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Topics: Construction, Consulting, Cost Management
Design fees as function of construction cost
Happy new year and I hope you are all doing well. I have a question am I am hoping that from either experience or literature someone could provide me feedback about design cost as a function of construction cost.

I have a project on which I have a consultant responsible for 4 task: feasibility, schematic, design, construction management. I am trying to re-negotiate the cost of the tasks. The reason the cost needs to be renegotiated is that at the end of the feasibility phase the construction budget quadrupled. Should the design fee be a function of direct cost only? I believe that would be the most reasonable way to renegotiate cost for pending tasks. At this point the consultant wants to use the TOTAL cost which includes mobilization, general conditions, escalation, art and permit fees, db fees, market location, leed fee, and contingency. I would appreciate if someone could share some of his/hers thoughts on this and/or if you could direct me to some literature about this subject (if there is any?)
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In my professional experience of over 25 years as a technology consultant who has worked as a member of the architecturally-led consulting / engineering team, or as the owner's direct representative, only the scope of work that will create actual deliverables / professional services should be considered as value that drives the fee. You mention several other typical cost allowances (mobilization, general conditions, permit fees, contingency, etc.) that are provided for overall project budgeting, but these would typically NOT contribute to deliverables required from the consultant. If your project is being architecturally-led (using AIA contract forms), I believe that you can find useful verbiage from within those contract attachments for consultants / engineers / specialty contractors.
In a way, I do agree with Rod but the GC's are normally part of that construction cost but they would be affected if the schedule was extended because they are mostly time based elements like vehicles, computers, staff and so on.

As for the construction fees, it should be solely based on the CONSTRUCTION BUDGET not the Project Budget which includes engineering, development charges, interest, bonding and all other categories that you've mentioned.

Construction budget is the cost of actually constructing the building (Labor, material, time) and normally all consultants base their fee on this number not the over project budget which includes contingency, that does not make sense.

Hope this helps.
Here Architects fees are base on the construction cost (See Rami post on Construction budget). Engineering fees are generally an hourly base or fix price.

There is a complaint from the client that in a construction base project, the consultant increase (add a feature or in another way) construction costs to increase their return.
Thank you all for your feedback. Very much appreciated.
It's better to seggregate the tasks and assign different yardsticks to each - like a lumpsum amount for feasibility study, unit price (usually structural consultants charge per sq.ft) for design and percentage of construction cost for construction management. These are the one best suited for construction as far as my experience in the field.

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Very funny, Scotty. Now beam down my clothes.



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