RESEARCH PAPER

DEALING WITH ARCHITECTS

REMUNERATION IN MALAYSIA

HOW DO WE MOVE FORWARD?

Prepared by:

AR RIDHA RAZAK
 WHAT ARE THE ISSUES WITH ARCHITECT FEES

ISSUES

APPOINTMENT PAYMENT

1. Many client do not 1. Late Payment

follow SOMF 2. Don’t pay as per
2. Client dictate the fee invoice
base on hear say low 3. Contra
market percentage or 4. Client does not pay
lump sum at all
3. Architect are force to 5. Client impose LAD to
give huge discount. Architect or set off
MANY SAY, WHY MAINTAIN
SCALE OF MINIMUM FEES
WHEN NO BODY USES IT?
 THE MALAYSIA SCENARIO

Recently, I accompanied my boss to a meeting with one of his business partner.

What ensued was nothing out of the norm. Quite boring actually. However, I
was awakened from my daydream when the business partner lambasted my
poor old boss as follows:

"No! We cannot proceed la like this!"

"Why not? It's a very good proposal?"
"Ya la, the proposal is good but the fee is not."
"Ooo.."
"How much are you charging him?"
"2.5%"
"Hah?! That's damn low!"
"I know"
"Then why did you agree?"
"Too much competition lor. If I refuse, they'll employ somebody else. In these
times, we cannot choose what?"
"Aiyah..“
WE CANNOT DISMANTLE AS
IT IS PART OF OUR ACT.
SELECTED WORLD SCENARIO
 WHAT ARE THE WORLD PRACTISING

FEE GUIDES

STATUTORY FEE MANDATORY FEES/ RECOMMENDED NO FEE

SCALE MIN FEES FEE GUIDE RESTRICTION

EMPOWERED BY EMPOWERED BY INSTITUTE GO WITH THE

ACT THROUGH RULES, BY FEE BUREAU FLOW
BYE LAWS, NOTICES BY ASSOSIATIAN
EXAMPLE: KENYA CONSULTING
THE ARCHITECT EITHER ARCHITECT ACRCHITECT
AND QUANTITY BOARD OR
SURVEYOR ACT INSTITUTE IN BED
IN STATUTORY
ACT/BY LAW
 WORLD SCENARIO

Country Type of fee scale Fee scale Scale or Guide by

Europe Board Institute/ ACA/ Others
Royal Institute British Architect
UK Recommended Fee guide RIBA fee guide
& Fee Bureau
Germany Recommended Fee guide HOAI fee scale The Federal Chamber of Architects

Africa Board Institute/ ACA/ Others

South African Council for the
South Africa Mandatory Fee Via board notice 72 / 2015
architecture profession
Nigeria Institute of Architects/
Nigeria Recommended Fee guide ACAN fee guide Assosiation consulting Architects
Nigeria
Board of Registration of Architects and
Kenya Statutory Fee The Architects and Quantity Surveyors Act
Quantity Surveyors

Asia Board Institute/ ACA/ Others

Singapore Recommended Scale of fees SIA Calculator Singapore Institute Architects
Malaysia Mandatory Min Fee Scale RULES SOMF 2010 Lembaga Arkitek Malaysia
Professional Regulation Commission THE UNITED ARCHITECTS OF THE
Philippines Mandatory Fee Scale 200 - CODE OF ETHICAL CONDUCT
and the Board of Architecture PHILIPPINES
Thailand Recommended Scale of fees ASSOCIATION OF SIAMESE ARCHITECT
COA- Conditions of Engagement and Scale of
India Mandatory Fee Scale Council of Architecture
Charges
Hong Kong Recommended Scale of fees HKIA Scale of Professional Charges HONG KONG INSTITUTE OF ARCHITECTS

Oceania Board Institute/ ACA/ Others

Australia Recommended Fee guide RAIA practice notes Australian Institute of Architect
New Zealand Recommended Fee guide NZIA Guide to Architect Charges New Zealand Institute Architects

