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Small practices need help battling unreasonable fees

Following RIBA President Ben Derbyshire’s condemnation of unreasonable fee expectations from some clients, Ian Angus of Carden & Godfrey Architects explains the problem from a smaller-practice standpoint

 

The President’s column on fees in the May edition of the Journal was hopefully a welcome sign that the Institute will step up its support for small practices battling with unreasonable fee bidding requirements. These are often in the context of framework invitations; unreasonable in expectation, as in the example of Sanctuary Housing’s ‘no win, no fee’ for work up to planning stage, but also uninformed in the case of many corporate and charitable clients, whose misguided competition briefs have increasingly required responses from bidders that are both muddled and unethical.

A common example is the conflation of professional fees and chargeable expenses. Recent feedback from highly reputable clients, including charities, has revealed that bids from architects have been accepted where a firm’s ‘commercial offer ‘includes all expenses and disbursements within the proposed fee for architect services, including travel, printing costs and accommodation. In most cases, the confusion between a fee for professional services and the cost of (quotable) expenses incurred along the way is the result of a client’s inexperience or misunderstanding of professional services and their corresponding fees. If part of our task is to explain to a prospective client how these things work, then all practices should be singing from the same sheet and, with the help of the RIBA’s Plan of Work, should always distinguish between fees and expenses.

I believe this issue needs the Institute’s proactive involvement, along with the President’s clear-sighted support, to maintain the proper balance of opportunity between firms of all sizes, especially in specialist areas such as building conservation.

The second issue stemming from a client’s often misinformed assumptions, (including where projects are potential recipients of Lottery Fund grants), is the brief’s requirement for the architect, usually as lead consultant, to commission and employ fellow consultants direct. Apart from the obvious strain this puts on the cash-flow balance of a small to medium size practice (effectively providing interest-free banking) it also diverts the responsibility and liability which the consultant engineers, quantity surveyors, planning advisors etc should owe to the building commissioner and client direct. This should not be via the architect.

The weight of both these issues clearly sits most heavily on the shoulders of small and medium size practices, but both matters also concern the fundamental basis of fees charged direct to a client for professional services rendered, irrespective of project size or subject. Can we count on the Institute’s campaigning support to inform and illuminate that simple and ethical basic truth, inside and outside the profession?

Ben Derbyshire, RIBA President, replies:

I sympathise entirely with the points made by Ian Angus.

The RIBA recommends that expenses and disbursements should be identified separately on fee proposals; the fee schedules in the RIBA Appointment Agreements are structured to facilitate this. Even if the client demands an all-in fee, this is a worthwhile precaution should it be necessary to negotiate variations. 

It is increasingly common for clients to seek a single professional appointment and to ask architects to appoint members of the project team as sub-consultants.  You must of course inform your PI insurer and ensure that your sub-consultants are employed on ‘back-to-back’ terms with the architect’s appointment agreement (the RIBA produces a sub-consultant appointment agreement for this purpose).  Careful fee management is also required to protect cash flow – payment terms in line with the Construction Act, monthly payments and polite reminders before payments are due. It is important to remember that you cannot operate on a pay-when-paid basis for these sub-consultancies.

Because sub-consultancies create additional burdens of management and liability, it is appropriate to include a management fee in your appointment agreement.  Presented with this option, many clients revert to direct appointment.


 

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