Many architecture firms, and some engineering firms, price basic services as a percentage of the estimated construction cost of the project. The method is old, it is widely understood by clients, and it scales the fee with the size and complexity of the building. It also has well known weaknesses.
How the percentage is set
The percentage depends on project type, complexity and size. Simple, repetitive buildings sit at the low end; complex buildings such as laboratories and hospitals sit at the high end. Larger projects attract a lower percentage than smaller ones because some costs do not scale. Firms keep their own bands from experience, and some professional bodies publish historical guidance, though in the US fee schedules are no longer published by the AIA for antitrust reasons.
How the fee is split across phases
Once the basic fee is computed, it is split across the standard design phases. A common split, which many firms adjust:
| Phase | Share of basic fee |
|---|---|
| Schematic design | 15% |
| Design development | 20% |
| Construction documents | 40% |
| Bidding or negotiation | 5% |
| Construction administration | 20% |
Worked example with sample figures: a $4,000,000 construction cost at 7.5 percent gives a basic fee of $300,000. Schematic design at 15 percent is $45,000, construction documents at 40 percent is $120,000, and so on. The fee engine demo on our homepage computes this live.
What counts as construction cost
The proposal must define it. Usually it is the cost of the work designed by the firm, excluding land, the client's own costs, the firm's fees and, often, furniture and equipment. Say whether it is the estimated cost at the time of the proposal, the lowest bid, or the final cost, because the fee changes with the definition.
Consultants and disciplines
When the architect carries engineering consultants, their fees are usually a share of the basic fee or priced by discipline within each phase. Multidiscipline firms show a phase by discipline grid so the client sees civil, structural and MEP separately.
Where the method breaks down
- The fee rises when the construction cost rises, which can look like a reward for an over-budget design. Many firms fix the fee once the construction budget is agreed.
- Renovation and small projects need more effort per dollar than the percentage gives.
- Scope changes that do not change construction cost, such as additional design options, are not covered. Price them as additional services.
Additional services and reimbursables
Services outside basic services are priced separately, hourly or as fixed fees, often with a not to exceed cap. Reimbursable expenses are shown as an allowance or billed at cost. Keep both outside the percentage so the client sees them.
Feebeaver: Percentage of construction cost with a phase split is a fee structure in Feebeaver on the Firm plan. Enter the construction cost and the phase fees compute; additional services and reimbursables are separate rows.