Professional Documents
Culture Documents
Prepared by:
AR RIDHA RAZAK
WHAT ARE THE ISSUES WITH ARCHITECT FEES
ISSUES
APPOINTMENT PAYMENT
FEE GUIDES
1.Percentage fees are great when construction costs are rising, but
if they drop, as they always do in a recession, then architects’
fees decline proportionately.
2.The architects’ work stays the same, but the return varies
depending on the contractors’ market and performance.
3.fee from a graph may be quick and easy, but it is foolhardy to rely
on fee data that does not represent your actual cost base or the
specific services to provide for a particular project and client.
4.fee scales and generic fee graphs have done a great disservice to
the profession.
HISTORY OF MINIMUM FEE SCALE IN UK
1982 The RIBA’s mandatory fee scales were abolished and replaced by
recommended fee scales
1989 RIBA work with Mirza & Nacey Ltd to conduct survey on fees ( Fee Bureau)
1992 Recommended fee scales were withdrawn and shown as sliding scale
graphs for different building types
2003 Office of Fair Trading ruling against any form of fee scale and with draw
indicative fee scale.
2003 RIBA negotiated an agreement with the OFT whereby it could publish fee
guidance based on actual fee survey data that had been independently
collected and interpreted.
http://www.bdonline.co.uk/why-has-the-riba-ditched-its-fee-scale-
graphs?/3153524.article
SETTING UP OF FEES BUREAU BY MIRZA & NACEY RESEARCH LTD
• In 2003 , The lack of any fee information was bemoaned not only by professions but
also by clients seeking guidance on what they should pay their consultants.
• RIBA negotiated an agreement with the OFT whereby it could publish fee guidance
based on actual fee survey data that had been independently collected and
interpreted.
Survey data
• The survey data was based on relatively small samples, particularly for smaller scale
domestic projects, where the demand and reliance on this data was highest.
• The survey data also did away with the in-built “front-loading” of the previous RIBA
fee scales, intended to help practices’ cashflows.
The RIBA fee guidance graphs 2003-9 gave a simple range of fees as an average of a wide
range of different types of buildings and projects with very different client demands on
architects’ services.
For example, there can be a great difference in the architects’ inputs required for the
refurbishment of an historic listed mansion, compared with an extension to a recently
constructed house, but they were all mixed up in the same fee range.
Although the RIBA did carefully describe and qualify this fee information, its limitations
were probably not fully understood.
ISSUES
1. RIBA concern that the fee guidance was being misunderstood and misapplied
2. Some members of the profession consider that any form of fee guidance lowers fees as
clients negotiate downwards from the published information, particularly in a
recession.
3. Clients are seeking more certainty of costs and don’t see the benefit of paying more for
their architects just because they have produced a more expensive building.
RIBA FEE GUIDE
ARCHITECT FEE INCOME FALLS 40% DUE TO RECESSION
AFTER EFFECT OF DISMANTLING OF SCALE OF FEES IN UK
Research by the Fees Bureau has revealed that hourly rates by sole
principals, and the architects’ fees index, have both fallen for the first time
in a decade due to under cutting of fees
Architects feel the loss of RIBA fee survey chart
Clients see
indicative fee scales
as a cost to be
negotiated down.”
THE CURRENT OUTLOOK
THE CURRENT OUTLOOK- ARCHITECTS EARNING BY FIELD OF EMPLOYMENT
TREND EARNINGS 2008-2014 BASE ON MEDIAN DATA
THE AUSTRALIA SCENARIO
HOW GOVERNMENT OF
AUSTRALIA HANDLES NO
MANDATORY SCALE OF FEES
CHARGING ARCHITECTURAL FEES IN AUSTRALIA
Australia does not have a fix scale of fees. The architects are free to use any method they
prefer either percentage, lump sum or time charges fee.
However there is a guide prepared by AIA for its members to follow as a basis to charge
its fees.
Fee guide
Percentage fees for full & partial Lump sum fee Time charges
services The charge for principal’s and staff
• The architect may agree with the client time should be calculated by each
Percentage fee graphs to charge a lump sum fee for those practice (refer to AN02.02.300).
The graphs have been prepared in services defined in the scope of
relation to various building types, services. Can refer to fairworks minimum
classified in accordance with their wage charges for architect
degree of complexity, and the extent • The fee charged could be derived from
and nature of services a percentage calculation, time charge
required to be provided in relation to calculation, or some other method.
them.
• Should either the scope of services, or
The graphs are based on information the scope of the project defined within
from the architectural services cost the written brief change, then the lump
survey, conducted twice a year by the sum fee should be re-negotiated.