North America Board Institute/ ACA/ Others

RAIC - A guide Determining Appropriate Fees The royal Architectural Institute of
Canada Recommended Fee guide
for the Services of an Architect Canada
Tariff of Fees for Architectural Institute of British
British Columbia Mandatory Fee Scale
Architectural Services empowered under act Columbia
 THE UK SCENARIO
HOW ARCHITECTS IN UK FAIR
WITH NO SCALE OF FEES
 UK HAVE LONG AGO
DISMANTLE THEIR SCALE OF
FEES SINCE 1982
 OPINION ON FEE SCALES AND GENERIC GRAPH

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

Year Milestone on Fees

1872 The RIBA operated a mandatory minimum fee scale &
1979 the UK’s Monopolies & Mergers Commission, decided that mandatory fee
scales were anti-competitive and ordered them to be withdrawn by all UK
professional bodies.

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.

2009 RIBA removes percentage fee graph from Client’s Guide

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

Started since 1989

After The RIBA’s

mandatory fee scales
were abolished
In 1982 and replaced by
recommended fee scales
 FEE GUIDE BASE ON MARKET SURVEY DATA

• 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.

Fee guide outcome

Survey
As based on actual fees,
rather than the ambitions
of the profession
outcome
the survey data gave significantly lower fee levels than the
previous “indicative” fees.
A higher proportion of the fees were now shown to be in
the latter work stages, reflecting real working practices
 CHALLANGES ON FEE GUIDE BASE ON MARKET SURVEY DATA

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

Britain’s leading architects have railed

against RIBA’s decision to abandoned fee
survey graphs from the official publication A
Client’s Guide to Engaging an Architect, with
David Chipperfield describing it as a ‘policy
against quality’

‘This decision erodes the authority and

status of architects. It is completely shocking
that the RIBA should be even thinking about
this,’ says the London-based architect.
6 November, 2009 | By Merlin Fulcher
British fees are so low according to
Chipperfield (pictured) that it is impossible
to deliver quality architecture within
expected timescales.

‘For the last 25 years, my office has lived

on the edge of financial viability – if I was
a doctor or in any other profession, this
would not be the case.
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
services
Percentage fee graphs
The graphs have been prepared in
relation to various building types,
classified in accordance with their
degree of complexity, and the extent
and nature of services
required to be provided in relation to
them.
The graphs are based on information
from the architectural services cost
survey, conducted twice a year by the
RAIA.
Lump sum fee Time charges
The charge for principal’s and staff
• The architect may agree with the client time should be calculated by each
to charge a lump sum fee for those practice (refer to AN02.02.300).
services defined in the scope of
services. Can refer to fairworks minimum
wage charges for architect
• The fee charged could be derived from
a percentage calculation, time charge
calculation, or some other method.
• Should either the scope of services, or
the scope of the project defined within
the written brief change, then the lump
sum fee should be re-negotiated.
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.

Note : From 1 October 2015:

•the adult rate will increase by 20 pence to £6.70 per hour
•the rate for 18 to 20 year olds will increase by 17 pence to £5.30 per hour
•the rate for 16 to 17 year olds will increase by 8 pence to £3.87 per hour
•the apprentice rate will increase by 57 pence to £3.30 per hour
•the accommodation offset increases from the current £5.08 to £5.35
This is the largest real-terms increase in the National Minimum Wage since 2007, and more than 1.4 million of Britain’s lowest-
paid workers are set to benefit.
 NATIONAL MINIMUM WAGE AUSTRALIA

http://www.wageindicator.org/main/salary/minimum-wage/australia
 AUSTRALIA TRIBUNAL FOR FAIR WORKS ACT 2009

The Fair Work Commission (FWC), formerly known as Fair

Work Australia (FWA), is the Australian industrial relations
tribunal created by the Fair Work Act 2009 as part of the
Rudd Government's reforms to industrial relations in
http://www.fairwork.gov.au
Australia in lieu of work choice act. It commence Operations
on 1 July 2009.

FWC is an independent body with the power and authority

to regulate and enforce provisions relating to :
• minimum wages and employment conditions,
• enterprise bargaining,
• industrial action,
• dispute resolution, and
• termination of employment.[4]

The Fair Work Act is an attempt to create a more national

system for regulating industrial relations in Australia.

