The Value of an Architect
“The Value of an Architect
Architecture is the sole profession whose members are qualified to design and to provide advice, including technical and aesthetic judgment, on the built environment. Architects provide services and solutions with technical competence and aesthetic sensitivity suitable to the physical, social, cultural, and economic environment, thereby inspiring the community and its citizens. In matters of public health and safety, architects are obliged to serve the public interest and respond to the public need. And now, these concepts of health and safety have been expanded to encompass the sustainability of the global environment and accessibility for all persons.
Architects add value to building projects by creating a design and layout that is functional. Architects design for construction that is durable and energy efficient. Architects work to enhance the look and visual impact of the project to provide a positive experience and increased market value to clients and users. An architect is invaluable on any building project and furthermore, the use of architectural services by a licensed or registered architect is a requirement for many building types or “occupancies”, as required by building codes across Canada.
Design services are usually around 10% of the total of all design and construction costs. Therefore, the architect’s fees can be as low as 0.01% of the life cycle costs for design, constructing, and operating a facility. Through good design, the savings can be many fold over the design fees charged in the lifecycle of a building. Building design services are an inappropriate place to cut costs.
Clients and architects need to discuss the value of architectural services and how an architect’s ideas and knowledge can result in significant increases to the real estate value of a building, as well as savings in the building’s operating and maintenance costs. The pie chart to the right illustrates that the architect’s fees are a very small fraction of the total costs for constructing and owning a building. This important upfront investment in professional services can have very significant impacts on future costs of the ownership of any building.
Strategic thinking that is informed, integrated, and builds on intelligent pre-design and design decision-making will have a positive impact on project quality, cost, and schedule. Clients that invest in integrated early design will realize increased value by significantly reducing the risk of project shortfalls. The MacLeamy Curve1 in Figure 2 illustrates that early design-based decision-making can lever resources to achieve successful project outcomes and operational efficiency. Reducing project costs by reducing the resources available for an effective design acts to work against the client’s and user’s best interests.”
Royal Architectural Institute of Canada with contributions from Patrick Mac Leamy.
We included the above excerpt because it is a very succinct description. Throughout Alberta and Southern Alberta there are a few considerations within this local perspective we wish to add. Cost vs Value is an important distinction.
Architectural Fees in Context
The easiest way to describe our thoughts on our cost is through the following example comparing architects to real estate agents. This is not intended to degrade the profession of Real Estate. We believe a good real estate agent has value. Where the discrepancy lies is it socially acceptable and necessary to have a real estate agent. Architects and the profession of Architecture is considered to be a luxury. This myth has been created and perpetuated by lower calibre housing contractors and drafting services. See the below first hand story. As for the ‘socially acceptable’ real estate costs versus the ‘elected’ real estate fees consider:
Real Estate Fees
Split between the buying and selling agent(2)
There are brokerage costs to each
Fees of real estate apply to both the land and the structure
Architectural Fees
Split between Architect, Structural Engineer, Mechanical Engineer and Electrical Engineers
Each discipline has professional Fees
Fees apply only to the structure
We would argue both professional add value to a residence. Most houses and buildings that the general public have the best curb appeal are designed by architects. We challenge anyone to provide an example of a house designed by a housing contractor that has greater appeal. Greater Curb appeal=Higher Selling price usually. So if there is a higher selling price therefore the cost of an architect is not wasted.
Architects Protect Clients
90% +/- of the Contractors we deal with are true professionals. Gone are the days of contractors working out of the back of a half-ton. We have great respect for the professional contractor. What is often not discussed is how architects protect owners from Contractors. Owners do not need protection from the professional contracting 90%. They do need protection from the unsavoury 10% contractors. The problem is the 10% unsavoury contractors have a good con. Owners usually only build a couple times over their lifetime and there are many owners. After your project they will be assured to find another owner.
Below is an example from Lethbridge. Be assured we also have similar stories in Calgary, Edmonton and throughout Alberta.
We had a small daycare client in 2016. After graduating the Daycare program, their family wanted to invest in themselves, and be daycare owner rather than daycare workers. They came to us through a recommendation from a past client. They were approved from the bank for $200k for the renovation. Our fees were extremely fair. $7,500 plus gst. We work our fees in a number of ways and this fee represented the amount of work on our end. We work on small projects as well as large projects (it’s part of working in Lethbridge) . The space was a tenant improvement space of 4308 sq ft/223sm. These are 2014 dollars. Below is 90% of the package ‘Happy Lethbridge Contractors’ bid. The remaining 10% had been redacted as it is proprietary to the mechanical engineer.
