Beware the Boogeyman of Design Fees

The F-word you’re likely to hear before construction starts

A creepy clown hiding inside a sewer. A chainsaw wielding crazy man in a hockey mask. A hideous villain who tends to show up at night. If you’re a fan of scary movies, you can probably cite each of those movies by name. In reality, each these are different versions of “The Boogeyman.”

On any construction project, there’s a name for this Boogeyman too: Scope Creep. Any number of unexpected scenarios can cause Scope Creep, from weather delays to scarcity of materials to change orders. That’s not news. Here’s what is. And it has everything to do with that F word – Fees!

Design Fees as Usual?

Design fees typically range anywhere from 4% to 14% of the total construction cost. Almost all design firms and many design-builders will state this fee as their agreed upon terms. We know because it is a part of our history too. It’s considered business as usual. It’s one of the costs of business that owners expect to pay, no different than site procurement costs, when deciding to locate a new branch or main office. (The Art of the Branch: Site Selection Edition.)

Here’s why design-fees-as-usual needs to change.

The costs of design is not a function of construction costs. It is a function of people-hours. It is the creativity, productivity and talent it takes to bring a unique solution to the table. Design has nothing to do with machine and tool rental, hardhats or safety glasses.

“Let’s say you’re building a typical house on Main Street USA, and the designer quoted a fee of 10% of the construction costs. The median house cost in the US is $188,900, so you pay $18,890 as a design fee. But, let’s say you decided to arbitrarily add 10 lbs of gold inlay and fixtures into the design (hey, it’s possible.)” 

“This would add 146 troy ounces to the construction costs. Given the cost of gold, you’ve almost doubled your construction cost, and in the process…(drum roll please)”

“You also doubled your design fee – with little additional effort from the designer!”

What really matters?

To be sure, complexity, size and scope do impact the cost of your design, but so does your ability to state your desired aesthetic…along with your ability to make decisions. Communication skills matter, and knowing what you want really impacts the cost of design.

Applying what you just learned to future projects can only help. Knowing your likes and dislikes. Narrowing down a choice of concepts. Working within the budget (for real, not just a general direction that can be tweaked later). Construction-led design-build is all about designing and building to a budget, so you don’t wreck the Titanic!

Can you get the Fox out of the Hen House?

The problem with agreeing on a design fee as a percentage of construction cost is it offers an incentive to increase costs, indirectly. That’s not to suggest a designer compromises their professional integrity. They don’t. It’s simply that contract commercial terms must align with goals and objectives. So there’s no reason to allow the fox into the hen house!

Let’s try something different.

At the end of the day, all clients are concerned about the budget. At LEVEL5, we have been working to offer a different model to introduce more predictability into the process. A process that marries contract terms with the client’s preferences and needs.

For others in the industry, who are all too happy to reap the fruits of numerous design changes after the fact, this model may seem scary. Not hockey-mask scary mind you, but enough to keep you awake at night.

Everything starts when you decide what kind of facility is right for you.

Perhaps answering these five questions about your strategy will start the conversation.

Click Here

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