It is also involved in the process of determining national

industrial relations policies, including setting minimum
wages and regulating the award system.
 Minimum wage Australia is reviewed by Fairworks commission annually

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).

• The minimum wages received by employees in the

national workplace relations system are reviewed by the
Fair Work Commission annually, with any adjustments
taking effect on 1 July each year.

• The Fair Work Commission is required to make a

national minimum wage order each year that sets both
a national minimum wage and special national
minimum wage.

• Employers and employees cannot agree to a rate of pay

which is less than the applicable minimum wage.
 ARCHITECTS FAIRWORK MINIMUM WAGES/AWARD GUIDE IN AUSTRALIA

Fair Work has pay guides for every field in Australia

to determine its minimum wages
OTHER COUNTRIES SCENARIO
1. COUNTRIES WITH
APPROPRIATE FEES OR FEE
GUIDE
SOUTH AFRICA COUNCIL FOR THE ARCHITECTURE PROFESIONAL
FEE GUIDE

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

Collection of fee upon signing agreement

PHILIPINE ARCHITECT INDIA PUT PRIORITY ON

COLLECT 85% BEFORE CONSTRUCTION WITH
CONSTRUCTION AND 45% CLAIM DURING
LESS PRIORITY DURING CONSTRUCTION
CONSTRUCTION
THE UNITED ARCHITECTS OF THE PHILIPPINES
PAYMENT SCHEDULE

PHILIPINES
PAYMENT SCHEDULE
Stage % Accumulation
Upon signing agreement 5 5
Schematic 15 20

Design Development 35 55
Contract Documentation 30 85

CONSTRUCTION PHASE 15 100

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

PROFESIONAL FEE GUIDELINE

Stage % Cumulation
Stage 1 : Inception 5 5
Stage 2: Concept & Viabiliity 15 20

Stage 3: Design Development 20 40

Stage 4: Documentation & Procurement 30 70

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:

Positive risk Negative risk

1. Competition between architectural 1. Possibility of Fees will be lower

firm and increase competency
2. Encourage mergers between sole
prop & partnership
3. Competitive fee benefits client and
may lower the property prices ( risk
developer might absorb as profit)
4. Partial services will be more viable
5. Emergence of new specialist
profession
2. Only the strong will survive. Non
competitive firm will have to close
down
3. Demotivate young architect to
pursue architecture
4. Hard for new practices to start up
5. Wages of employee will be reduce
6. Increase unemployment in
Architectural industry
7. Architect will start reducing scope.
 PRACTICE EFFECT OF DISMANTLING FEES

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 to bid for the lowest fees.
Architect will compete fee with each
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

Pertubuhan Akitek Malaysia

 Why Good Regulatory Practice (GRP)

• To address the gaps in the management

system for regulations;
• To standardise regulatory and rule-
making process with emphasis on public
consultation and measurement;
• Consistent with International
development on regulatory coherence;
and
• Recommendation by World Bank that
Malaysia to have GRP embedded in its
regulatory development process

51
 Regulatory Impact Analysis (RIA)

What : Regulatory Impact Analysis (RIA)

The process of examining the likely impacts of a proposed
regulation and a range of alternative options which could
meet the government’s policy objectives

Why: RIA requirements are intended to achieve better

regulation by supporting:
i. Sound analysis
ii. Informed Decision Making
iii. Transparency

52
 Adequacy Criteria or Elements of RIA

1. Identify the Problem or Issues

2. Explain the Objectives
3. Identify a Range of Alternative
Options (Regulatory and Non
Regulatory)
4. Provide Adequate Impact Analysis
(Cost, Benefits and Risks)
5. Describe How Consultation was
Conducted
6. Clearly State Conclusion and
Recommended Option
7. Provide Strategy to Implement and
Review
 RIA ANALYSIS

RIA CRITERIA OPTION 1 – FOLLOW AUSTRALIA OPTION 2 – FOLLOW UK

Problem or Issues Public feels that Architect SOMF is considered overcharge and not following market
pricing
Objectives To provide more competitive market
Alternative Dismantle mandatory fees Yearly survey on market fee. Fee
LAM Fee guide in a form of percentage, determine by market survey.
lump sum, time cost

