Architects' Guide to Fee Bidding

M. Paul Nicholson

• Publisher: Taylor & Francis
• Year: 2005
• ISBN:
  9781134481637
• Edition: 1
• Topic: Architettura
• Subtopic: Architettura generale

Fee bidding still generates emotive reactions from within many sections of the architectural profession. Fee bidding is not taught in most schools of architecture, so practitioners generally rely on hunches and guesswork. It is these wild card guesses, which exacerbate the poor levels of income for which the architectural profession is renowned. This book introduces practising architects, architectural managers and senior students, to the philosophy and practice of analytical estimating for fees. By means of a detailed case study it illustrates the many problems which may be encountered in the calculation of fees for professional services. It gives a step-by-step guide through the complexities of fee bidding and acts as a source of reference to successful bidding. A detailed discussion of the philosophy of design management and architectural management is developed as a backdrop to the preparation of a bid. It leads the reader through the mysteries of converting the calculation of a bid into a serious tender. This unique text is an essential guide for all practitioners, particularly those at the commencement of their careers and Part 3 students. Indeed it will be of importance to all constructional professionals who operate within a highly competitive market.

Part I Commercial professionalism

Design

Management

Design and build

Bids and fees

Competition is good for you

One of the core beliefs of the capitalist system is that competition improves the breed. In ‘Yes, we have no competition’, Pawley (1998) wrote:

In the heyday of public-sector architecture after the Second World War, competition was even claimed to justify the mandatory fee scale. The idea was that if all architects charged the same fees for the same work, they would compete on merit alone. Oddly enough, during the Thatcher years, the official view of this cosy arrangement changed. The mandatory fee scale was dismissed as an anti-competitive professional cartel and, as we all know, overt fee competition soon became the bottom line of competition.

Nevertheless, fee scales are still very much in evidence, although they are officially described as indicative fee scales. Their very existence provides a fallback position for novice architects and clients alike, which does nothing to encourage practices to explore the realities of calculated fee bidding.

It was only about five or six years ago that architects felt threatened by the large firms with big resources that could appear to work for minimal fees – thus bringing their apparent fees down to understandable levels. These fears gradually subsided because the architectural profession began to adjust to new conditions of engagement as Pawley (1998) pointed out:

Rather than suffer the iron rule of the marketplace, they found instead a way of neutralising its effects. Instead of the few architectural competitions and many direct commissions of the post-war years, there were suddenly many architectural competitions and few direct commissions – again, not because competition was succeeding, but because it was failing. Today competition is managed. It is brokered by master-planners, project managers, consultants and contractors so that architects appear to compete when really they are collaborating.

The architectural profession developed gradually from being master-builders and house developers forming, by the nineteenth century, an élitist tightly knit body of design professionals ‘to drive out the charlatans from within, and to protect from the charlatans from without’. About a century later, the Monopolies and Mergers Commission tramped through the adjacent professions, which forced the Royal Institute of British Architects (RIBA) to reconsider its position rapidly. In an act of unprecedented bravery, in 1982 the RIBA removed its protectionist policies at one stroke and joined the modern world of industry and competition. Out went advertising restrictions and fee scales, in came unfettered competition, commercial freedom and an opportunity to integrate into the construction industry.

Restrictive professional practices and complacent attitudes came under widespread attack. In 1962, the British Government investigated architects’ fees. The Prices and Incomes Board began a twenty-year period of acrimonious discussions that finally resulted in defeat for the profession, which then changed the Code of Engagement and Conduct that, for the first time, severely undermined the monopolistic position attained before the War. Yet, in spite of their monopolistic protection, the Pilkington Report (1956) had identified that architects earned less than most professionals and others in the construction industry.

In a letter to the Editor of the Architects’ Journal, Tim McArtney (2000) wrote:

Fee levels for the majority of mainstream practices are still too low. The Design and Build industry depresses fees and there is far too much front-end design work being undertaken by the [architectural] profession for little or no reward. This is serious because it leads to a devaluation of the single most important process where the architect adds real value – the ability to solve problems through design flair. Private Finance Initiatives (PFI) have compounded the situation and many practices are having to undertake large amounts of work at risk if they want to be in the significant end of the public sector markets.

He continued:

Fee bidding, for projects being advertised in the OJEC Journal is absolutely lethal; we know of some practices bidding as low as 2% for highly complex, lengthy medical building projects requiring a level of professional input which this sort of fee cannot possibly provide. Both parties are irresponsible in this instance – the consultant for whom the bidding is suicidal and the client body for accepting his price knowing, cynically, that the consultant will lose money, or, worse still, fail, but complacently believing that authority has driven down its initial costs and satisfied standing orders. Best Value bidding may go some way to alleviating this state of affairs but I doubt if the conditioned reflexes of some audit-driven hospital trusts and university estates departments will understand the criteria or bother to apply them. The concept of ‘partnering’ on a long-term basis to improve the quality of the built environment will take many years to break down the arbitrary financial rules that public authorities have erected around themselves.

McArtney then referred to the Ministry of Defence (MOD) and the Public Audit Office as prime movers in the evangelistic movement to re-engineer the construction industry, which would benefit from discontinuous change rather than from an extension of past practices.

A strong response to McArtney’s letter was provided by Hugh Wright (2000):

I read with interest Tim McArtney’s letter and make the following observations […] Architects lack clout when negotiating fees. The RIBA’s survey of fees as listed in the SFA Guide (1992 edition) has lacked credibility with clients, and is therefore generally disregarded by them. A Housing Association in January 2000 insisted on using the ‘Purple Book’, RIBA Conditions of Engagement (1979 revision; originally 1971), for appointing consultants of another discipline. The maximum rate stipulated by the same Housing Association for additional work by a principal was £25, excluding VAT per hour. The sum of £500 will not even pay for four hours of a solicitor based in Liverpool on planning matters.

Wright concluded that architects lacked an ‘august body’ to stand up for them. He complained that the RIBA had its priorities in the wrong arenas; it should be getting the message across on behalf of architects for fees, and making comparisons with other professions such as accountants, doctors, engineers and, especially, lawyers.

Without the protection of a price-fixing monopolistic system, the architectural profession has to bid in an open market. The only protection given by law is (in the UK) the protection of title – ‘architect’. The function of designing buildings as a process is open for competition from within and from without the architectural profession. It appears that not only are the clients in a position to dictate terms, but also the profession itself should treat architecture as a profession and as a business, not just as an exciting and liberating vocation.

Architects generally practise in a world where professional boundaries are blurring: in Japan, the Fair Trade Commission challenged an attempt by the architects’ association to fix fees for its members; in Germany, the Cartel Office opposed attempts to restrict fee cutting; in Sweden, fees had to become recommended rather than mandatory; in Denmark, fees had to be reduced; in the USA, the American Institute of Architects (AIA) ban on competitive fees was rescinded. Areas of interest are overlapping and the traditional professional markets are merging under pressure from international competition, deregulation and a degree of societal impatience with Victorian notions of professionalism.

In 1985, the Organisation for Economic Co-operation and Development (OECD) referred to middle-class occupations of high status (and high fees) that were market-sheltered by statutory protection. It described the architectural profession as ‘the provision of intellectual or specialized skill on a personal, direct basis, based on extensive educational training. In addition, professions are generally subject to controlled and restricted entry, and organization and regulation through professional associations.’ In the UK, the statutory body, the Architects’ Registration Board (ARB) exists to regulate educational and professional competencies and the title of ‘architect’. The RIBA assists the ARB in upholding standards of education and professional ethics as well as acting as an international focus for architectural qualities and a forum for the development of the architectural profession. It has to be viewed from the outside as a learned society whilst supporting its members in their need for a trade union – clearly a dilemma for any organization. Whilst appearing to act in unison, the RIBA and ARB have opposing motives – the ARB exists to protect the British public by the maintenance of high standards of competence, which keeps numbers of practitioners to a minimum, while the RIBA is ever striving to enlarge its critical mass by increasing the volume of members. One is restricting growth by quality constraints, the other needs numbers to survive.

One illustration of client power was described by J. R. LeGood (2000), again in the Architects’ Journal letters columns, in which the request for design tenders for a house extension (single-storey garage, porch and kitchen – completed ‘sometime this year or next’), included the following request for information:

• What services are you able to offer? For example, do you provide a planning service, including design, gaining planning permission and obtaining building regulation approval? Do you also provide ‘overseeing’ and inspection services during the construction?

• Are you able to provide a free quotation?

• Do you offer a firm price quotation? If not, is the final price likely to vary significantly from the quotation? Do you offer a price limit to a percentage variance?

• Are you able to offer a detailed breakdown of the price quotation?

• What accreditation and/or association membership do you hold?

• How long has your business been established?

• What guarantees and warranties do you offer?

• Are you able to provide references of recently completed work?

• Any other relevant information.

These are genuine and obvious concerns of any client. Possibly in this case the client had suffered previously at the hands of an architect who offered a low quotation, who then found that the only way to show a profit (or even cover costs) was to reduce the levels of service and/or increase the fees. The architect in question would have been well advised politely to decline to tender, or to face these worries squarely and offer a full price that took all the client’s questions into account.

In fact, LeGood replied saying that, ‘For what is a major investment on your property, I would respectfully suggest that your choice of architect should be driven by quality and value for money, not cost.’ (Trust me, I am an architect!) For every vexatious client claiming against a beleaguered architect, there are aggrieved clients suffering from the depredations of unscrupulous architects. It is apparent that there is an unacceptable underbelly of the architectural profession who are not caring, sharing, creative, innovative, sustainable architects, but who steer a tightrope course between maximizing commercial imperatives and narrow interpretations of professional responsibilities to the detriment of their client’s immediate interests and the longer term interests of the profession.

There is no evidence to prove Pawley’s assertion that ‘competition improves the breed’. Indeed, for the majority of architectural practices, the temporary removal of the supporting mandatory fee scale has further depressed the income of an already financially challenged profession.

Design

Design communication

Any author of a piece of directed study, or a student who is entering the field for the first time, will probably expect first to consider the imperative of a definition. What is ‘design’? What does ‘management’ mean? Is there any synergy produced by coupling design with management?

Design: ‘A plan or scheme formed in the mind.’

(Chambers and Chambers 1983)

As design is a function of the mind, then it would be right to ask whether design is implicit in all the actions of creative man. Similarly, to what extent is design instinctive or an inherited skill, or gained through exposure and experience? The craft and skill of painting, for example, can be taught. The great masters have all had their apprentices to whom they taught technique, the use of colour and so on. In India, there are several ‘artists’ villages’ which are communes of artists (and their families) who live and work together to develop and share their skills and knowledge.

Examples from nature may indicate that in fact design is instinctive. Consider the intricacy of a bird’s nest, or the modular formation of a beehive, or the engineering beauty of a spider’s web. All are fashioned instinctively over generations, yet they are not innovative: they only repeat the patterns from the past. Man has the ability to use his instinctive skills and develop them in a creative and progressive way by using his natural talents and an open mind.

However, the proposal that design can be developed or taught implies immediately the imposition of a third party – a tutor who was himself ‘directed’ in his formative years by others who had their own baggage of tradition and standards from their past.

Lawson (1997) suggested that to ‘attempt a definition of design too soon might easily lead to a narrow and restricted view. To understand fully the nature of design, it is necessary not only to seek out the similarities between different design situations, but also to recognise the very real differences’. Any definition of ‘design’ is likely to be controversial. Chris Jones (1970) gave what he regarded as the ‘ultimate definition of design’:

‘To initiate change in man-made things.’

Such an interpretation denies the richn...