I pretty much use Dave Atkin's method. On small projects (under $1500) or anything that does not involve a lot of drafting I will simply estimate my time and multiply by my hourly rate for the type of work it is.
For larger projects and building designs where I must provide a set of drafted plans I will estimate my time and also use the percentage method and come to some sort of conclusion as to which price is better.
For large projects, say 10,000 square feet or more I will usually just go with the percentage method. I will estimate somewhere between 10% to 12% of the architect's fee based on the complexity of the design and how much drafting will be required.
The architect's fee of course is based on the project's budget and is usually 5% to 8% depending on the size. So larger cleaner projects will slide towards the 5% end of things and smaller or more complex projects towards the 7% range.
For construction cost I use the entire budget which includes whatever the contractor is being paid for. This usually includes sitework, furniture, carpet, everything. For architect's they are in play from the very beginning of the project all the way until the last piece of furniture gets moved in. So their fees are usually based on total construction cost.
In the end I guess my fee range would then be somewhere between 0.5% to 0.9% of TOTAL construction cost. Insurance usually requires that we know the construction budget of these projects and often architects only have very schematic looking plans at the time we must give our fee proposals so I'm not shy about simply asking what the budget is. And usually I'm told exactly what the budget is because they know structural expenses play into whether the design team has to redraw later on or not. So it is pretty easy to find out what the project budget is. If they won't share this with you I'd walk away from the project right there.
In fact in my fee proposals I will often not only cite the size of the proposed building but also the estimated construction budget. This way later on if scope changes begin to occur you can reasonably state whether something was included in your fee or not.
Over the long term if you stick with this methodology you will form a bond with your architect. When he doesn't do so well you won't either. But when they hit that home run they won't mind sharing in the spoils because they know you have billed them consistently. I also think it helps the architect's if they know you have a consistent way of billing. It helps them to also set their fees. If they know you charge this way. They will also get the hint that they are better off keeping projects simple and larger. Usually a series of smaller projects will eventually lead to some nice big ones as well. So over the long run it works out.
In the end if using the percentage method results in what seems like a low fee you must be willing to go with estimating your hours as a check on whether it is reasonable or not. And in those cases I'll just explain to the architect that for a small project it is too complex.
In general I will also explain to the architect how I formulated my fee (which is often the percentage method). Percentages are nice because budgets and scopes can change. And over the long term if the architect knows you are charging him consistently he or she will be willing to compensate you when those nice large simple projects come along.
In general I've found regardless of the billing method I can do better budget wise on larger projects. Usually they are simpler and more redundant and the drafting expenses don't eat you up as much.
John Southard, M.S., P.E.