RAIA.
AUSTRALIA FEE GUIDE FOR FULL SERVICE
AUSTRALIA FEE GUIDE FOR PARTIAL SERVICE
MALAYSIA MINIMUM WAGE
UK MINIMUM WAGES
From Thursday 1 October 2015, the adult rate of the National Minimum Wage (NMW) will rise by 20 pence from £6.50 to
£6.70 per hour, as recommended by the Low Pay Commission (LPC) in March 2015 this year.
http://www.wageindicator.org/main/salary/minimum-wage/australia
AUSTRALIA TRIBUNAL FOR FAIR WORKS ACT 2009
Overview
• A minimum wage is an employee’s base rate of pay for
ordinary hours worked, and is generally dependent on
the industrial instrument that applies to their http://www.fairwork.gov.au
employment (for example, a modern award, enterprise
agreement, transitional pay scale, or national minimum
wage order).
CURRENCY : RAND
THE UNITED ARCHITECTS OF THE PHILIPPINES SCHEDULE OF MINIMUM BASIC FEE
CURRENCY : PESO
COUNCIL OF INDIA SCALE OF CHARGES
CURRENCY : RUPEE
http://www.coa.gov.in/practice/practice.htm
NIGERIA SCALE OF FEES BY NIA & ACAN
CURRENCY : NAIRA
NIA Scale
NIA Scale
ACAN Scale
NEW ZEALAND FEE GUIDE ACCORDING TO CLASS OF BUILDING
NZIA: Architects’ fees for providing agreed services may be calculated on CURRENCY : NZ DOLLAR
Lump Sum, Time Charge, or Percentage Fee bases, or a combination of
these appropriate to the nature or stage of the services agreed.
SCHEDULE OF WORLD WIDE FEES COMPARISON STUDIES DONE BY
PRESIDENT OF ACAN 2010
OTHER COUNTRIES SCENARIO
1. METHOD OF PAYMENT
STAGE PAYMENT COMPARISON
PHILIPINES
PAYMENT SCHEDULE
Stage % Accumulation
Upon signing agreement 5 5
Schematic 15 20
Design Development 35 55
Contract Documentation 30 85
100
COUNCIL OF INDIA SCHEDULE OF PAYMENT
India
% Cumulation
Retainer On appointment/ Signing of Agreement/ Acceptance of Rs. 20M* or 5% of the total fees payable, whichever is
5
offer higher, adjustable at the last stage.
Stage 1
5 10% of the total fees payable.
On submitting conceptual designs and rough estimate of cost.
Stage 2
On submitting the required preliminary scheme for the Client's 10 20% of the total fees payable less payment already made at Stage 1.
approval along with the preliminary estimate of cost.
Stage 3
a. On incorporating Client's suggestions and submitting drawings for
30% of the total fees payable less payment already made at Stages 1 and 2.
approval from the Client/ statutory authorities, if required. 15
35% of the total fees payable less payment already made at Stages1 to 3a.
b. Upon Client's / statutory approval necessary for commencement
of construction, wherever applicable.
Stage 4
Upon preparation of working drawings, specifications and schedule
10 45% of the total fees payable less payment already made at Stages1 to 3a.
of quantities sufficient to prepare estimate of cost and preparation of
tender documents.
Stage 5
On inviting, receiving and analysing tenders; advising Client on 10 55% of the total fees payable less payment already madeat Stages 1 to 4.
appointment of contractors.
65% of the total fees payable less payment already made at Stages 1 to 5.
Stage 6
70% of the total fees payable less payment already made at Stages 1 to 6a.
a. On submitting working drawings and details required
75% of the total fees payable less payment already made at Stages 1 to
for commencement of work at site.
6b(i).
b.
80% of the total fees payable less payment already made at Stages 1 to
i. On completion of 20% of the work 35
6b(ii).
ii. On completion of 40% of the work
85% of the total fees payable less payment already made at Stages 1 to
iii. On completion of 60% of the work
6b(iii).
iv. On completion of 80% of the work
90% of the total fees payable less payment already made at Stages 1 to
v. On Virtual Completion
6b(iv).
Stage 7
On submitting Completion Report and drawings for issuance of 100% of the fees payable less payment already made at various stages and
10
completion/ occupancy certificate by statutory authorities, wherever retainer.
required and on issue of as built drawings
100
http://www.coa.gov.in/practice/practice.htm
SOUTH AFRICA COUNCIL FOR THE ARCHITECTURE PROFESIONAL
APPORTION OF FEES BETWEEN WORK STAGE
AFRICA
Stage 5: Construction 27 97
Stage 6: Close out 3 100
100
ROYAL INSTITUTE OF BRITISH ARCHITECT
SO IS MALAYSIA READY TO
DISMANTLE SCALE OF MINIMUM
FEES AND FOLLOW UK OR
AUSTRALIA, OR OTHER
COUNTRIES?
