My design contract provides for a retainer, half of the balance upon acceptance of concept, and balance upon delivery of blueprints. Normally no problem. Got one that’s a bit trickier. Got retainer. Work well with client…nice people. Have a concept they love (“We’ve fallen in love with this house”) and would build now, so it seems that half the balance should be due. But….but….we aren’t sure exactly how close to their budget it will come. They have flexibility in the budget, but they also have limits. Builders I’ve dealt with have been all across the board lately, so I cannot predict where any given one might come in on this. I’m intending to create a bid package and send it to the interested builders (at least 7 want the bid package) for a quote…first time I’ve done that. If the numbers are too high, I’ll redesign.
So….should I invoice the half balance now or not? On the one hand I’ve finished a concept they love. On the other hand, they might not be able to build this one if it’s too high, so is that really acceptance of the concept? On the other hand, builders need dimensioned drawings to give a reasonable bid, and that takes a lot of time to do, so I can’t really see creating a concept and sufficient drawings for a bid package, then risking the client saying they can’t or don’t want to do it and all I have is the retainer. On the other hand, I have no provision in the contract for a qualified acceptance of the concept.
Looking for a long term solution to this, too, be/c I’m likely to see this again…
Replies
sounds like they accepted the concept
sounds like they want bids so they need blue prints
sounds like time to invoice
sounds like you have the "standard" problem (or they do)
would like to build something but don't know how much it will cost.
how do archys handle this? suspect some of them probable care less about their clients then u do (for the archys out there, that comment is based on the number of posts i've read where the archy doesn't have a clue what something will cost and then tries to get the builder to build for lower cost to fit budget. i know there are archys who care)
part of your problem seems to be that you are lilkly to have something built anywhere, so it is hard to establish a data base of costs/prices
bobl Volo Non Voleo
Seems to me you've finished the concept for them. Whether or not they can afford it is another issue.
I expect you made a reasonable effort to keep the project in line with their budget? If so, then I think you've done what you were hired to do.
I used to have a handle on life, then it broke.
Thanks, guys. Now I'll complicate it further. I told them it was time for the next invoice and the price, and they have no problem with the price. But here's the catch-22. They've been wanting/hoping to use the construction loan and/or sale of existing house to pay for everything because they don't have lots of ready cash. But that means that for them to get a loan, I have to have all the drawings done and they have to have a contract with a builder and the loan papers approved. So I have hundreds of hours invested, and then wait while they do that other stuff, and have to hope nothing messes up the process? And I just went through one where the client never got through the loan process, so I was out the time to do the drawings, so I'm gun-shy. Sheesh. How would you approach it?
What, Cloud, you don't want to be their friendly banker, giving them credit on a no-collateral basis?
That's what credit card companies are for, or home-equity lines. Payment for services rendered is hardly unreasonable. I've occasionally plead poverty, or at least something along those lines, to get payment sooner than later.
Presently I have something going on with a guy I poured a concrete house for. We both knew he was going to run out of the small first mortgage I arranged for him. He chose not to get a construction loan (my suggestion), preferring to wait for a new mortgage. He's since maxed his credit cards. Our agreement is that he'll pay 10% interest for the period I've been awaiting payment. My concrete work was paid and he only owes me a few thousand on incidentals. As I didn't need the cash, it struck me as a good deal. Major difference is I still hold the first mortgage. We're about a month away from payoff, but I'm pretty well covered. The best news is: we're still friends!
Your deal leaves you with too great a possibility of never getting paid, as you found out. I understand their position, especially as they are apparently counting on you to know what this place will cost. That's a tough position for any architect but it happens all the time. The ones I know expect payment when the plans are delivered. If the bids come in a lot higher than predicted, there's a problem. Sometimes a major one. Comes with the territory. Hoping everything will work out is NOT something I'd consider doing.
I'm also pretty sure you already knew what to do before you asked. PAHS Designer/Builder- Bury it!
cloud.. you gotta get the money while they still have lust in their hearts.. the morning after, you are just yesterday's plaything..
also .. an extra incentive is to make sure you have a clause or a stamp or a notice that past due invoices will acrue interest.. an all too common omission on my part.. and even the best customers always put the non-interest bills at teh bottom of the pileMike Smith Rhode Island : Design / Build / Repair / Restore
That interest fee does get results.
On a recent job, contract detailed, I got the deposit from the payee in Calif in less than ten days. The larger lump payment took almost two months to come through but when I sent the final bill for balance and extras, I showed the interest for previous late pay in red.
