Money matters: finances, costs, and professional fees

By Boyet Tejuco

Several methods of project execution have been devised to ensure quality of work, the shortest possible construction period, and lower cost to the owner. They require the architect to represent the client from preparing the legal documents to negotiations with government agencies. Differences lie in the client’s project financing setup and the payment of professional fees. Here’s what you need to know:

Project financing setup You can have a Design-Build by Administration arrangement, wherein only you, the client, can advance any money for payment of construction expenses. The architect may be asked to prepare a detailed cost estimate with an allowance of 10%, plus or minus his estimate.

Alternatively, you can agree on a Design-Build Service on a Guaranteed Maximum Cost arrangement, where you release a revolving fund to the architect at the start of construction. The architect also guarantees a limit to the project cost. With an excess by not more than 10%, the savings is divided equally between architect and client. However, if it exceeds more than 10%, the architect pays for the extra costs in excess of the said 10%.

Payment of professional fees For compensation, percentage of construction cost is commonly used, wherein the amount of the percentage is related to the size and type of the project. It is similar to the percentage fee concept being used by realtors, developers, and lawyers.

Under the Guaranteed Maximum Cost setup, the architect’s fee is either 10% of construction cost or may be included in the cost. It is higher than the fee for Design-Build by Administration setup which is only 7%.

Note that these fees do not include the architect’s regular design services. Said information is stated under the United Architects of the Philippines (UAP) Documents 207 Design-Build Services.