Expert: Roger Zona - 8/16/2010

Question
QUESTION: Dear Roger:

Re: Construction Defects, Design Errors and Statutory Omissions dated 5/30/2008

I have a question regarding the Architect's services.  As it turns out the Architect charged 10% of his $3MM construction value for just the construction document phase of his basic services.  Everything eles he charged on an hourly basis (Schematic design which he included investigation, Design Development, Bidding and Negotiation, and Construction Phases)  

He also charged hourly for producing "As-builts" that were nothing more than putting the permit drawing into an electronic format, which were not field verified.

The Architect charged as part of his "investigation and design solutions" for this remediation project over $460,000.

The actual cost of the remediation should be considerably less than his estimated $3MM probabbly less than $1.4MM.

In addition to having to content with construction litigation we are now involved with litigation over the architects fees... re actual cost v construction value.  
construction

Is it standard to bill both on a percentage basis and hourly for work that is considered basic services?  

I understand that additional services are generally considered hourly but is it standard practice to bill hourly for invoicing the owner?

Thank you for help

Molly

ANSWER: Hello Molly,

I guess the old adage applies - get it in writing!  I sympathize with you for being led down the prim-rose path!  I can tell you about my experiences when I had my firm.  My services were written out in a very detailed manner so there was no misunderstanding with my client.  For example, if full service is needed and a percentage of the construction cost is the basis for determining payment to the Architect then the written contract should contain all the services provided, those services not provided, and the method, amounts and time of payments.

Most Architects use the standard AIA form contract which has blank spaces for outlining the services.  The percentage or fixed fee can be negotiated.  When I was in practice a 6% fee was the usual full service fee.  Additional costs could be travel (if the job was in a different city or state), additional blueprints if requested beyond the usual ten sets (two signed and sealed for permitting), the cost of appearances before zoning boards if required, and any permit or registering costs such as notice to owner and notice of commencement.  Also, if additional inspections are required due to the general contractor, the cost of such inspections should be itemized and back-charged to the GC.

The Architect usually assists in the bidding process and advises the owner if the bids are "apples to apples".  If the original budget (either predetermined by the owner - "I don't want to spend more than X dollars! - or determined by the Architect) is exceeded then the Architect should make adjustments to the plans that will help bring the cost into budget - at no additional cost to the owner.
Lets assume a budget of $2MM is established and agreed upon for a project.  The plans are prepared and the lowest bid is $2.25MM.  The Architect is obligated to make revisions to reduce the bids by $.25MM.  Often this is easily done by revising the room finishes, allowing the use of alternate materials such as the brand of windows, hardware, etc. or convincing the owner that the budget should be increased.

The GC reduces his bid to $2MM and a 10% fee to the Architect is payable in increments as the Architects work progresses.  If the winning bid was less than $2MM -lets say $1.85MM - then the 10% fee applies to that number.  Instead of a $200K fee he receives $185K with no changes is the agreed upon services he provides.

My experience has been that the Architect takes a conservative approach and estimates on the high side.  When bid are received and are less than the estimate, the Architect is a hero.  In reality he probably suspected that the bids could be less than the budget.

As for "as-builts" - that function is often the GC's burden.  The GC may hire the Architect to make the necessary drawings, but with the CADD drawings used today, making changes to match field conditions is relatively easy.

Again, in today's electronic age, billing, using an AIA draw schedule, is the GC's burden and is verified for payment by the Architect.  The Architect then produces an invoice from his computer for payment.  This is a monthly procedure and takes about 10 minutes after a field inspection verifies that the work and materials being billed for by the GC are actually completed as the GC certified!  No, the owner should not be charged by the Architect for preparing an invoice.

It's a complex world in the construction industry and making it more difficult is not acceptable.  It sounds as though your Architect thinks he has carte-blanc to bill you.  Unless you agreed to such an arrangement prior to the work being executed, it is my opinion that you are being taken advantage of by the Architect.  Like lawyers, Architects usually keep records or job logs of the hours or time spent on a project.  How else is he to know if he is making money?  Certainly you are entitled to see such records to verify his requests.

I hope this has been helpful.

