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Study of Fees Indicates Project Type Doesn’t Matter

April 11, 2008

By Richard Korman

Common sense says a laboratory should cost more to design than a dormitory because its piping, ventilation, and special-use areas would require more hours of work, more drawings, and more consultants than a dorm of equal size. Since 1866, when the American Institute of Architects first published professional guidance, designers considered it wise to charge higher fees for more complicated projects. But a new study by university researchers and facility planners throws at least part of this logic into question and shows several possible reasons why design fees vary.

Published in January in the Journal of Management in Engineering, a publication of the American Society of Civil Engineers, the authors say designers working on recent college and university projects did not charge more for laboratories than dormitories, on average, and that project type did not make a significant difference in what designers charged. According to their research, regional location and size of a university endowment are more closely linked to the amount of the design fee than project type or complexity.

“The idea of complexity it’s logical to you and me and it should ring true, but it didn’t,” says Matt Feldmann, director of institutional research at Blackburn College, Carlinville, Illinois, and the lead author of the study paper. “I can’t tell you exactly why.”

There are some possible explanations. The differences between building types may not be as great in 2008 as they were in 1968, Feldmann says. “It’s not as simple to build a residence hall. They aren’t just rooms with baths at the end. Now, they are building pretty sophisticated structures. The old categories don’t apply.” One of Feldmann’s co-authors believes design professionals who specialize are so adept that they no longer need to bill at a higher rate.

To help universities and colleges decide how their design fees stack up against what others have paid, the authors provide a mathematical model. Whether or not schools will find the model useful is unclear. But at a time when many designers feel they are being pressed to compete on price and often must fight against scope creep, the subject is especially sensitive.

The authors say their biggest concern is murkiness about what services colleges and universities are buying when they sign a design contract. With colleges and universities spending heavily on construction in recent years, and design fees accounting for 6 percent to 12 percent of a small building’s construction costs, a fresh look was needed.

Feldmann was on staff at Iowa State University in Ames, where all his co-authors work and study. They believed fees would be higher for more complex projects, so they decided to look at the project-type categories described by design professional societies. In the groups, warehouses and garages are the simplest and museums and aquariums the most complicated. To evaluate what drove the actual design fees, the researchers listed 58 variables and then tested them against a Stanford University Benchmarking Study of more than 200 building projects from U.S. post-secondary and research institutions.

Instead, the new study shows the key factors in design fees are whether the school is state or private, the project’s gross square footage, regional location, total school endowment and the school’s annual spending for construction and maintenance.

The size of the endowment seems to suggest that designers are adding services, what marketers and sales people call “up-selling,” because the school is wealthier and more prestigious.

Says Feldmann: “Is [endowment] why fees are higher? No. There’s not any architect out there saying, ‘Hey, they have a big endowment, I’ll charge more.’ But people with big endowments are trying to make gestures with buildings and doing cool things with glass or putting student radio stations near the dormitory rooms.”

That flies in the face of longtime practice. Matching fees with service scope is one of the most important aspects of managing a design practice. Over the decades, designers have expanded the scope of their services. The State University Construction Fund of New York, for example, shows nine possible additional services deserving extra compensation, including final models, photos, testing labs, surveys, and borings. Feldmann says he wishes his data was more precise to show whether designers’ fees fell into any of these areas. “Those breakouts weren’t in the Stanford data,” he explains.

The authors say they still want to use quality-based selection in choosing designers. On the other hand, Feldmann complains there is “an aura of mystery that surrounds costs and it frustrates people. There’s probably not a lot of consistency in how designers define services.”

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Paul G. Carr, a civil engineer and Cornell University professor, says Feldmann and his co-authors are themselves guilty of grave inconsistency in their research that skewed the conclusions. Referring to the correlation of fee amount with a school’s endowment, Carr asks, “What in the world does the bank account of an institution have to do with the amount of time a designer needs to spend on a capital project?”

The authors of the new study failed to notice an important conceptual flaw, Carr continues: By excluding the most complex structures, such as stadiums and museums, and the least complex structures, those used for parking, the authors limited their study to offices/classrooms, laboratories and residences/dining halls.

“Any practicing architect knows that the complexity-factor addition to the most basic of fees, applied to these categories, is the same or similar,” Carr says. “Of course [the authors of the new study] find no difference [the buildings] are in the same complexity category. There is no multiple-category evaluation.”

“It’s unfortunate, because there was legitimacy in their effort to dig deeper into what’s going on with fees,” Carr says.

As to whether or not Feldmann and his co-authors used sound judgment in excluding the more complex structures from their study, Feldmann says, “We did restrict it.” The idea behind the study was to address the most frequently built type of structures. “You don’t build a stadium every day, but you do build research facilities and residence halls,” he says. “So we’re hitting 80 percent of what people care about.”

This story first appeared on McGraw-Hill Construction’s ENR.com.

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