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ACH 231 Lecture 05 (Design Contracts Part 1)


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ACH 231 Lecture 05 (Design Contracts Part 1)

  1. 1. Design Contracts Part 1-Contract Considerations Architectural Selection Methods Compensation Methods Contract Services Scope Part 2-Highlights of the AIA B141 Document
  2. 2. Contracts <ul><li>What is a contract? </li></ul><ul><ul><li>A contract is a mutual agreement, which requires two or more parties and a matter or consideration to which the parties must agree upon </li></ul></ul>
  3. 3. Considerations for Contracts <ul><li>Architectural Selection Methods </li></ul><ul><ul><li>Comparative Selection </li></ul></ul><ul><ul><li>Direct Selection </li></ul></ul><ul><ul><li>Design Competition </li></ul></ul>
  4. 4. Architectural Selection Methods Comparative Selection <ul><li>Pre-selected group of Architects sent an invitation to present qualifications, or </li></ul><ul><li>Requests for Proposals (RFP) are solicited publicly (through newspapers) </li></ul><ul><li>Architects respond by submitting a proposal </li></ul><ul><li>Owner selects a small group to be further considered – Short-list </li></ul><ul><li>Owner interviews short-listed Architects </li></ul><ul><li>Owner selects Architect based on qualifications </li></ul><ul><li>Owner and Architect negotiate fee </li></ul>
  5. 5. Architectural Selection Methods Comparative Selection/Fee-Based Selection <ul><li>Owner requests fees from short-listed firms </li></ul><ul><li>Often done in conjunction with an Interview </li></ul><ul><li>Owner determines what weight the fee carries in final selection </li></ul><ul><li>Not favored by Architects </li></ul>
  6. 6. Architectural Selection Methods Direct Selection <ul><li>Owner contacts Architect directly </li></ul><ul><li>Owner selects Architect based on: </li></ul><ul><ul><li>Prior work performed by Architect for Owner </li></ul></ul><ul><ul><li>Recommendations from other Clients </li></ul></ul><ul><ul><li>Word-of-Mouth (Reputation) </li></ul></ul><ul><li>No comparative selection involved </li></ul><ul><li>Most preferred method by Architects </li></ul>
  7. 7. Architectural Selection Methods Design Competition <ul><li>Owner initiates design competition </li></ul><ul><li>Open to all Architects, or </li></ul><ul><li>Open only to select list of invited firms </li></ul><ul><li>Award criteria are issued with competition announcement </li></ul><ul><li>Commission to follow through with design may or may not be part of award </li></ul><ul><li>Designs are submitted, reviewed and one is selected </li></ul>
  8. 8. Considerations for Contracts <ul><li>Compensation Methods </li></ul><ul><ul><li>Percentage of Construction Costs </li></ul></ul><ul><ul><li>Stipulated Sum </li></ul></ul><ul><ul><li>Cost + Fee </li></ul></ul>
  9. 9. Compensation Methods Percentage of Construction Costs <ul><li>Historically is an accurate method </li></ul><ul><li>Disadvantages: </li></ul><ul><ul><li>Assumes service cost relates to amount spent on construction </li></ul></ul><ul><ul><li>Allows construction economics to determine fees </li></ul></ul><ul><ul><li>Requires rigorous agreement and determination of construction cost </li></ul></ul><ul><li>Requires waiting until end of project to determine final construction cost, and fee </li></ul><ul><li>Doesn’t work well for very small or very large projects </li></ul><ul><li>Does not take into account inflated construction costs due to high-end finishes </li></ul>
  10. 10. Compensation Methods Stipulated Sum <ul><li>A specified amount of money (fee) for a specific scope of service </li></ul><ul><li>Both items must be negotiated and understood to avoid disputes </li></ul><ul><li>Calculation of fee is often initially based on %-age of construction cost – starting point </li></ul><ul><li>Most commonly used method </li></ul>
  11. 11. Compensation Methods Cost + Fee <ul><li>Often called “Time-and Material” (T&M) </li></ul><ul><li>Based on hourly rates for personnel </li></ul><ul><li>Reimbursable expenses are extra </li></ul><ul><li>Most fair to Owner since the effort expended results in the cost </li></ul><ul><li>Final fee amount may not be known, unless a “cap” is used – “Not-to-Exceed” </li></ul><ul><ul><li>GMP-Guaranteed Maximum Price </li></ul></ul><ul><li>Useful when scope of services cannot be determined </li></ul>
  12. 12. Compensation Methods Cost + Fee <ul><li>Hourly rates: </li></ul><ul><ul><li>Direct Salary Expense multiplied by a factor to cover overhead expenses and profit </li></ul></ul><ul><ul><li>Direct Personnel Expense (hourly plus that person’s overhead costs), multiplied by a factor for expenses and profit </li></ul></ul>
  13. 13. Considerations for Contracts <ul><li>Contract Services Scope </li></ul><ul><ul><li>Standard (Basic) Five Phases </li></ul></ul><ul><ul><ul><li>SD, DD, CD, B/N, CA </li></ul></ul></ul><ul><ul><li>Designated Services List </li></ul></ul><ul><ul><ul><li>Comprehensive “shopping list”, allows both parties to clearly determine what needs to be done and the respective costs </li></ul></ul></ul><ul><ul><li>Special Services List </li></ul></ul><ul><ul><ul><li>For very limited scopes </li></ul></ul></ul>
  14. 14. To prepare for the next lecture………. <ul><li>Refer to CD-ROM in the back of your book for copy of B141 document </li></ul><ul><li>Review for reference </li></ul><ul><ul><li>Pages 1-15; B141 Instructions </li></ul></ul><ul><ul><li>Pages 16-27; B141- Standard Form of Agreement Between Owner and Architect with Standard Form of Architect’s Services </li></ul></ul><ul><ul><li>We will reference these documents in Part 2 of this lecture. </li></ul></ul>
  15. 15. NEXT LECTURE Part 2-Highlights of the B141 Agreement