Roger
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---------- FOLLOW-UP ----------

QUESTION: Dear Roger:
Thank you for your response.  

The biggest issue is that the owner in this instance in a the HOA (home
owners association)  The contract was executed but not standard. Only one
person on the board was aware of the terms of this contract the rest of the
board saw only a blank contract.  The architect used the AIA B151 1997 for
the basis of the contract then at some point several sections were typed
printed cut and pasted on to the contract. (we saw his original and have
photos of same that show the sections that were added in this manner)

Under the compensation portion Basic services where all of the phases are to
= 100% the architect notes that Construction Documentation Phase = 100%
and that the other phases are to be billed hourly!  

In addition he bills $90 for his tech staff which includes his
secretary/assistant. $175 for his own time.  
he also bills 1.25% for all consultants or any other work invoiced.

Granted this is not new construction... I can understand hourly invoicing, but
not in addition to 10% of his construction estimate.  The architect billed
thousands of dollars for what he called "As built" drawings because he said
the record set was inadequate.  

Question:  If we paid for As built drawings would they be a deliverable.  If he
produced "As built" documents should they include field verified drawings
showing what was built not just what was on the permit or record set?

Question:  What can we do if the Architect will not or can not produce the
records that support his invoicing?  

Question:  The architect also made assumptions that were not correct
regarding build code issues.  An exemption existed regarding impact glass.  
The Architect was hired 6 months prior to the changes in the wind-borne
debris building codes.  The architect assumed that the project was "in the
impact zone" when in fact the project was not and the exemption applied.  
The wind loading was the same but just the addition of the impact glass
made the windows much more expensive than had we applied for a permit
prior to the change in code.  Should the architect have confirmed or know
this information?  

Thank you again for you well thought out answers to my original questions.  I
appreciate your insight.

Molly

Answer
Hello Molly,

I am disturbed that a professional resorts to such things the way your
Architect has.  I can't give you legal advice but I will tell you of my experiences in such matters.

In this electronic world, cut and paste is a quick and easy way to alter a document.  I see it all too often.  That's why I insist on originals being signed with blue ink.

Most Architects will list their types of employees and their hourly rate such as Chief Architect, Project Captain (leader), Draftsman, CADD operator, Spec. Writer, and Typist Clerk.  Then, of course, they should submit a log along with their invoice to justify the charges.  As for the consultants, it is not unusual to markup their costs - all-be-it 25% seems a little excessive considering the economy and all!  (I marked up 10%!)

I'm a little confused about the "as built's" vs the record set. The record set is the one submitted to a building department for a permit. Did the same Architect prepare those drawings?  AS-built's should reflect exactly what was constructed.  Often it means changing a dimension (and noting that it is N.T.S. or "not to scale") or adding a plan revision notation to the plans or specs. And yes, the owner should receive a final and as-built set of all documents for their records.  Your General Contractor should mark a set of drawings indicating any changes or revisions that occurred in the field.  A copy of the notations may be given the Architect who in turn may adjust the drawings.  This is done on a schedule as work proceeds.  The building department must be made aware of any changes and approve any revisions.  

As for the Architect producing records; how can you be expected to pay for something that can't be documented.  That's like a store clerk saying "I don't have your size in stock but pay for the shirt anyway". Not a likely scenario.

As for the glass issue - yes, the cost of impact resistant glass increased the cost of the window dramatically.  The building department would not necessarily care if you specified a product that exceeded the code.  I am in Florida and when a permit application is submitted, it must include "product approval" documents which are issued by the State, or, depending on the project location, from Miami-Dade county.  These documents are free for the taking from the internet.  I personally think the Architect is obligated to be aware of code changes which include impact zones.  Granted, the impact resistant window is a better product and requires a more structurally sound installation system, but the cost option should be the owner's.

Regretfully, you may need an Attorney to sort out the mess.  Be sure you interview 3 or 4 and ask about similar cases and references.  Some attorneys specialize in Construction Law which deals with liens, licensing, product liability, etc.  This sounds like a Contract  dispute.  Arbitration is an option that is usually included in an AIA contract.  You may want to start documenting all the events and line up your witnesses.

I hope this has been helpful.

Roger
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