Pro Rata Fees Explained
Architects fees are commonly charged on a pro rata basis, which means that the fee is calculated in proportion to the amount of work done or the time spent on a project. The fee is based on the scope of the project, the services required, and the time and effort required to complete the project. The pro rata method of calculating fees is commonly used in the architecture industry because it allows for flexibility in pricing and enables architects to tailor their fees to the specific needs of each client.
When an architect is hired to design a building, they charge a fee based on a percentage of the construction cost. This method is used for projects because the fee is tied to the size and complexity of the project. The percentage rate may vary depending on the scope of the work, the level of detail required, and the amount of time needed to complete the project.
Examples of Pro Rata Calculations
Design Budget Inclusive of VAT €300,000
Pro Rat Fee 9% €27,000
+ VAT at 23% €6,210
Total Architects Fee €33,210
Recalculation of Pro Rata Fees – Contracts Stage
It is common for architects' pro rata fees to rise with the value of the work, particularly as a project moves into the contracts stage. This is because the contracts stage typically involves more detailed and time-consuming work, which is directly related to the overall value of the project.
For example, if an architect is hired to design a building with a construction budget of €300,000, their pro rata fee may be calculated as a percentage of the construction budget. As per the example above which amounts to €33,210.
As the project progresses, and the architect moves into the contracts stage, they may need to devote more time and effort to the project to finalize the details of the construction contract, such as reviewing and negotiating the terms and conditions, preparing addenda and clarifications, and ensuring compliance with applicable laws and regulations.
Say for example the Contract value is now €345,000 once the detail design and tendering are complete the following additional fees would apply.
In summary, architects' pro rata fees can rise with the value of the work, particularly during the contracts stage when more detailed and time-consuming work is required. The specific method and rate of fee calculation may vary depending on the scope of the project and the agreement between the architect and client.
Example - Contracts Stage
Additional Contract Value inclusive of VAT €45,000
Pro Rat Fee 9% €4,050
+ VAT at 23% €932
Additional Architects Fee €4,982
The Architects' fees may be recalculated on the final account at the completion stage of a project, which provides a more accurate picture of the actual cost of the project.
Any changes or variations to the original design may result in additional fees for the architect, which could lead to additional fees to cover the extra work and detail involved in supervising such work.
In this example, the final account for the project was €366,000 inclusive of VAT.
Example - Final Account
Additional final account value inclusive of VAT €21,000
Pro Rat Fee 9% €1,890
+ VAT at 23% €435
Additional Architects Fee €2,325
As noted in the example above, at JEA we charge our pro-rata rate on the final construction cost of the project inclusive of VAT. This method of determining the pro-rata fee is done to make the calculation simpler to understand.
If the client wishes to use the alternative method used in the 'RIAI Agreement between Client and Architect for the Provision of Architectural Services for Domestic Work' where the pro-rata rate is applied on the ex-VAT value of the construction project instead, this can be arranged.
However please note that the pro-rata rate will increase from 9% up to 10% (excludingVAT) for the full service if this RIAI agreement/calculation method is to be used instead of the JEA agreement.