Method of Compensation

NA PO LES, MIKA ELA CASA NDRA S.

BA SARCH 4-B
PPA 412
Introduction
Known as the 1979 UAP Doc. 208-B (Method of Compensation and
Schedule of Fees), but now known as the “UAP-IAPOA Doc. 210:
Architect’s Guidelines for Standards of Professional Practice (SPP)
Compliances – Method of Compensation and Schedule of Fees.” which was
approved by the PRC on July 27, 2010.
What is the Purpose of the Method of
Compensation?

Standardize the ranges for which the Client

will compensate an Architect in direct relation
to the value of services that the Architect
provides.

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 Criteria

The criteria for computing the Architect's compensation

should be based on mutual evaluation of the amount of the
Architect's/ Architectural firm’s talents, skill, experience, effort
and time available for, and required by the project.

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The Method of Compensation should:
 Be fair to the Architect in that it should permit him to recover his costs and net him an adequate profit, provided he is
reasonably efficient.
 Be fair to the Client and the Architect by reflecting the value of the Architect’s services.
 Be flexible to protect the Architect from cost increases because of changes or the scope of the commission.
  Not create legal problems for the Architect.
  Encourage the Client to be cooperative and supportive.
 Provide incentive for the Architect to produce the highest design quality. 
 Be easy to understand and simple to use.
  Provide a basis for the Client to predetermine his costs for architectural services, and be otherwise acceptable to him.
  Encourage the Architect to develop a solution which will result in the lowest possible construction cost consistent
with the Client’s requirements.
 Not focus the Client’s attention on “price”, but rather on the quality and performance of the Architect’s services.
  Protect the Architect against the rising costs of providing services during the course of a commission.

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Regular Design Services compensation may be
based on one or more of the following:

 Percentage (%) of Project Construction Cost (PCC)

 Multiple of Direct Personnel Expenses
 Professional Fee Plus Expenses
 Lump sum or Fixed Fee
 Per Diem, Honorarium Plus Reimbursable Expenses
 Mixed Methods of Compensation
Percentage (%) of Project Construction Cost (PCC)

This method is fair to both the client and the Architect as the fee
pegged to the cost of the project the client is willing to undertake.
The amount of the percentage is related to the size and the type of
the project. It is flexible and easy to apply since if there will be
changes, additions or deductions of the work demanded by the
project or by the Client, the Owner-Architect Agreement is not
needed to be supplemented.

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Percentage (%) of Project Construction Cost (PCC)
• Group 1
– Simple construction.
– 50M endless
DAEDS – Detailed Architectural and Engineering Design Services – 5%
DADS – Detailed Architectural Design Services – 3%
• Group 2
– Buildings of complexity
– 50m less
DAEDS – 6%
DADS – 3.6%
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Percentage (%) of Project Construction Cost (PCC)
• Group 3
– 50M and les
DAEDS – 7%
DADS – 4.2%
• Group 4
– Residences
DAEDS – 10%
DADS – 6%

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Percentage (%) of Project Construction Cost (PCC)
• Group 5
– Monumental Buildings
DAEDS – 12%
DADS – 7.5%
• Group 6
– Repetitive construction and design
1st building – 100%
2nd – 50%
3rd – 40%
4th & succeeding time – 30%
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Percentage (%) of Project Construction Cost (PCC)
• Group 7
– Housing Project. 1M
– Multiple units & same design.
- Whatever the amount of 1st layout/project - 10%
- 2-10 units – 50% of original fee x 9
Example
1st - 1M x 10% = P100,000
2-10 units - 50,000 x 9 = P450,000
11-30 units – 100,000 (original fee) x 40% = 40,000 x 19 = P760,000
Total fee = 100,000 + 450,000 + 760,000 = P1,310,000 11
Percentage (%) of Project Construction Cost (PCC)
• Group 8
– With extensive detailing.
– Whatever amount – 15% of PCC
• Group 9
– With alteration and additions
– 50 - 150% of PCC
• Group 10
– Consultation & Arbitration Services
– Not less than P1,000 per hour
– Arbitration – legal activities – Not less than 5,000 per appearance. 12
Manner of Payment – 1M residential
• Upon signing of the contract – 5% of the Professional fee.
• Upon of the completion of the schematic design – 15% of the PF
• Upon the completion of the design development phase – 20% of PF.
• Upon completion of the construction – 50% (to be given within 15 days)
• Upon the completion of the work – 10%