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

Consultation LAM, PAM, MINISTRY HUMAN RESOURCE LAM, PAM

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

1. LAM MUST BE READY TO STEP UP AND CONDUCT VARIOUS

TYPE OF FEE SURVEY TO DETERMINE THE BASELINE FEES FOR
EVERY TYPE OF DEVELOPMENT.
2. LAM CAN EMPLOY OTHER PERSON TO BECOME THE
MALAYSIAN FEE BUREAU TO CONTINUOUSLY PROVIDE
REPORT AND ADVISE ITS MEMBERS.

TO BE LIKE AUSTRALIA

1. TO ESTABLISH A DETAIL MINIMUM WAGE SCALE BY INDUSTRY

FOR MALAYSIA OR LAM MINIMUM WAGE SCALE.
2. ALLOW FOR MARKET FORCES TO FIND ITS LEVEL.
WHY SHOULD WE ENFORCE
MINIMUM SCALE OF FEES?
 REASON FOR A MINIMUM SCALE

Scale minimum fee is important

1. Prevent inadequate remuneration to professional architect

2. Prevent inadequate service provided

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.

2. Architect ignoring the PAM Scale of professional Charges fee

structure or finding ways to circumvent it,

3. Architect violated provisions of the Architects act and provide

unsatisfactory service to third parties.

4. IN 1986 , SOMF 1986 WAS INTRODUCE BY LAM, SUBSEQUENTLY

CAUSING PAM FEE STRUCTURE TO BE WITHDRAWN.

5. IN 2010, AMENDED TO SOMF 2010 TO SUIT MARKET CONDITION.

 DERRIVATION OF SCALE OF MINIMUM FEES (SOMF)

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,

2. This has taken into consideration

• years of research and work to provide the minimum level of

remuneration
• minimum level of professional services required in the public
interest,
• to satisfy both the legal requirements of the relevant building
legislations
• the stage certifications under the SPA.
 SCALE OF FEES COMPARISON WITH OTHER PROFESSION PREPARED BY BAR COUNCIL
STATUTORY
GOVERNING DISCOUNT
PROFESSION SCALE OF REMARKS
BODY ALLOWED
FEES

MIA has set out a recommended basis

Malaysian for determining audit fees based on
Not
Institute time charge, and the value of total assets
Accountants No applicable
of Accountants or gross turnover or operating
expenditure.

Fee is based on cost of works and a

Architects Board of
Yes No regressive yardstick ranging from
Scale of Minimum Fees 2010 Architects
10% to 3.5% is applied.
Malaysian
Not MMA has set out guidelines on charges
Doctors Medical No
applicable payable.
Association
Fee is based on cost of works and a
Engineers Board of
Yes No regressive yardstick ranging from
Scale of fees Engineers
8.25% to 2.28% is applied.
Fees are paid to Board before
Land Surveyor Board of Land commencement of work and will be paid
Yes No
Scale of fees Surveyors. out by Board in accordance with work
done.
Lawyer
Solicitors remuneration order Bar Council Yes No Scale of fees for non contentious matter
2005
 MEMBERS SURVEY 2012 BY PAM

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
Fees
1. The Scale of Minimum Fees will
guide architects in computing the
architectural services fee to charge
their client; and
2. The Scale of Minimum Fees shall
be a mutual reference for both
architects and developer in
establishing the architectural
services fee.
3. It can also be a guide for
developer to estimate
architectural consultancy cost in
their development.
Improving the Scale of Minimum Fees
1. The Scale of Minimum Fees must be
reasonable and justifiable that can be
justified when were questioned by
other parties.
2. It has to be relevant to the base cost
and profit for the services to be
provided.
Enforcement for Implementation of
Mandatory Scale of Minimum Fees
1. A mechanism needs to be set up
to ensure that architects follow to
the Scale of Minimum Fees;
2. Firm actions must be taken
against Architect who contravene
Architect (Scale of Minimum
Fees) Rules;
3. To expedite the implementation
of LAM as stakeholders of
Architect’s Fees;
AWARDED PROJECT IN MALAYSIA 2012-2014

WHO SAYS NO BODY

DON’T USE SOMF
???? PUBLIC SECTOR
STILL USES SCALE.