The owner’s wanted to use ‘Happy Lethbridge Contractors’. They had a good web presence and backed by a marketing team of project managers. ‘Happy Lethbridge Contractor’s’ have defined themselves in Lethbridge as design-build contractors that also do work in Medicine Hat, Calgary, Edmonton and further north. The owner’s boyfriend worked for these design-build ‘experts’. See the communication below. We asked for costs as the owner wanted to get going but hadn’t signed a contract with ‘Happy Lethbridge Contractors.’:
Happy Lethbridge Contractor’s offered generous fee of $8.900 to manage the project. Like us, everyone wanted to help these girls and this was a generous fee like ours. They only had received on costs-they tendered the electrical. The lowest tendered electrical contractor offered a fee of $60,260 plus gst (Let’s call them ‘Calgary Electrical’) . Usually the electrical cost is 12-18% of the build costs, depending on the client type. My jaw hit the floor hard. We were only providing a handful of new circuits off an existing panel and new lights off and existing panel in a 4000 sf space?
We know many sub-trades. After the exchange I asked a trusted commercial electrical sub-trade to submit a price to me, not the Happy Contractor. Their price was nearly half. $32,550 plus gst. I presented this to the owner which spooked them into contracting the project themselves.
The truly funny detail occurred as the owner was proceeding on their own. ‘Calgary Electric’ contacted the owner. The heard the owner was not proceeding with the ‘Happy’ Contractor. ‘Calgary’ Electric asked if they could offer a price. Guess the price of ‘Calgary’ Electric? $34,000.00 plus gst.
I suspect Happy Contractors would have over-charged the owner by over $100,000.00. Our fee was $7,500.00 plus gst. How’s that for value? I have dozens of similar stories, mostly involving design-build contractor but other sometimes too. My colleagues also have many of the these stories. There are ‘Happy’ Edmonton, ‘Happy’ Calgary, and ‘Happy’ Red Deer contractors.
‘I’m smart enough to catch a thief’ I have heard many owners claim. I personally know 4 owners-all university educated in finance who have been dooped by ‘Happy’ Contractors. They are victims of their own ego. ‘Happy’ Contractors have ‘good game.’
Architects have great value, and it is beyond the creation of pretty drawings. Consider the additional below information:
What You Should Expect For Fees?
Below is a rough expectation every client should expect for architectural, structural, Mechanical and Electrical fees as issued by the Consulting Architects of Alberta in partnership with the Consulting Engineers of Alberta. It is a rough guideline, where more simple project cost less and more complex projects cost more. New projects or renovations that do not require all professionals are generally simpler. Complex renovations are difficult project types are more. This chart was created by tracking firms over the past 100 years along with the owner’s true expectations of minimum service.
A Category 3 would imply an office building, store or market, or a Kindergarten/ Elementary School.
A Category 5 would imply a City Hall, Restaurant or lounge.
Source: Consulting Architects of Alberta, ‘Recommended Schedule of Fees’
Source: Camino Financial Group
Also of note, we included the net profile margins by industry as created by the Camino financial group. The net profit margin for Architectural and Engineering services over North America is 5%. So how can a consulting firm offer fees signicantly lower than those shown in the Architectural Fee Guidelines?
Source: American Institute of America, ‘The Business of Architecture, 2020’
Source: American Institute of America, ‘The Business of Architecture, 2020’
What Lower Architectural Fees Actually Mean
5% isn’t a whole lot of fat.
Discounting rates signals other office decisions. The bulk of the cost in operating a firm is due from carrying a technical staff. Having a technical staff gives back to the community where you live by building intelligence within the community and good paying technical jobs. Some consulting firms work around this by sending this service to India. As well these firms tend not to give back and support the not for profit sector. Shorting the community is one way to cut expenses.
With only a 5% net margin with 61% of office expenses coming from staffing, it should be clear, we sell our time. When a consulting firm offers discounted rates what they are actually saying is they intend to spend less than the minimum scope on your project. As a consumer, the question should be ‘what did the consulting firm cut for services to reach the discounted rate?’ This conversation is awkward, some firms steer clear of the conversation.
There is an occasional tactic used to get your project. There would be an offer for fees far less than the recommended fee guidelines above. Mid-way through the project this company would submit a bill for ‘additional fees’. These were never additional and likely more basic in nature. Some firms first present themselves as the cost effective option to get your project. A true professional will have the awkward conversation of fees in the onset. Consumers who feel they were taken advantage of should always contact the Alberta Association of Architects. We are not perfect as a profession, but endeavour to be.