Cost plus fee NOT a common architectural fee structure

Practice Management
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In practice exam 2, I was asked a question about typical architectural service fee options and I was surprised to read that Cost-Plus-Fee is " a common fee structure used by contractors, but not by architects" and was hence marked incorrect.

In the Architectural Handbook for Professional Practice, Pg. 622 it states:
"The following are common compensation options for fee calculations that begin the budgeting process formally in one’s accounting system after the contract is signed:
• Lump sum fixed fees.
• Hourly with no upset based on hourly billing rates.
• Hourly-not-to-exceed fees based on hourly billing rates.
• Cost plus fixed fees.
• Unit cost pricing.
• Percentage of actual construction cost.
• Reimbursable and non-reimbursable direct costs are considerations in all options.

So which is it? This seems to me like a bit of a catch question on purpose.
@coachchrishopstock perhaps you can help?

Thank you

2

Hi @avatarlucas -
thanks for writing in! This isn’t meant to be overly tricky on our part; there’s just an error in AHPP here. There are a few known errors in the book.

Cost plus fixed fee is common for contractors - they charge the cost (the actual cost of the work, i.e. materials and labor) plus a fixed fee for their efforts, to cover their OH&P.

How could an architect create a similar fee? what would the ‘cost’ be? It makes sense for a contractor - it’s simply the cost of the work. Similarly, what would the ‘fixed fee’ portion be? It just doesn’t make a lot of sense for an architect to develop a fee this way.

1 Like
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Thanks @coachchrishopstock