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The Business of Architecture

The value of an architect is often overlooked. Partially, because the process of working with one is unclear. It’s almost taboo to the public. In a previous blog post we explained what architects are. Now, it’s time to explain the basics of how they work.

I’m not a businessman/ I’m a business, man/ Let me handle my business damn
— Sean Carter. Diamonds From Sierra Leone (Remix)

First, contracts. Architects make money from projects that are formalized by contracts. Engaging in a professional relationship with an architect will require one. The American Institute of Architects (AIA) publishes standard contracts that architects use for the services they provide. Form B141, is the AIA's standard agreement between a client and architect and most contracts are based on this form. The form contains many provisions but generally it defines: project info; legal responsibilities; scope of architect’s basic and additional services; client responsibilities; project schedule; and compensation methods.

Next, clients should know how architects are paid. There are four primary methods of compensation.

Stipulated Sum or Fixed Fee

The architect and owner agree to a fixed lump sum of money paid to the architect in exchange for architectural services specified in the contract. The lump sum contains the architect’s overhead and profit. This is the most straight-forward common method of payment.

Cost + Fee Method

Similar to the fixed fee, this method makes a distinction between an architect’s overhead and profit. The architect is compensated for actual costs to do the project then an additional percentage fee is added for profit.

% of Construction Cost Method

The architect is paid as a percentage of the total cost of construction. This was a popular method during the mid 20th century and is still used today. It is a very fair and effective way to establish a fee for architectural services. 

Unitary Cost Method

The architect is paid based on the number of definable units produced. For example, a unit could represent the number of ‘cookie cutter’ houses built in a subdivision or the number of classrooms in a school or the number of units in a multi-family residential building. This is least used method of compensation.

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Architects offer a variety of services. However, every architect will define their basic set of services which are fairly consistent across the board. These basic services are generally categorized into five major phases: Schematic Design (SD), Design Development (DD), Construction Documentation (CD), Bidding and Negotiation (BD), and Construction Administration (CA). There is also an initial Pre-Design Phase, which is vital to further project development. Each phase contains certain tasks and requires various intensities of work and resources. An architect’s total fee, however it is determined, will be distributed among these categories (or whatever categories are defined in their basic services) and be directly proportional to the amount of time and resources that each requires. This is also typically how clients will be invoiced. These six categories are at the core of architectural business and clients should be familiar with each.

Pre-Design Phase

Pre-Design is a phase of analysis where pertinent information is collected and used to define the design problem. This info enables the architect to determine what can be built on a site. Architects will conduct zoning and feasibility studies, building code summaries, research legal restrictions, survey the existing building and site, evaluate the budgetary and time constraints, analyze public utilities and much more. (Check out the Fabric[K] Design Zoning and Possibility Packages. It's the Pre-Design Phase made easy.)

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After information is gathered, architects sit down with their clients and evaluate their desires and wants. This will complete the project program - a set of design goals and spatial requirements that will define a successful project. Programmatic concepts are developed from these guidelines to lead the architect during the design process. These concepts are usually abstract statements and diagrams, and are not yet actual design solutions.

This phase is typically an additional service - outside of the architect’s basic services - because sometimes these tasks are done by another party or because the timing of this phase is very uncertain. For these reasons architects tend to bill clients for these services by the hour. The architect’s hourly rate should be listed in the proposal and contract. For approximation purposes, Pre-Design can take anywhere from 2 weeks to 1 ½  months, depending on the project. 

Schematic Design (SD)

In Schematic Design, programmatic concepts will develop into initial design solutions. Architects will explore as many options as time allows and will present the best solutions to the client in the form of drawings and models. The client will choose their preferred concept and over the course of a few meetings, minor revisions will be made to refine the idea. A final SD drawing set will be given to the client for review and must be approved before the architect can proceed to the next phase.

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SD is particularly enjoyable for architects because its where they get to diverge from practical thinking and really be creative. So developing many design alternatives is something most architects have no problem doing. But, this can get expensive and necessitate additional fees. After all, this is a business and architects many architects are compensated on an hourly basis outside of their basic services. So, it is important for clients to be decisive and settle on a schematic concept within the scheduled time to keep the project on budget and schedule. But, if you have the funds for extra ‘play time’ then please, “Be our guest/Be our guest/Put our service to the test”

You can approximate that the SD phase will take anywhere from 1-2½  months and will represent 15% - 25% of the architect’s total fee.

Design Development (DD)

During Design Development, architects will take the approved schematic design and start to develop the various components and systems that allow the building to function. If specialty consultants are involved - structural, civil, mechanical engineers - this is the phase where they are fully introduced to the project. The architect will lead the coordination of these disciplines and insure the integrity of the design is maintained.