• PF – 100,000 x 5% = P5,000
• Schematic - 100,000 x 15% = P15,000
• Design dev. – 100,000 x 20% = P20,000
• Construction – 100,000 x 50% = P50,000
• Completion of work – 100,000 x 10% = P10,000
• Total = P100,000

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 Multiple of Direct Personnel Expenses
This cost-based method of compensation is applicable only to non-creative work such as
accounting, secretarial, research, data gathering, supervision, preparation of reports, etc. This
method of compensation based on technical hour expended does not account for creative
work because the value of the creative design cannot be measured by the length of time the
designer has spent on his work.
This method may therefore be applied only on pre-Design Services, Supervision work and
other works which the Architect may perform other than the Regular and Specialized Allied
Design Services.

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Sample Situation

Computation :

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 Professional Fee Plus Expenses

This method of compensation is frequently used where

there is a continuing relationship on a series of projects. It
establishes a fixed sum over and above reimbursement on
the general scope of the work in necessary in order to set
an equitable fee.

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 Lump sum or Fixed Fee
A Lump-sum payment is an often large sum that is paid in one
single payment instead of broken up into installments.

A Fixed Fee is an ​amount that is ​paid to contractor for their

overhead and profit, which does not ​change according to the ​
amount of ​work done, or the ​number of ​times something is used.

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 Lump sum or Fixed Fee
This method may be applied to government projects since they entail
more paper work and time-consuming efforts.

For example is some government agencies sometimes requests a form of

contract which establishes a fixed sum for architectural and engineering
services. The disadvantage of this method is that it represents a risk
situation to the architect. Secondly, as there are often changes in the work,
the Architect and the client will have to supplement their contract to
stipulate the additional fee and time involve.

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Per Diem, Honorarium Plus Reimbursable Expenses
Per diem is an allowance paid to your employees for lodging,
meals, and incidental expenses incurred when travelling. This
allowance is in lieu of paying their actual travel expenses.

An honorarium is a token payment made to bestow recognition to

an individual for services they perform, for which payment is not
required. Typically, an honorarium is issued when custom or
propriety forbids a price to be set. Therefore, payment to the
recipient is at the discretion of the payer.

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Per Diem, Honorarium Plus Reimbursable Expenses
In some cases a Client may request an Architect to do work which will require
his personal time such as:
 attending project-related meetings, conferences or trips;
 conducting ocular inspection of possible project sites; and
 conferring with others regarding prospective investments or ventures and
the like.

For these particular activities, the Architect as agent of the Owner may be
paid on a per diem and honorarium basis plus out-of-pocket expenses such
as but not limited to travel, accommodations and subsistence.
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 Mixed Methods of Compensation
The SPP provides for more than one method of compensation on a
project. Each project should be examined to determine the most
appropriate and equitable method of compensation.
There is no reason that an assortment of compensation methods should
not be used if appropriate in a single Project.
For example, Pre-Design Services and Construction Work Services could
be compensated on a multiple of Direct Personnel Expense, while the
Regular and Specialized Allied Design Services could be paid on a
Percentage of Construction Cost basis.

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References
Board of Architecture, Professional Regulation Commission, Philippines. (2010, July 27). Standards of Professional Practice
(SPP). Series 2010 https://www.architectureboard.ph/wp-content/uploads/2019/09/1.4-2010-SPP-for-PH-Architects.pdf
Bassig, R. (2018, December 21). Professional Practice (14 Questions, Difficulty Level: Moderate to Challenging). Radically
Artistic Individual in a Strangely Opinionated Neighborhood (R.A.I.S.O.N.). https://
raisonjohn.blogspot.com/2018/12/architectural-professional-practice-14.html
Board of Architecture, Professional Regulation Commission, Philippines. (2004, March 17). Implementing Rules and
Regulations (IRR) of Republic Act No. 9266. Officialgazette.Gov.Ph. https://tinyurl.com/m73zmynu
Valencia, N. (2014). UAP doc 207-208 [PowerPoint slides]. SlideShare. https://www.slideshare.net/FlobzCaloy/uap-doc-207208

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 END OF PRESENTATION

NAPO LES, MIKAELA CA SANDRA S. NA POLES

BASA RCH 4-B
PPA412