Prasad urges architects not to cut fees

Sunand Prasad, the president of the RIBA, has written to the Institute’s membership to discourage them from cutting fees in order to secure work.

In an e-mail sent to RIBA members at the end of last week, Prasad urges architects not to “succumb to pressure from clients in the recession to the extent of making unrealistic fee bids.”

The president warns that buying work or “working below cost” puts projects and clients at risk and increases the likelihood of redundancies. He urges architects to emphasise the value that properly-resourced work will bring.

The letter says: “I appeal to all architects to do what they can to avoid further decreasing what are already very low earnings relative to other professions. Let the recession not be a downward ratchet that leaves a legacy of even poorer remuneration.”

The letter also reveals that the RIBA is to lobby the government to ensure public sector procurers are aware of the dangers of fee-cutting.

It wants government departments to “demonstrate exemplary practice to the wider industry, and avoid putting at risk long term project value in favour of short term financial savings.”

Rab Bennetts, director of Bennetts Associates, welcomed Prasad’s e-mail. He said: “Well done him, for not pretending it doesn’t exist for a start. Architects are their own worst enemies when it comes to fee-cutting, and they always have been.

“Even good firms are cutting fees, which is ridiculous. If they think it’s going to be a short recession then perhaps they think they can buy some cash flow, but if it’s a long one – as I think it will be – then they’ll be in trouble very quickly.”

Sunand Prasad's letter to RIBA members in full:

Dear Member,

In the light of growing evidence of pressure from clients for extensive fee cutting and architects themselves engaging in unrealistic fee reductions in order to secure work and achieve some cash flow, the RIBA is concerned that architects do not succumb to pressure from clients in the recession to the extent of making unrealistic fee bids.

Fee cutting raises a number of concerns:

• Working below cost is not sustainable and may mean that a practice cannot adequately resource projects to deliver a service of sufficient quality. This puts projects and clients at risk and places architects in conflict with their professional code of conduct.
• Below-cost fees can damage clients' interests, as they are known to increase insolvencies, with projects left in a state of disarray, possibly without the benefit of professional indemnity insurance.
• Construction tender prices are now falling rapidly in real terms. Since many design fees are based on a percentage of construction cost, most consultants are actually reducing their fees without there being any change in the percentage charges.
• Reduced fee income increases the likelihood of job cuts. A second major construction recession in fifteen years risks a second lost generation of young professionals.
• Reduced fees will tend to mean reduction in scope of service and may impact negatively on project quality.
• Proper resourcing of projects is a legal requirement under CDM legislation

At the suggestion of the ACA/RIBA Joint Task Force for Recovery, the RIBA is contacting key government procurement departments to raise awareness of the dangers of aggressive fee reductions and to encourage the government to demonstrate exemplary practice to the wider industry, and avoid putting at risk long term project value in favour of short term financial savings.

I appreciate that in these difficult times, with the survival of your practice the priority, winning work is all-important. The competitive culture promulgated in the UK leaves architects with few external defences and we have to rely on our own collective will and wisdom to ensure proper payment for the services rendered.

A key problem we face is the difficulty clients have in comparing the quality of service being offered. In an inherently "lowest price" culture, that provides another reason to default to fee level as the basis for selection. It is vital that architects set out in their offer to clients exactly the services they are offering and the value that their work will create, to enable clients to evaluate fee bids in the context of the quantity, quality and outcomes of the services offered. The new Good Practice Guide on Appointment and Fees, due out in the autumn, will expand on these key points.

I appeal to all architects to do what they can to avoid further decreasing what are already very low earnings relative to other professions. Let the recession not be a downward ratchet that leaves a legacy of even poorer remuneration.

With best wishes in these difficult times,

Sunand Prasad
RIBA President