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Fee bids drop to 1.8 per cent as ‘suicidal’ undercutting continues

Top UK practices are bidding at fee levels as low as 1.8 per cent, prompting professional bodies to step up their efforts to curb undercutting among architects

After last week’s revelations about practices making ‘suicidal bids’ (AJ 02.09.10), quantity surveyor Rider Levett Bucknall released research (pictured) showing that unsustainably low fee bidding is becoming increasingly common.

The firm’s chief executive, Lance Taylor (see comment, below), said: ‘We have seen good-quality architects going in at 1.8 per cent, which is suicidal.’

In response, the Association of Consultant Architects (ACA) has announced plans to replace the abolished fee survey graphs with a survey showing how many hours it takes architects to resource a job. Brian Waters, president of the ACA, said: ‘My hunch is that we will end up with [a graph] that looks like the old one, but instead of a simple line we will have a band.’

The RIBA has revealed it intends to make its Business Benchmarking Survey obligatory for all 3,000 chartered practices. Currently 200 chartered firms take part in the anonymous annual survey, which compares charge-out rates and targeted chargeable hours between practices.

Adrian Dobson, RIBA director of practice, said: ‘What we are trying to do is provide tools to make sure people are not taking on jobs at any price.’

Under its Code of Professional Conduct, the RIBA can discipline architects for failing to properly resource projects, but at the time of going to press the institute was unable to confirm whether the recession had increased investigations.

Peter Drummond, chief executive of Britain’s biggest practice, BDP, said: ‘We are seeing very low and unsustainably low fee bids. We should be very cautious about this, because we know construction costs are going down further.’

 

Lance Taylor on why architects should avoid undercutting

If you choose to undercut another firm, be aware of the damage you are doing to your brand and the industry. If you do one job for a low fee, they will ask you to do it again.

In a recovery, most people go bankrupt because of cash flow, so it’s more important to get paid than to win a job. The fee earner should ask for the money – it’s amazing how often that conversation doesn’t occur.

We are asking long standing architect customers to aim above 3 per cent because otherwise we are worried about the longevity of the firm and the quality of the project. However we have seen examples of good quality architects going in at 1.8 per cent which is suicidal.

Architects are in the same boat as all consultants and many are fighting for survival. The big picture for us as an industry is to stay strong and charge the right level of fee for the right service.

 

Take part in the ACA fee scales survey

Readers' comments (2)

  • Is there a way of naming and shaming firms engaged in this unethical and short sighted practice? I am sure I'm not alone in having submitted very competitive (but not loss making) fee bids only to be undercut by well known supposedly reputable practices offering fee levels that cannot possibly deliver the service requested. And what of clients.......what is the RIBA doing to persuade clients (LA's and HA's in particular) that accepting low fee bids is appallingly bad practice? Sweet FA as far as I can see.

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  • The RIBA needs to show strong leadership on the matter of sustaining architectural fees at commercially viable levels. The anti-cartel legislation designed to protect the consumer/client is failing in that they are not protected from fee bids that do not fund the proper resourcing of their work. Given an unregulated markletplace, the only route for fee levels is downwards. The RIBA needs to engage urgantly with legislators to ensure a viable market and fee levels that are sustainable.

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