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?

AND SECURE OUR CLAIM?

 PROPOSE WAYS TO ENFORCE & RECOVER FEES

There are many strategies to enforce scale of fees:

Fee enforcement Securing & Recovery of

fees
Legislation change
• Period of honoring claim Legislation change
• Partial services increase fees • Architect COE- Payment upon
• Determine Prolongation time cost signing

Establish SOMF Enforcement Committee Late payment interest

Prosecute Architect Late payment invoice compounded
• Suspend/ Deregister interest
• Advertisement public apology
Prosecute developer Debt collection agency
• General penalty under Architect Act • LAM debt agency vendor

Building an electronic system CIPAA

• Architect Stakeholder management • Prohibited paid when paid condition
system for fee collection • Right to suspension without breach
of contract
Awareness
• Fee calculator
• No discount rule campaign
 INTRODUCE NEW ARCHITECT ACT PROVISION

RECENT AMENDMENT TO ARCHITECT RULES INCLUDES:

NEW ADDITION TO THE MOA CLAUSE FOR PERIOD OF HONOURING CLAIM, GIVING A
DEFINITE PERIOD FOR ARCHITECT TO SUSPEND AND TERMINATE WORK WHEN NOT PAID.

FOURTH SCHEDULE
PART ONE
[Subrule 29(1)]
MEMORANDUM OF AGREEMENT BETWEEN THE CLIENT AND THE PROFESSIONAL ARCHITECT FOR ARCHITECTURAL CONSULTANCY
SERVICES

…………………………………

NOW IT IS HEREBY agreed as follows:

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)

34. General penalty

(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.

(2) If a sole proprietorship, partnership or body corporate contravenes or fails to comply

with any of the provisions of this Act or any rules made thereunder, the sole proprietor
or every partner, director, manager, secretary or other similar officer thereof
shall be guilty of the same offence and be liable to the same penalty as the sole
proprietorship, partnership or body corporate is guilty of and liable to,

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

PROPOSE DEVELOPMENT OF LAM

STAKEHOLDER MANAGEMENTSYSTEM

LAM stakeholder management system (LAM-SMS) is an

integrated software system that integrates :

1. Updated Parties Database and information

2. Verification & Push Notification options
3. Managed via integrated cloud system for increased
stability and scalability
4. Architects Fee calculator in system and in apps form
 ALLOW PARTIAL SERVICE TO ACCOMMODATE FEE REDUCTION

USE PARTIAL SERVICES AS A MEAN

TO ENFORCE SCALE OF MINIMUM
FEES.

IF A CLIENT REQUEST TO REDUCE

FEE,

ARCHITECT ALLOWED TO
REDUCE SCOPE. THE SCOPE WILL
BE PRORATED AGAINST
ARCHITECT MINIMUM FEE
 PUBLIC AWARENESS OF MALAYSIA ARCHITECTS FEE USING MEDIA APPS

1. FEE CALCULATOR IS BECOMING A TREND

IN THE APPS MARKET.

2. TO DATE, THE USE OF FEE CALCULATOR IS

WIDELY USE FOR CALCULATING
• BUYING OF A HOUSE, MOT, STAMP DUTY,
CAR LOAN
• FEE FOR WEB DESIGN, DESIGN FEE AND
MANY MORE

ARCHITECT INSTITUTE IN SINGAPORE, UK AND

SOUTH AFRICA ALL HAVE THEIR OWN FEE
CALCULATOR GUIDE IN A FORM OF EXCEL OR
WEB BASE.
BAR COUNCIL ACTION ON DISCOUNTING & NO DISCOUNT RULE CAMPAIGNC
HOW TO RECOVER OUR FEES
 ARCHITECT FEE DISPUTE

SINCE 1980, THERE HAVE BEEN OVER 20

REPORTED CASES RELATING TO
ARCHITECTS SEEKING LEGAL RECOUSE
AGAISNT FEE.

