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How to Determine the Cost of Your Architectural Design Project

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How to Determine the Cost of Your Architectural Design Project

An architect is of value to any commercial project requiring the building of a new structure or altering of an existing property. An architect can your vision into a reality, developing detailed plans and blueprints for the builder to work off of.

Not only are architects skilled with spatial planning, but also are familiar with the building codes and zoning regulations you’ll encounter in the project. An architect can also serve as the owner’s agent, assisting in the bidding process and hiring of contractors.

(Free download: 30 Questions to Answer Before Starting an Architectural Project)

Architectural fees are typically charged by the hour, as a percentage of construction costs, or by square footage. It really depends on the firm, the nature of the job, the location and your knack for negotiation.

Though the cost of an architectural project may vary, there are some commonalities you’ll find with rates and services. In today’s blog, we’ll be focusing on commercial projects and how you can better estimate the cost of your project.


The Role and Value of an Architect

As mentioned, there are many benefits to hiring an architect for your project. An architect can provide technical and aesthetic expertise in-line with your development’s physical, social, cultural and economic environment.

Because architects are obliged to serve the public interest and respond to public need, their plans also encompass sustainability and accessibility as well as health and safety precautions. They add value to commercial projects by creating a design that’s both functional as well as durable and energy-efficient.

Architects are also helpful in that they orchestrate and coordinate the integration of building systems into buildings. Not only do they lay out the plans for your architectural development, but can work closely with your engineers, contractors and other team members to bring your vision to life.


Elements of a Cost Estimate

Cost estimators provide the information that bankers, owners, designers and contractors need to make budgetary (and feasibility) decisions. For you, the owner, a cost estimate can be used to determine the project scope or whether the project itself should proceed.

From an architect’s perspective, an estimate will determine the construction bid or whether or not the company will bid on that particular contract.


When determining the cost of an architectural project, there are eight elements you’ll need to consider: 

  1. Quantity takeoff – the quantity of various materials involved in the project.
  1. Labor hours – developed by crew analysis or applied on a unit man-hour basis. The use of a labor dollar per unit of work may be applicable when a cost history supports the data being used.
  1. Labor rates – the cost per hour for the craftsmen on the project. To determine craft rate, an estimator begins with basic wages and fringe benefits. 
  1. Material prices – the price of materials in today’s current market which may be affected by peak or slack times, availability, order size, delivery timeframes or payment terms. 
  1. Equipment costs – take into considerations project conditions to determine the correct size or capacity of equipment needed to perform the work.
  1. Subcontractor quotes – includes the cost of labor, materials, equipment, indirect costs and profits as well as dependent on quantities, labor hours and rates.
  1. Indirect costs – includes the cost of labor, materials and equipment required to serve the overall project. For the owner, it may include design fees, permits, land acquisitions, legal fees and administrative costs. While for the contractor, this may include mobilization, staffing, on-site job offices, temporary construction, small tools and consumables.
  1. Profit amount – a uniformly applied appropriate or contracted profit rate to all contractors and to original bid and change orders.
  1. Designer fees – a fee for architects, engineers and other consultants.


Selection of Fee Basis

The fee basis will largely depend on the complexity as well as the type of architectural and engineering services to be provided. When determining fee basis, the following criteria should be considered:

  • Time schedule for furnishing services and potential changes that may affect the consultant’s cost.
  • Studies, programs and other professional input provided by the owner.
  • Time for the owner to review and approve the architect’s recommendations or designs.
  • Administration costs such as maintaining and preserving records.
  • The probability of contingencies that aren’t included in the design cost estimate.
  • Agencies and third parties required to be consulted, or furnished plans, specifications, reports and similar documents.


Methods of Compensation

There are several payment options available for an architect’s services, but the most common methods of compensation are a lump sum or fixed fee, hourly rates for individual services, cost-plus or a percentage-based fee. Often, owners and projects are best served by using a combination of these methods depending on the phase.