PROS AND CONS OF DISMANTLING FEES
Various speculative risk will happen when the fee scale is dismantle:
Situation Effect
1. Situation when LOA given to client and Architect will have to prove his fees
unable to obtain his signature. Work rather than the basis of SOMF.
done by conduct as per COE 7 Fee will be base on quantum meruit.
2. Currently there are clients who calls Architect will compete fee with each
architect to bid for the lowest fees. other until the fees be very low just to
get the project and maintain its client.
Company with good cashflow will be at
an advantage.
3. When fees are too low, company will Jeopardize the quality of work by
not be able to hire or sustain good staff. architect firm.
4. The rules in SOMF 2010 which has Old practice issues will occur.
been improve due to various practice Example: when big omission occur during
problems will be obsalete construction. The omission will impact all
stage when SOMF is dismantle.
RIA
REGULATORY IMPACT ANALYSIS
Source : MPC
51
Regulatory Impact Analysis (RIA)
52
Adequacy Criteria or Elements of RIA
Impact Analysis 1. Architect will still follow SOMF 2010 Business will be as usual
as a fee guide. 1. Some will use market percentage
2. Government jobs below 40 mil rate base on common practice.
which uses SOMF will be change to 2. Some will just follow what the
man month. client give.
3. Client will treat fee guide as a
maximum fee to mark down.
4. Architect undercut peers to get the
lowest price in order to secure the
job
Conclusion and If fee is to be dismantle, various strategic and execution plan to minimize the impact
Recommended to all stake holders
Strategy to Implement Establish Fee bureau
ARE WE READY TO FOLLOW UK AND AUSTRALIA?
TO BE LIKE UK
TO BE LIKE AUSTRALIA
3. Prevent Malpractice.
KNOWING THE HISTORY OF SCALE OF MINIMUM FEES IN MALAYSIA
PRIOR TO 1987
1. The credibility of the profession was being placed in jeopardy as a
result of actions of a few delinquent Architects specifically to
residential projects.
1. The Scale of Fees was derived after taking into account the fact
that it is a necessity for every human activity to be profitable,
Members Direction
The feedback received from the members attended the PAM Professional Practice Forum 2012 show
the direction that the Scale of Minimum Fees should not be abolished.
The Scale of Minimum Fees is very much needed by the profession, government and members of
public.
A few members recommended that the Scale of Minimum Fees should be revised and not to be
made mandatory, instead, to be implemented as a fee computation guides.
However, 84.6% of the respondents insisted the Scale of Minimum Fees should be made mandatory
and more than a quarter of them insisted that the rules have to be enforced. The summary of the
feedbacks from the respondents are as follows:
CONCLUSION TO MEMBERS SURVEY 2012 BY PAM
It is concluded that the industry should maintain to have the Scale of Minimum Fees with
some improvements need to be done to the scale. A mechanism need to be established
to enforce the implementation of mandatory Architect (Scale of Minimum Fees) Rules.
Conclusion
The Need for the Scale of Minimum Improving the Scale of Minimum Fees Enforcement for Implementation of
Fees Mandatory Scale of Minimum Fees
1. The Scale of Minimum Fees must be
1. The Scale of Minimum Fees will reasonable and justifiable that can be 1. A mechanism needs to be set up
guide architects in computing the justified when were questioned by to ensure that architects follow to
architectural services fee to charge other parties. the Scale of Minimum Fees;
their client; and
2. It has to be relevant to the base cost 2. Firm actions must be taken
2. The Scale of Minimum Fees shall and profit for the services to be against Architect who contravene
be a mutual reference for both provided. Architect (Scale of Minimum
architects and developer in Fees) Rules;
establishing the architectural
services fee. 3. To expedite the implementation
of LAM as stakeholders of
3. It can also be a guide for Architect’s Fees;
developer to estimate
architectural consultancy cost in
their development.
AWARDED PROJECT IN MALAYSIA 2012-2014
MINORITY PRIVATE
DEVELOPER FOLLOWS
SCALE OF FEES
PAM SURVEY 2012 –
6% Arch paid SOMF
HOW DO WE ENFORCE THE
SCALE OF MINIMUM FEES TO
PRIVATE PROJECTS?