THIS HAS NOT TAKEN INTO ACCOUNT

THE NUMBERS OF CASES WHICH HAS
BEEN SETTLED, THROUGH
ARBITRATION OR SETTLE OUTSIDE
COURT
 CASES ON ARCHITECT FEE UP TO HIGH COURT

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

2009 KUMPULAN PERUNDING (1988) SDN BHD.. PLAINTIF High court

(No. Syarikat: 163318-V) DAN WEE FONG MO... DEFENDAN
(Didakwa sebagai Wasi dan Pemegang Amanah Bagi TAN LIAN THIAN, Simati)

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

1984 TR Hamzah & Yeang - vs - Lazar Sdn Bhd Federal

court
1985 Khin, C. S. Development Sdn. Bhd. v Chung Yoke Onn [1985] 1 MLJ 319 (Malaysia) Federal
court
2001 AKITEK TIMOR v. TAI KIAN CHEONG Federal
court
THERE IS A NEED TO LOOK AT
HOW TO PROTECT
ARCHITECTS FEE AND ITS
RECOVERY
 SECURING OUR CLAIM

1. PAYMENT UPON SIGNING- NOT A NEW THING AS

PHILIPINE, INDIA, SOUTH AFRICA PRACTISE THIS

2. CHARGING LATE PAYMENT INTEREST – INTEREST

SHALL BE CHARGE FOR LATE PAYMENT OF ARCH FEES

3. Debt collection agency – Use of good debt collector

agency

4. DEVELOPER PERIOD OF HONOURARY OF FEES (PHF)

IN MOA & CIPAA 2012- DEVELOPER TO HONOUR
CLAIM WHEN INVOICE IS GIVEN OR NOT HAVE TO GO
THROUGH ADJUDICATION
PAYMENT UPON SIGNING OF AGREEMENT
SOUTH AFRICA INSTITUTE OF ARCHITECT CLIENT- ARCHITECT AGREEMENT

Covers issues of
• late payment via interest
• Disputed invoice
• Prolongation
• Set off
 PROPOSE AMENDMENT TO ARCHITECTS COE

Propose new addition for recovery of fees

Condition of Engagement of An Architect (Rule 29)

Suggestion to add the following clause

Recovery of Professional Fee

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

Example companies in Malaysia

1. Milliken & Craig (M) Sdn Bhd
2. Debt Collection Service Malaysia
3. Tish & Matheson (M) Sdn Bhd
4. TGS & PARTNERS
5. HUP LIK DEBT COLLECTION (M) SDN BHD
SUSPENSION OF ARCHITECT DUE TO DEBT COLLECTOR ACTION ON CLIENTS CAR
 RECOVERY OF FEES THROUGH CIPAA

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

35. Prohibition of Conditional Payment

1) Any conditional payment provision in a construction contract in relation to
payment under the construction contract is void.

Example conditional provision

• 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

36. Default Provisions in the Absence of Terms of Payment

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.

Frequency of 3) The frequency of progress payment is:

payment a) Monthly, for construction work and construction consultancy services; and
b) Upon the delivery of supply, for the supply of construction materials, equipment or workers
in connection with a construction contract.
4) The due date for payment under subsection (3) is thirty calendar days from the receipt of the
invoice.
PAYMENT DISPUTE RESOLUTION THROUGH CIPAA
 ENFORCEMENT OF ADJUDICATION DECISSION

28. Enforcement of adjudication decision as judgment

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).

4) The party who exercises his right under

subsection (3) —
a) Is not in breach of contract;
b) Is entitled to a fair and reasonable extension of time to complete his obligations under the contract;
HOW DO WE MOVE FORWARD
DECIDE WHICH ROUTE WE
WANT TO TAKE
TO DISMATLE SOMF 2010

OR TO

ENFORCE SOMF 2010

 TO DISMANTLE:

WHICH SYSTEM WE WANT TO

FOLLOW?

UK OR AUSTRALIA OR FREE
FOR ALL
 TO ENFORCE:

LAM AND PAM HAVE TO

WORK TOGETHER TO
UPHOLD THE LAW AND
PREPARE THE STRATEGIC &
ENFORCEMENT PLAN
THE END