting paid for all the work done can only be achieved if the practice knows what its services will cost and understands the business risks of the client and the project.
Equally important factors are the value the practice puts on its own work and the client's perception of the added value of the architect's services. But added value is not a constant, each project will generate its own benefits – these may be cash returns for a developer, or better or improved facilities for a business, hospital or school. Other projects may arise just out of necessity. Some clients may not want 'art', only effective delivery. Others know the advantage of having both. Some clients drive Rolls Royce cars, others, secondhand Fiestas.
The subject cannot be covered on one side of A4 paper, but the 'golden rules for a healthy fee regime' encapsulate many of the important issues:
- Always have a comprehensive agreement in writing
- Make certain that the client understands the payment provisions
- Use RIBA Agreements, wherever possible
- Don't start any significant work until the agreement is signed
- Carefully evaluate the cost of providing the services
- Get the client to sign off and pay for:
- The relevant work before initiating any activities with third parties, such as making applications to statutory or local authorities for planning or building regulations, or to freeholders or inviting tenders
- each work stage as completed
- Establish rigorous procedures for managing fee accounts, including routine credit-checking of clients.
- Keep a separate fee file, with copies of the agreement, all fee correspondence, file notes and submitted fee accounts. Keep it up to date at all times
- Invoice monthly on every commission for any amount due, no matter how small
- Submit claims for additional fees as incurred, not at the end of the commission – claiming additional fees on completion of the commission can surprise the client and lead to argument, late payment or, even worse, a counterclaim for some alleged negligence.
This may seem to relate to the architect's traditional role for a simple building project, but the principles behind the rules are transferable to any role or service that the architect is to perform; including, for instance, as project manager or as technical due diligence auditor in a PPP or PFI project.
About this article
This article is an extract taken from Good Practice Guide: Fee Management by Roland Phillips. Published by RIBA Publishing. Copyright RIBA Publishing November 2009.