Types of Fee Structures
Example of Costs Savings from Design-Build
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percentage-based fees
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fixed (or lump-sum) fees
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hourly rates
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a hybrid combination of the above
1. Percentage-based fee structure
What Is a Percentage-Based Fee Structure?
In percentage-based fee structures, fees are based on a specified percentage of the construction cost then get adjusted along the way as the design is refined. The percentage is defined by the architect based on many variables. Industry standards for residential projects have architectural fees that range between 8% and 20% of construction cost (which is different than the overall project cost).
For example, renovations and additions are usually more complicated so they usually lead to a higher percentage fee. In a similar way, complicated projects that have a lot of program requirements or detailing will take longer to design and document so their percentage may be higher, also. Projects that have a high level of design also warrant fees on the higher end.
2. Hourly Rates
What is an Hour Rate Fee Structure?
This concept is pretty straightforward. Architects have standard billing rates they state in their contracts. They then bill you for their services based on the number of hours they work on your project multiplied by their billing rates.
3. Fixed Fees
What is a Fixed Fee Rate Structure?
A lump sum or fixed fee contract is one that stipulates an agreed upon flat fee amount for the professional services rendered by the architect.
4. Hybrid Fee Structure
What Is a Hybrid Fee Structure?
A hybrid fee structure is one that combines aspects of more than one fee structure. For example, the fee structure might be such that some phases or services are provided at an hourly rate and others at a fixed rate.
