The specification process of materials and fixtures, including luminaires, and their purchase and installation on a project is a multilayered process; it always has been. Flash back to the year 1866 in New York, when the first schedule of charges was adopted by the American Institute of Architects (AIA). It stipulated 5 percent of the project cost for full professional services, which included preliminary studies, general drawings details and specifications (construction documents), and superintendence (construction management).
In 1888, the AIA's constitution and bylaws included the same 5 percent as published in 1866, despite the increasing scope of the architects work. Nine years later, in 1897, Illinois became the first state to enact a licensing law. Other states followed, and in 1908 the AIA, after 42 years, raised its fee schedule to 6 percent. The new fee schedule included about the same scope of responsibilities as did the 5-percent fee schedule.
The resulting dilemma—how to secure new projects while keeping scope of work and fee in balance—often produced with it an enthusiasm for obtaining new business by undercutting competitors based on fees. To combat the effect of fee-based competitive bidding and to regulate its members, the AIA issued a “Circular of Advice Relative to the Principles of Professional Practice and Canons of Ethics” in 1909, stipulating that members could not advertise, engage in the building trades, offer free services, or compete for work on the basis of fees charged. There was a conflict between the AIA's (advisory, not mandatory) fee schedule and its Code of Ethics (which deemed fee-based competition unprofessional). Architects were expected to accept the same fees regardless of differences in their respective levels of competency.
The AIA's 1928 Handbook of Architectural Practice schedule of proper charges remained at 6 percent, but it included recommendations for special fees to compensate for expanding scope of responsibility. By 1951, local AIA chapters had assumed responsibility for developing appropriate fee schedules for their respective markets. The AIA Handbook strongly advised members to strictly adhere to these fee schedules so as not to acknowledge that their work was worth less than others. When fees were cut too far, the only way to avoid a loss was to resort to cutting the quality of service or to resort to dishonest practices. This was expressed in the 1928 AIA Handbook text: “Either of these is distasteful and reprehensible. … Rather than resort to the latter, it would be more admirable to engage in a bolder, outright criminal career.”
A 1966 study, commissioned by the AIA, found that in the 16 years from 1950 to 1966, combined direct costs, indirect expenses, and outside consulting services had risen from 77.4 percent of total revenue to 91.7 percent, and pre-tax income had declined from 22.6 percent of total revenue to 8.3 percent.
Basing fees on a percentage of project cost was not a panacea. Despite diminishing profit margins, the AIA held fast to the belief that architects should compete with each other based on professional qualifications, not based on fees. This notion was reinforced in 1970, when the AIA adopted new ethical standards.
About the same time, the federal government's attitudes toward antitrust laws was shifting. Professions had previously been exempt from the 1890 Sherman Antitrust Act, but by 1970 the Justice Department began examining the ethical practices of many professionals, including architects. In late 1971, the Justice Department notified the AIA's attorneys of its plans to file suit based on violations that amounted to restraint of trade. In a 1972 consent decree, the AIA agreed to cease imposition of any practice or policy prohibiting the discussion of price (fees) in quotes for architectural services.
By the recession of 1984, many in the profession were struggling for survival. One AIA chapter issued a compensation and fee policy statement. In 1986 the Justice Department proceeded against the AIA, including threats of criminal prosecution. Negotiations with the Justice Department continued until agreement on a new consent decree reached a civil rather than criminal resolution. Finally, after 124 years, the recommended fee schedule era was officially over.
For many years, architects had searched for and found ways to differentiate their firms from others based on the services they provided. At the same time, they were being pressured not to discuss fees or deviate from the basic published fee schedule. Now, suddenly, the game changed.
Born to replace it was the new era we'll call the era of discounted professional fees. For many years, architects had searched for and found ways to differentiate their firms from others based on the services they provided. At the same time, they were being pressured not to discuss fees or deviate from the basic published fee schedule. Now, suddenly, the game changed. As a way to address this issue, architecture firms began to redefine the scope of their responsibilities in an effort to reflect actual costs. But by doing so, they created openings for work to be done by others. For example, when superintendence was removed from the fee schedule, an opening for the construction manager was created. The same is true of many of the other positions that are represented in the various layers of the supply chain, including the lighting designer.