The final payment came in four days, with an apology.
Excellence is its own reward!
Jim,
It's business.
You've got to get paid.
Their financial tightness is not your problem.
If their financial ball of wax melts after you put in your hundreds of house and the numbers come back too high, you'll see nothing. Like Mike sed.
They're supposedly engaging you as a professional, for your expertise and knowledge. Make sure they treat you like one.
It's a delicate line to walk at times...
Cloud,
If they are this tight for money that they can't find a hole to reach into for the planning and preparation costs, they will never qualify for loan and contract completion. Time to saddle up and call their bluff..
Excellence is its own reward!
Sounds to me like you're not an architect. Let me describe a problem my son just had, and you decide where you fit into the scheme of things.
My son went to college with a guy who is now an architect. He is involved in onlyl projects that are seven figures ... real high end stuff. And this is the San Francisco Bay Area we're talking about. The "architect" (he is one, but I'm putting it in quotes because I think he's a sleazeball) was given a budget. He came up with plans they absolutely love, but you can tell from looking at them that his ideas cannot be built for less than three times the budget.
I've since talked to an architect and the feedback I got was that the architect is due absolutely nothing unless actual plans are drawn and the project can be built within budget.
My son is out over $8K and probably won't ask for the money back, due to "friendship". I think he got screwed. The architect didn't pay attention to the budget ... he did what *he* wanted to do, and it was way, way too costly.
I don't know how you fit into this, but if you charge the owners thousands of dollars for work that is useless to them, because it cannot be built for the budget, I don't think you deserve anything ... just like the architect mentioned above. However, if you are a draftsman who is doing what you've been told to do, on a time and material basis, and the ideas are theirs, it's another ballgame.
This is really a can of worms. By the way, my son's budget was about $100K, and the plans came in at about $350K. Reasonable? In no way. The foundation work alone, because it's the Berkeley Hills, would probably have been at least $60K.
John
So what's your suggestion for a designer knowing what a builder will decide to bid on the job, when no builder has been selected? What if a builder can do it within their budget, but client doesn't like the builder? What if the one they do like is too expensive? None of that is within the designer's control, so should his compensation be held hostage based on that?
I ran the plans by a builder who's currently building another of my designs. He told me what he'd bid, but he's too busy to meet their timeframe, and he doesn't want to travel to that location. But his number would have been perfect, and is a legitimate number based on two other jobs he's done that I designed. So now what am I to do if the ones who decide to bid on the job don't price it the way this guy did? I mean, how is it possible to design for the cost estimating of an unknown builder? And at what point should a designer invoice for the design work?
First, it looks like your design *can* be built within budget. Second, you're apparanetly not an architect, and are being paid for the design. Given the above, it seems appropriate to me that you be paid for your time.
My son's case was with a real architect, and they aren't supposed to be paid until the permits are pulled and the job is done ... within a reasonable percentage of the original budget.
John
Thanks for clarifying. And thanks to all others for their comments. Since I don't have a staff to run situations by, I look for sounding boards elsewhere, even when I think I know how to handle it. Can always catch a new perspective.
I'm a designer, John. I don't run the job or do the construction management. I do the concepts and plans and prints. I can take educated guesses on building costs, but since I don't provide or control or charge for the construction management, I can never know for sure what the builders will bid on any job. That can make it awkward at times, and I'm always trying to improve that part of the process.
I'm curious about how it should work with architects who provide those services. You indicate that they should not be paid till a permit is pulled. My question is, what is their protection in the case of a client who decides to not build just before that stage, or doesn't get the full financing, or goes through a layoff, or for reasons outside the architect's control, just don't wanna build? They've invested a lot of time and cost by then. Is that just the cost of doing business?
Cloud, as you point out, it's not nearly as clean a distinction as johnhardy seems to indicate. Sometimes in the contract between architect and client, there are provisions made if the design is over budget... For example, I just grabbed this bit from a contract for a project we're working on:
"The Architect represents and agrees that it shall, at its own cost, provide re-design services and corresponding revised plans and specifications should any construction bid packages result in bid proposals that exceed the Project Budget. Furthermore, if the Architect is responsible for adding scope to the Project, the Architect shall perform the services necessary to remove that scope without further compensation. Should the Architect refuse or neglect to make good such required services or re-design efforts within a reasonable time after receiving notice requesting such remedial services, then [client name here] shall be entitled to make good such required services or re-design services at the expense of the Architect."