FOURTH SCHEDULE
PART ONE
[Subrule 29(1)]
MEMORANDUM OF AGREEMENT BETWEEN THE CLIENT AND THE PROFESSIONAL ARCHITECT FOR ARCHITECTURAL CONSULTANCY
SERVICES
…………………………………
1. The Client hereby appoints the Professional Architect to provide architectural consultancy services for the Project subject to and in
accordance with the Conditions of Engagement of a Professional an Architect as prescribed in the Architects Rules 1996 and the
Professional Architect hereby accepts the appointment for the purpose of providing architectural consultancy services for the Client,
subject to and in accordance with the Conditions of Engagement for Professional Architect.
2. This Memorandum of Agreement, the Conditions of Engagement of a Professional an Architect and the Architects (Scale of
Minimum Fees) Rules 2010 shall together constitute the Agreement between the Client and the Professional Architect.
3. In consideration of the Professional Architect providing the architectural consultancy services required, the Client hereby agrees to
pay the Professional Architect in accordance with the Architects (Scale of Minimum Fees) Rules 2010.
4. The intervals of payment shall be *monthly / ………………… beginning from the commencement of the Professional Architect’s
appointment.
5. The period of honorary of fees claimed by the architect shall be …………..days (if non standard 28 days) from the date of receipt of
the fees claimed.
PROSECUTE & IMPOSE PENALTY TO DEVELOPER & ARCHITECT
( JOINT LIABILITY CONTRAVENING THE LAW)
(1) Any person, sole proprietorship, partnership or body corporate who contravenes or
fails to comply with any of the provisions of this Act or any rules made thereunder shall
be guilty of an offence and where no penalty is expressly provided shall, on conviction,
be liable to a fine not exceeding ten thousand ringgit or imprisonment for a term not
exceeding two years or to both.
unless he proves that the offence was committed without his knowledge, consent or
connivance or was not attributable to any neglect on his part.
DEALING WITH ARCHITECTS FEE ISSUE
ARCHITECT ALLOWED TO
REDUCE SCOPE. THE SCOPE WILL
BE PRORATED AGAINST
ARCHITECT MINIMUM FEE
PUBLIC AWARENESS OF MALAYSIA ARCHITECTS FEE USING MEDIA APPS
Year Case
1979 Soon Nam Co Ltd v Archynamics Architects (1979)1 MLJ 212 (Singapore) High court
1983 Taylor- vs - Udachin Development Sdn Bhd High court
1991 Akitek Tenggara Sdn Bhd - vs - Mid Valley City Sdn Bhd High court
1997 Hasbullah Chan & Associates Architect - vs - Rahika Development Sdn Bhd High court
1999 LAWRENCE K.L. CHIN (practising under the name and style of High court
L.C. Chartered Architect) vs SRI SOMAHA (S) SDN BHD
2001 ABDUL KARIM BIN HUSSEIN v MAJLIS UGAMA ISLAM SABAH High court
2004 CHONG SU MEE @ ESTHER vs C.H. & SONS DEVELOPMENT SDN BHD (311388-D) … 1ST DEFENDANT High court
AKITEK BILLINGS LEONG & TAN SDN BHD (098120-V) … 2ND DEFENDANT
2004 AR HJ ZULKIFLI BIN HJ A KARIM ( KAZ ARKITEK) vs High court
1. GERBANG PERDANA SDN BHD 2. ARKITEK MAA SDN
2005 MAIMUNAH BINTI DERAMAN (Practising as an Architect under the name of D’Mai Architect) ... PLAINTIFF High court
AND MAJLIS PERBANDARAN KEMAMAN … DEFENDANT)
2006 Hock Seng Lee Realty Sdn. Bhd. v. Teo Ah King @ Teo Cho Teck and Others (2006) MLJU 455 (Malaysia) High court
2008 NG POH KWANG VS 1. TAN CHUAN YONG 2. CHAN SOCK MUN 3. TETUAN TAN CHUAN YONG & S M CHAN High court
2010 1. Adrian Tio Sii Hoong 2. Christina Tiong Lea Hung practicing and/or trading under the style High court
and firm name of ATCT Architects (a firm) vs 1. Kementerian Kesihatan Malaysia 2. Government of Malaysia
2010 RASHID KADER ARKITEK … PLAINTIF DAN KISWIRE SDN BHD…DEFENDAN High court
CASES ON ARCHITECT FEE UP TO COURT OF APPEAL OR FEDERAL COURT
Year Case
1991 North South Properties Sdn Bhd - vs - David Teh Court of
appeal
2000 Sami Mousawi & Utama Sdn Bhd - vs - Sarawak Court of
appeal
2012 SDA ARCHITECTS … APPELLANT (sued as a firm) Court of
AND METRO MILLENNIUM SDN BHD … RESPONDENT appeal
2009 SA ARCHITECTS SDN BHD v. MARINA SDN BHD [2009] 1 LNS 853 Court of
appeal
Year Case
1980 Lim, K C and Assocs. Sdn. Bhd. v Pembenaan Udarama Sdn. Bhd. Federal
[1980] 2 MLJ 26 (Malaysia) court
Covers issues of
• late payment via interest
• Disputed invoice
• Prolongation
• Set off
PROPOSE AMENDMENT TO ARCHITECTS COE
26(1) In the event the client fail to make payment to the architect
within period of honorary claim, the Architect shall be entitled to
claim to a minimum monthly charges of 1.5% or as agreed
percentage with the client.
