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Design Fees: Self-Inflicted Losses

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Design Fees: Self-Inflicted Losses

| architects, architecture jobs, Hiring trends, jobs, recession, starting a business, unemployed architects | August 17, 2010

Via ARCHITECT
By: Ernest Beck

The second installment of our series on architectural fees finds that increased competition for even the smallest of projects is leading firms to slash rates. But have things gone too far?

When a major New York financial institution asked three architecture firms to submit bids for a high-end office renovation last year, it was a relatively small project, but one that was eagerly sought by the bidders to keep revenue flowing in tough times. What transpired reflects the cutthroat nature of the industry these days: Two firms came in at around $175,000, while the third offered a bargain-basement price of $100,000, according to one of the participants, who asked to remain anonymous to protect client confidentiality.

Not surprisingly, the low bidder won, prompting an angry response from one of the other bidders. “If we went in at $160,000, it would have been low-balling—and dangerously low—but not impossible,” says this person, principal of a small New York design boutique that specializes in interior renovations. “But bidding $100,000 is impossible. … [T]hey won’t make any money.”

The recession has wreaked havoc on the architecture industry in many ways, from a rollback in projects to staff layoffs to declining revenue. One of the most devastating aftershocks, however, has been the practice of fee-cutting, as firms struggle to survive by meeting client demands to save money and tighten budgets.

While no exact numbers are available, architects say fee-cutting is widespread. Scott Kuehn, partner at Denver-based H+L Architecture, an 85-person firm that specializes in healthcare, education, science, and technology, had one long-term client ask for a 10 percent cut on all future work. This client, Kuehn says, “indicated that economic pressure and uncertainties … were driving similar requests to all business partners, suppliers, and vendors.”

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About the author

After working at various design practices on a full-time and freelance basis, and starting his own design firm, David McFadden saw that there was a gap to be filled in the industry. In 1984, he created an expansive hub for architects and hiring firms to sync up, complete projects, and mutually benefit. That hub was Consulting For Architects Inc., which enabled architects to find meaningful design work, while freeing hiring firms from tedious hiring-firing cycles. This departure from the traditional, more rigid style of employer-employee relations was just what the industry needed - flexibility and adaption to modern work circumstances. David has successfully advised his clients through the trials and tribulations of four recessions – the early 80’s, the early 90’s, the early 2000’s, and the Great Recession of 2007.

One Response to "Design Fees: Self-Inflicted Losses"
  • Pat Graleski August 18, 2010

    I’m confused as to this article. Maybe the type of clients we have in North Carolina are different; but as an engineering design firm and the architectural firms we partner with, price is not included in proposing for a job. The design fees are discussed strictly after the job has been awarded. I have heard of the Owner and the design firm not being able to come up with a mutually agreeable fee and, therefore, the job is awarded to the second choice.

    Is this different elsewhere?

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