Now, some things to keep in mind... this is a contract for a large commercial project for a large client, and they can negotiate for clauses like that to be added, when for a residential project (especially for a small fee like $8k,) few architects would accept that kind of risk.
Another point, when a GC or CM is involved from the beginning, the potential risk represented by the clause above can be significantly reduced. If an architect is working with a client alone, with no input from construction professionals (like in johnhandy's example,) then it's much riskier.
One more point... everyone here loves to talk about things like stupid architects blowing the budget and stuff like that, but PLEASE think about the other side. Think about what happens when projects (especially larger commercial ones) come in under budget. Do you think that clients are generally happy about that? The first reaction is disappointment because they could have gotten more 'building' for their budget... and then they ask for part of the already spent design fee back because it was based on the construction cost.
The fact is, construction costs are extremely variable... the commercial construction market (here at least) has been hungry enough that bids have been coming in very low for the past year or two... but that will change.
The idea that "the architect is due absolutely nothing unless actual plans are drawn and the project can be built within budget" is just bologna... unless, of course, the contract between the architect and client says that. At most, though, the architect would be responsible to assume the cost for any re-design required to get the project back under budget. That would be something that would be negotiated ahead of time, and I'm doubtful it would be agreed to on such a small project (relatively speaking) like this.
Sorry this is so long, but it feels like someone's got to stick up for the stupid architects out there!
Oh yeah, and Cloud, it's time for you to be paid. Period. Can anyone imagine a tradesperson billing for work they've done only to be told that the owner hasn't quite figured out how they're going to do the financing yet and it might be some time before they have the money? It just doesn't work that way.
Thank you for the clearly explained and thought-provoking post. In fact, I do provide re-design at no extra charge--I want to get it right for the client, and it's incumbent upon me to get as close as possible to what they want. But as you point out, I cannot as a business practice accept the risk that things outside of my control won't go as the client wishes, and make my fee dependent upon that. Again, thanks for all of the perspectives. I'm learning a lot of the subtleties involved.
Cloud,
I am a designer at a residential design/build firm. The way we have come up with to handle situations like yours is to break the design process into two phases. In the first phase we come up with a concept, use rough square foot pricing such as $150/sq.ft. for primary living space, $35 to $50 for garages, $80 for covered porches, rough numbers like that.
We use information gathered in the meeting with the clients to try to tailor these numbers to the client. For example, if we know they will want rosewood floors and super high-end kitchen cabs and lots of built-ins, the rough budgeting numbers might be more like $400/sq.ft. for primary living space. Without knowing what the final design will be, what the final specs will be, and who will be building it at what time of what year it's really not possible to be more accurate than that in the initial design phase.
When we present these initial budget estimates we show numbers 10% or 15% higher and lower, to show what the swing might be. If the high number is way too high, we need to change the scope or level of quality to get back into their comfort zone.
We try not to mislead clients, though in the end they always want more than they can afford and some tough compromises have to be made. If they can live with vinyl floors and storebought cabinets they can save money. It's up to them. By that point you've made an honest effort to design a home they COULD build for the square foot prices you've given.
Occasionally we still get stiffed but we are continually fine-tuning the process. It is especially important that we treat our clients right, because we want them to choose us for the construction phase of the project. You would think that being builders (My employer and I are both former carpenters) we would be better at the preliminary pricing than an average architect, but I don't know if that's true. It's extremely difficult to price something you haven't designed yet, but the system we're using now works pretty well.
We don't start phase 2, design development, until we have been paid in full for phase 1. In design development we do all the construction drawings and write the specs so the project can go to bid. Not until the bids come back do you know the real cost of the job. If the numbers are way off, you need to work on your initial budget multipliers and maybe you owe the client some free re-design time as tuition. If you're within 5 or 10% you should feel like you did your job well.
As far as payment goes, you are entitled to your money if (and I'm sure you did) you made an honest effort to design something within their budget.
I like the idea of putting the interest figure in red on the invoices.
Just my 5 cents.
Mike
While I haven't done many custom homes involving concepts from architects, the few I have done have worked along the process you've described.
The architects I've worked with have also given me the info on how their fees are based and how they are to be paid way in advance of any drawings. Clients know this as well, so awkward situations are usually avoided.
Tell them what you just told us and quit fool'in around. Your time is valuable. If they are not the kind of people that want you for the job, be gone and write it off. Let them know you want to work for them and you need to be compensated for your time.
Slim