The scenario –
An architect is engaged for full services by a client for a major renovation to an existing residence located in an inner Melbourne suburb. The CA agreement signed by the client states the budget will be $1.5M. The SD stage proceeds followed by the DD stage and the architect suggests the appointment of a QS to check their proposal is within budget. Client declines to engage QS stating they ‘trust” the architect will manage the costs.
The architect could have made a Senior Counsellor Service call at this point.
The architect then suggests they will send the DD drawings to a couple of “friendly builders” for a check on cost. One of the builders comes back with a quote of “around $1.1 to $1.3M”. The second builder declines claiming they are too busy.
After the CD stage is completed, tenders are received from 3 builders proposed by the architect. The three prices obtained from tenderers are $1.9M, $2.1M, and $2.5M.
The client is devastated at this outcome, and not only wants to abandon the project, but demands return of fees paid to date.
What should the architect do in the circumstances?
The considerations –
In proceeding with CD, it is assumed that the architect has informed the client of the approximate price range from the ‘friendly’ builder and they have agreed that is appropriate to proceed with documentation.
The architect should first liaise with the lowest tenderer to see if there is any potential to reduce the cost of construction. The architect should also identify whether there are any particular trades that are driving up the cost, or if the increases are across all aspects of the project.
If the architect is unable to negotiate a satisfactory price with the lowest tenderer, the client is likely to demand a refund of some of their fees. The architect should be prepared to refund some of the fees, as they did not adequately manage the project costs despite the client declining to engage a professional cost estimator.
In hindsight, the architect should have either withdrawn from the project or included a clause in the client-architect agreement that would protect their fees in the event of the client abandoning the project.
Next time –
The architect has a responsibility to manage the design in line with the project budget. It is always advised that in relation to estimating project cost the architect should have insisted on having an independent cost planner for the project. This is particularly necessary in times of rising inflation and high demand for builders and materials.
If a client doesn’t want to engage the services of other building professionals to assist on the project then the architect is in danger of compromising their service and placing themselves at high risk. When a client chooses not to engage a professional cost estimator, the architect should inform the client about the risks. Refer to the guide letter on this in Acumen via the link below.
If an architect has a concern about the conduct of a project, they can always contact the Senior Counsellor Service. It is better to do so early, rather than waiting until the situation becomes irretrievable.
