One of the challenges to setting the correct fee has to do with a thing called the “market rate.” Or as I say a lot “what the market will bear.” We try to set up our fee agreements so that they are based on the time it takes to do the job, but at the end if we review the fee and it is more than we feel like is fair in the marketplace, we have to cut it back.
Why do this? Well, I would like to tell you it is because we are nice guys, (we like to think we are nice guys) but it is also because if we don’t provide good value the client will go somewhere else. What I have found is that there is always someone who will quote a lower fee and also always someone much higher. We try to maintain a balance in our firm between great design and reasonable cost, so we are happy when we fall in the center of the range.
Why is there such a disparity in cost? It is a complex question. One answer has to do with the “art” portion of the profession. There may be a minimum level of deliverable that will get a project permitted and built, but different architects want to put more art and a higher level of detail. We feel that a certain amount of this provides great value, but we draw the line where we feel the benefits for the client drop off.
Professionals that work out of their house or are just getting started will quote lower fees because their overhead is low or they don’t have the experience to foresee what the project will require. This can be a great savings to the client, but sometimes it backfires bigtime. When the professional is too small, they can be easily overloaded and the project timeline will get stretched to the point of breaking. And clients should value their time because they are paying interest and missing opportunities. Some of these home operators will simply walk away from a job when they realize they bit off more than they could chew. Then it falls back into our lap to pick up the pieces.
Differences in scope can be a frequent reason why competing firms have different fees. Proposals should be compared carefully to ensure they are truly “apples to apples”. I have lost jobs because we were “too expensive” only to find out later we included civil engineering and the other firm didn’t!
More to come soon. If you want to get in touch please let me know! Thanks for reading!