project costs
project fee
project
size
SIMON BERRY
Simon Berry started Fresh Projects
in 2014, after seeing how talentflight to more lucrative sectors had
decimated
the
Engineering
Professions in the UK (where he
worked for nearly a decade). South
Africa’s Built Environment sector
still attracts quality professionals,
{
value of works
x
fee scales
x
discount
economic
environment
fixed
overheads
design
value
quality of
employee
quality of
client
quality of
professional team
salary
x
efficacy
labour
costs
employee labour rate
x
hours spent
changes
meeting
frequency
}
project
duration
project size
but this is changing rapidly because
of the broken underlying economics
of the industry.
Fresh Projects vision is to make the
Built Environment Services Sector
financially sustainable.
We make the planning and financial management of time-based
projects an order of magnitude
easier for busy owners of small and
medium engineering and architectural firms – delivering higher
profit margins and removing the
stress associated with feeling out
of control.
Tel: 079 049 4979
E-mail: [email protected]
Web: www.freshprojects.co.za
18
with international best practice. The writing is on the wall: in the long term, fee
scales will cease to exist – and I would argue that this is the best thing that can
happen to our industry.
Fee guidelines are evil. They are like cigarettes – they make you feel good,
but are, in fact, killing you. They make us lazy and irresponsible. Instead of
calculating what a job will cost us (like most other professions do), we simply
apply a formula that someone else gave us to determine our fee.The main input
to this formula is the cost of works, which serves as a tenuous proxy for amount
of effort (more expensive building = more hours), but ignores a multitude of
other factors that dictate the real effort (quality of client, quality of employees,
quality of professional team, quality of council, etc). Then, on top of this, we
apply an arbitrary, yet ever increasing, discount against the guideline fee. And
just to make matters a bit more unclear, we have a new set of fee guidelines
that are nearly 40% higher than the previous published guidelines – resulting
in further confusion as to what the ‘real’ fee should be.
In fact, the answer is simple – the ‘real’ fee should be the fee that covers
your costs and provides a reasonable profit margin. The fee should not be
determined by some evil and confusing fee guideline, it should be determined
by the number of hours that it takes your highly skilled resources to deliver a
job.This is how lawyers, accountants and doctors operate, so why don’t we?
However, our clients (the savvy property developers) would never agree to
open ended contracts where we are simply paid by the hour for as long as the
job takes. But accountants and lawyers also have to provide fixed lump sum fees
for larger jobs – the difference is that they take the time, up front, to estimate
how many hours the job will take so that, on the whole, their businesses (and
their professions) are profitable and sustainable.
I am sure the thought of doing this extra admin on all jobs leaves you cold
– after all, architects love designing, not administration - but there are tools
available that make the task of job costing relatively painless. And the upside to
doing a proper fee calculation (as well as tracking your costs during the project
lifecycle) is that you will likely be more profitable. Which means you can invest in
and retain the best talent. Which means you can do better jobs more efficiently
and effectively. Which ultimately means, you can focus more on doing more of
the things you love doing, like designing.
Fee Debate