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At the end of DD, the building design will be more mature. The parts that support the building will be planned, located and sized. Spatial configurations will be set. Finishes and equipment will also be selected. The drawings will contain more detail and the project specifications (specs) will be initiated. The architect will also refine the project schedule and construction cost estimates as well.   

Design Development can take 2 - 4 months to complete and will comprise about 15% - 25% of the architect’s total fee.

Construction Documentation (CD)

The Construction Documentation Phase is where all the unique conditions and intricacies of a project are worked out and detailed. Final changes to the building systems also happen here.  Complementing the drawings, the architect will finish the project specs which describe the level of craftsmanship and quality the project is to be constructed with.

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At the end of CD’s, the project will have a set of contract documents. These documents include the construction drawings and specs. Along with the contract they comprise the legal documents from which the project must be built from. The drawings contained will reflect the architect’s work and the work of other engineers involved. The complete package will be used for final pricing and construction.

CD’s is usually the longest of the design phases because of the amount of tedious detail work required. It’s also one of the architect’s last chances to tie up any loose ends the project might have. Construction Documentation can take from 2 ½ - 5 months to complete and will comprise about 30% - 40% of the architect’s total fee.

Bidding and Negotiation (BN)

Bidding and Negotiating is all about pricing the project based on the architect’s contract documents and choosing a contractor to build the project. The architect’s role during BN is to assist the client in reviewing contractor cost proposals. The architect might also develop the bidding documentation. Once a client accepts a contractor’s price, an agreement is signed between the two.  AIA Form A101 is the standard form for this type of legal relationship. Note that architect’s are NOT a contracting party in this situation. The architect is only the client’s representative agent when dealing with the builder.

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As the name suggests, there are two ways to award a contract to a builder. In a bidding process, the contract documents are sent to a handful of qualified contractors to bid on. These contractors submit a construction price to the architect and client for review. After all bids are received and evaluated, the client will decide which contractor to award the contract to. In a negotiation process, a contractor is already known. The only issue is determining the construction cost. The client, contractor, and architect will negotiate until a fair price is reached.

With respect to time, the architect has a minimal role during the BN phase. However, the significance of the architect’s time is imperative to the process, especially with inexperienced clients. The time required for this phase is very unpredictable and contingent on the client. For this reason, many architects will offer BN services on an hourly and as needed basis. But as an estimate, this phase will take anywhere from 2 weeks to 1 ½ months and comprise about 5% of the architect’s total fee.

Construction Administration (CA)

This is the phase where the building actually gets built - where months of designing and planning materialize into a building. Construction will begin on the date of commencement as defined in the contract between the client and the builder. As mentioned before, the architect is only the client’s agent during construction. The contractor is the builder and is responsible for construction methods and safety. The architect has “no control” over how a contractor decides to build. The architect’s job is to oversee the construction process, providing insurance to the client that their project will be built exactly as it has been designed.

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During this phase, the architect will have several administrative duties and powers. Although there is no legal authority over construction procedures, the architect has the power to reject work by the contractor that does not align with the drawings. Architects will make periodic site visits to evaluate the progress of construction. They will review and validate contractor requests for payment. Architects will also respond to contractor submittals relating to field issues and provide clarification of the drawings. Upon substantial completion - another date specified in contract - the architect will make a “punch list”. This list will have any final tasks or corrections that the contractor must make in order to complete the project and receive final payment. The architect will also forward to the client all product warranties and waivers of lien rights certifying that the contractor has paid all debts to subcontractors and that no other party has claim rights to the property.

The time required for this phase varies depending on the contractor’s construction schedule. Schedules depend on a number of factors: size, quality, weather,complexity, etc. The contractor should deliver a construction schedule that takes all factors into account. Construction for any project could take anywhere from five months to two years. Expect that this phase will account for about 15% - 25% of the architects total fee. It is worth mentioning that this phase is optional. However, should a client not hire an architect for CA services, the client assumes the responsibility of interpreting the drawings to the contractor and solving any field issues during construction.

It cannot be stressed enough that standard architecture practice is a service based business, just like lawyers, doctors and other licensed professionals. People rarely gripe when they pay for these services yet, the established perception is that an architect’s time, skill, and knowledge are not deserving of compensation equivalent to their professional counterparts. Architects are expected to offer their skills for a discount, or for free and are constantly fighting for payment. Art and creativity in all forms suffer from this stigma. If we have proved anything, it’s that architects do much more than draw. They are responsible for the imagery and marketability of the built environment. They are managers of time and money. They are critical thinkers and problem solvers. They are investments that yield tangible dividends and value in your projects. But most importantly, architects are responsible for the health, safety, and welfare of people that use their buildings. This alone is a huge burden to bare - just like our medical counterparts -  yet it is one architects bare with pride and integrity. For this reason we alone, architects are worth their keep.

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