26(2) The client shall be responsible for any cost incurred in the
process of recovering fees inclusive of lawyers’ fees, court
charges, debt collection or claiming agency fees and any related
charges
LAM TO ESTABLISH CONNECTION WITH DEBT COLLECTION AGENCY
EXAMPLE DEBT COLLECTING COMPANIES
Collection method
1. Invoice Statement.
2. Telephone.
3. Letter - Automated or Selection.
4. Letter Telephone.
5. Personal visit to customer.
6. In-House Litigation.
7. Outside Agency - Debt Recovery Agent or Solicitor
DEFINITION:
AN ACT TO FACILITATE REGULAR AND TIMELY PAYMENT , TO
PROVIDE A MECHANISM FOR SPEEDY DISPUTE THROUGH
ADJUDICATION, TO PROVIDE REMEDIES FOR THE RECOVERY
OF PAYMENTS IN CONSTRUCTION INDUSTRY AND TO PROVIDE
FOR CONNECTED AND INCIDENTAL MATTERS.
APPLICATION
EVERY CONSTRUCTION CONTRACT MADE IN WRITING
RELATING TO CONSTRUCTION WORK CARRIED OUT WHOLLY OR
PARTLY WITHIN THE TERRITORY OF MALAYSIA INCLUDING A
CONSTRUCTION CONTRACT ENTERED INTO BY THE
GOVERNMENT.
NOT APPLY TO
a construction contract entered into by a natural person for any
construction work in respect of any building which is less than four
storeys high and which is wholly intended for his occupation.
PAID WHEN PAID IS PROHIBITED IN CIPAA
• obligation of one party to make payment is conditional upon that party having
received payment from a third party; or
• obligation of one party to make payment is conditional upon the availability of
funds or drawdown of financing facilities of that party.
SPECIAL DEFAULT PROVISION KICKS IN
Default provision
right of payment 1) Unless otherwise agreed by the parties, party has the right to progress payment at a value’
from basis value calculated by reference to—
a) The contract price for the construction work or construction consultancy services;
b) Any other rate specified in the construction contract;
c) Any variation agreed to by the parties to the construction contract
d) The estimated reasonable cost of rectifying any defect or correcting any non-conformance or
the diminution in the value of the construction work
2) In the absence of any of the matters referred to in paragraphs (1)(a) to (d), reference shall be
made to:
a) The fees prescribed by the relevant regulatory board under any written law; or
b) If there are no prescribed fees referred to in paragraph (a), the fair and reasonable prices or
rates prevailing in the construction industry at the time of the carrying out of the construction
work or the construction consultancy services.
party may enforce an adjudication decision by applying to the High Court for an order to
enforce the adjudication decision as if it is a judgment or order of the High Court.
RIGHT TO SUSPENSION
29. Suspension or Reduction of Rate of Progress of Performance
1) A party may suspend performance or reduce the rate of progress of performance of any construction work or
construction consultancy services under a construction contract if the adjudicated amount pursuant to an
adjudication decision has not been paid wholly or partly after receipt of the adjudicated decision under subsection
12(6).
2) The party intending to suspend the performance or reduce the rate of progress of performance under subsection
(1) shall give written notice of intention to suspend performance or reduce the rate of progress of performance to the
other party if the adjudicated amount is not paid within fourteen calendar days from the date of receipt of the notice.
3) The party intending to suspend the performance or reduce the rate of progress of performance under subsection
(1) shall have the right to suspend performance or reduce the rate of progress of performance of any construction
work or construction consultancy services under a construction contract upon the expiry of fourteen calendar days of
the service of the notice given under subsection (2).
OR TO
UK OR AUSTRALIA OR FREE
FOR ALL
TO ENFORCE: