DETERMINATION of PROFESSIONAL FEES
Post 360 ⇒ by Gautam Shah →
Determination of professional fees is a very difficult exercise. To determine a right fee, a professional is expected to know the following:
- What is the VALUE of professional services to the client, and in the society,
- What is the COST of providing professional services (cost of input),
- Wills there be a surplus (profit) after deducting COST from the VALUE.
Senior professionals have experience, and so can prejudge the value of their professional services. Fresh professionals and even seniors venturing into unknown fields cannot judge the value of their services. They would rather compute the cost of input first, and then add a fixed or a percentage amount, as profit.
Professional fees are very subjective. Fees vary from a professional to professional, from one project to project, and also from one client to another. There are no standards, though there may be traditions in the field. Professionals take on an assignment for a fee, determined by themselves, and sometimes after further negotiating with the clients. Besides fees, a professional also collects: Extras for other services, such as site visits, surveys, additional or optional detailing, special documentation, etc. and applicable taxes.
A professional gets engaged for different types of assignments.
Physical assignments are projects where implementation involves large resource outlays and the cost of the professional input is measurable with the scale of the project.
Intellectual projects are more intensive on conceptual input or idea. The cost of idea formation is indeterminable and cost executing the extraordinary concept is very small. The results or benefits accruing to the client are great. A client may gain extraordinary advantage by such professional contribution. So fees for intellectual projects are based the value of the professional input (to the client, society, etc.). Such fees need not match with the scale or cost of the project.
Involved projects are of two types: Involvement of the professional and the involution of the client. The client is fascinated by the prestige of the professional and desires personal involvement. Such clients will payout the stipulated fees. Professional involvement depends on many factors: Personal attitude (sincere, commercial), Demands by the client, Nature of the assignment / Competition from others / Client’s readiness to bear the additional costs (of intense involvement) etc.
■ Cost of a job nominally includes cost of all items that physically constitute a job. These items may be existing and are reformed, reused or acquired afresh. Cost of supplies by third party vendors and contractors are accountable, but items supplied by the clients from the existing stock are difficult to document. Cost of retained, saved-reused structures, antique materials, curios used in a project are not available, instead their values, though not easy to ascertain, are used. On sites where several professionals operate simultaneously, authorship to a creation is disputable.
■ Cost of professional inputs are costs or expenses incurred to conceive, design and plan out a project. It includes cost of data collection, stationary, documentation, presentation, printing, conveyance, staff salaries, cost of management, cost of investments, cost of rents for plants, tools and equipments, etc. It also includes the value of patent ideas, royalties, and taxes.
■ Scale of a project can enlarge or shrink during planning, designing and the execution phase. Even at fixed spread or volume, the costs inflate or deflate according to the economic conditions. But are the fees adjustable, accordingly?
■ Cost of involvement in the project is as per the agreement on the variety of design services offered and agreed upon, and the scale of the project. Any downward sizing of the project may not automatically reduce the involvement of the professional. Though upward scaling of a project, increases the professional’s work.