Lump Sum or Fixed Fee

A lump sum or fixed fee is a negotiated amount that’s defined during the outset of the project. This arrangement is best suited if the scope of the project, schedule for design and approvals as well as construction and other variables have been determined with reasonable accuracy.

The fee becomes effectively a fixed price unless project parameters beyond the architect’s control or scope of services increases or decreases.


Hourly Rate

A time basis fee varies based on an agreed-upon hourly or daily rate. This method is useful when services are difficult to determine in advance or are short in duration. Time-basis fees are typically used in pre-design, partial and additional services as well as conceptual design and renovation projects.


Cost-Plus Fee

In a cost-plus contract, payments to the architect are determined on the basis of his or her cost for services. A cost-plus fee may have an established upper limit beyond which the architect isn’t to be compensated.

This however, may change, if the limit is renegotiated due to a change in scope such as additional services or change in duration of the project. This structure is most commonly used for projects where the architect must provide services before the total scope is accurately defined.


Percentage-Based Fee

A percentage-based fee is a method that links the fee for the architect’s services to a percentage of the construction cost. The percentage may vary based on the type of building, construction value, the type of contractor or variables like fee adjustments.


8 Most Common Adjustment Factors

Because the design and construction industry is complex, it has become increasingly difficult to estimate a project due to its various factors. However, most architectural design projects are subject to a group of common variables, which can be used when calculating potential costs.

  • Scope of services
  • Project delivery method
  • Schedule and fast-track projects
  • Project location and site conditions
  • Renovations to existing buildings
  • New technologies
  • Demobilization or remobilization
  • Phased building occupancies


Payment Provisions

The agreement form in an architectural design project may also require other payment provisions to be completed. The most common provisions you’ll find include retainer, billing period or instruction fee structures. However, some other options may include statutory holdbacks, redesign charges or record documents.

A retainer is an advanced payment on fees which would be deducted from the final invoice and treated as a credit to the owner’s account while a billing period is a frequency-based structure that takes place at different intervals like bi-weekly or project milestones. Interest refers to the amount of interest on unpaid invoices as well as the time or number of days the calculation begins.


Time of Payments

The schedule or provisions for payment normally occurs on monthly intervals unless no significant services are provided within such an intervening period.

The agreement between yourself (the owner) and the architect should include provisions for payment on additional services should the project be changed, delayed, postponed or terminated prior to completion.


When determining payment for additional services, you’ll want to consider the following elements:

  • Commitments the architect may be required to make in anticipation of completing the project, including the schedule for design.
  • A redesign requested by the owner after previously approving the design.
  • Changes in the scope of the project.
  • An escalation in project costs due to external influence beyond the control of the architect, affecting the scope and/or time of the project.


Renovation Project Fees

Renovation projects typically include some form of investigation and discovery phase, which requires more time on the part of the architect to understand what exists in order to add, move or remove it.

It’s easier to build new from an architect’s perspective than to change certain portions and install new features. Renovation projects nearly always add to the complexity of the project. Because of this, the hours spent are higher as well as well as cost percentages for the renovations.


You Get What You Pay For

Generally speaking, when purchasing property, hiring an architect or accepting bids from contractors, it’s important to keep in mind – you get what you pay for. Quality, cost or time? You can only have one. This is why it’s crucial to choose an architect carefully and ask a number of qualifying questions to get started.

The most experienced architects can assist in other areas of your architectural design project outside construction. For example, Prime Architects can conduct a feasibility study before you ever purchase the property to ensure the stability of the building (as well as your investment).

To learn more about our architectural processes and offerings, we invite you to call us today at (866) 226-8071.


Pre-Planning is Everything

Need help transforming your dream project into reality? In this free checklist, we uncover a series of important questions that forecast your project needs, potential setbacks as well as expectations on how you plan to use your property. Click below to download the free list of questions now.


30 Questions You Need To Answer Before Starting an Architectural Project

Topics: Architectural Design Fees


Prime Architects

Written by Prime Architects

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