We find ourselves in a position where architects are cutting their fees to the quick in order to win work.  I'm not surprised because it is down to the simple economics of supply and demand.  Fees are being trimmed to extraordinary levels in order to win what little work there is out there.

So how low is too low?

That depends on many factors.  Cutting fees to win work has been employed by architects for years to attract new clients and to showcase their services to them with the hope of future work.  Working for little or no profit or in some cases making a loss can only be offset against a backdrop of a healthy order book of profitable work.

Supermarkets are masters at this, attracting customers into their shops with staggering deals for goods sold at a loss with the marketing strategy to entice customers into their shops with the hope that they buy more when they are in.

Suicide bids

I don't condone so-called 'suicide bids' but what concerns me is the sustainability of businesses who continually use this practice in the current climate; a practice which we all know is unsustainable.

Practices who continually cut their fees will find out the hard way but it's up to them to make these decisions.  A Practice who can't run it's business correctly deserves what comes its way.

Contributing factors in the current climate

This current recession has brought its own particular set of problems when you throw in the state of the public finances and the financial pressures on government funded bodies and Councils.  Add to the mix the new OJEU procurement rules and we have a set of factors that we have never seen previously.

European tender rules have seen Council’s look to framework agreements as the answer to their prayers for the procurement of consultancy services.  These agreements tend to last several years but more importantly are being won at extremely low fees.

Architects could find themselves locked into a fee levels for several years and if fees are too low in the first place they may find this difficult to sustain and everything could end in tears on both sides.

On the face of it clients must be rubbing their hands thinking that they are getting great value for money but have they stopped to think about the consequences? Are they getting the service they expect? Is the staff working on the project suitably qualified or experienced?

Professional Indemnity Insurance

This has probably never occurred to some clients but there is a duty of care on architects to ensure that jobs are suitably resourced by suitably experienced staff.

Such tender practices may also render the offending architect's PI Insurance void, which could in turn rebound badly on both architect and client.

If Architects are found to be negligent on these points when, heaven forfend, something goes wrong, the client could be left with more than a large bill when the insurers refuse to payout.

What’s the answer?

Given the financial pressures clients are under, it is very tempting for them to accept the lowest tender but care must be taken; short term gain could lead to long term pain.  Clients must think carefully when assessing fee bids and questions should be asked of prospective bid winners to provide evidence that they will adequately resource projects and provide assurances from the PI providers.

From a clients point of view they need to think before automatically accepting low fees without carrying out additional checks and assurances.

Architects need to take care not to get carried away cutting fees to unsustainable levels and to ensure that they adequately resource projects and carryout their business in a proper manner.

Drastically cut fees can have major consequences for both sides and come with a serious ‘health warning’.