Architects get short end of the stick

THE South African Institute of Architects says it is encouraging architects to unite and stamp out the practice of working on risk.

Working on risk is the practice where developers appoint architects to work on proposals for a development but do not pay them until the scheme goes ahead.

The body says there is a perception among developers in SA that architects always work on risk, but points out that other professionals such as dentists, doctors, lawyers and accountants do not.

One architect, who does not want to be named, says once a developer finds a piece of land and decides to do a property development, he appoints a team of professionals to put together the scheme.

This includes architects, quantity surveyors and engineers.

"The feasibility study has to be completed and there has to be some marketing ," says the architect.

Other problems such as obtaining town planning approvals or getting the site rezoned can stretch the time frame of the development.

"Developers are then coming to architects and saying: We want to appoint you but only on risk, meaning that we want you to do all the proposals, put the scheme together, get the feasibility study done and produce the marketing material, but we won't pay you anything until the scheme goes ahead'," says the architect.

He says architects sometimes carry the overheads on a job for as long as two years before they get any income. "It puts great pressure on cash flow. We depend on ongoing work to support the work produced on risk."

If the development does not go ahead, the architects do not get paid and sometimes if the land is sold by the developer to someone else, the purchaser does not pay any fees.

Architects are also asked to do the work at reduced fees.

He says architectural fees are usually worth about 5% of the cost of the project.

"In order to get the job profitable for developers, professionals are being asked to reduce their fees to as low as 3%," he says.

He believes the solution is for architects to unite and create guidelines where they set limits to the amount of risk work they are prepared to take on.

Stan Segal, chairman of institute of architects' practice committee, thinks there is "general abuse" of architects on the part of developers. Segal says this is detrimental to architects.

"For an architect to provide an adequate service, he needs to earn adequate fees and is entitled to a reasonable profit," he says.

Segal says an architect needs a certain amount of money to do his job properly and the current recommended tariff of fees without reductions would enable an architect to properly service his client.

As far as the practice of working on risk is concerned, Segal says ; "I don't find this anywhere else in the world. Only in SA."

Segal says a benchmark breakdown of fee income includes 40% going to salaries, 40% to overheads and 20% in profit.

"As soon as a client asks for a discounted fee, it comes out of the architect's pocket, no where else."

Should an architect agree to work on risk, he needs to safeguard himself "regarding his continuous involvement in the project. He needs to work on the full recommended tariff of fees and cover himself in the event of the land being sold by a developer".

Segal says architects' designs for the land add value and when the architect is not retained by the purchaser of the land, the architect should be entitled to recover at least his design fees.

Article by: Nick Wilson - www.bday.co.za