The Price is Right: Considerations in Design Fee Development

Despite being a sensitive topic, money is central to any project—managing costs, remaining on budget, and achieving maximum value per dollar spent are all critical to a successful design, whether a new build, a major expansion, or a renovation. So, let’s talk about it.

The latest episode of Side of Design from BWBR dives deep into this subject, exploring the intricacies of fee development and its impact on project success. Host Matt Gerstner leads a thoughtful discussion with representatives from BWBR's leadership team — CEO Terri Ulrick, Director and Principal Greg Fenton, and Principal Mike Boldenow—shedding light on their strategies for creating value-driven fee structures, all in service of not only good drawings, but great client outcomes.

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Chapters

• 0:00 Design Fees and Client Success
• 7:30 Value, Team Selection, and Client Relationships
• 14:14 Clear Communication and Value Proposition
• 30:06 Client Confidence and Fun in Design

Transcript

Matthew Gerstner: 0:00 

This is Side of Design from BWBR, a podcast discussing all aspects of design with knowledge leaders from every part of the industry. Hello and welcome to Side of Design from BWBR. I'm your host, Matt Gerstner. On this episode, we'll be talking about a sensitive topic money. I'm chatting with several members of BWBR's leadership team today, digging into everything about fees, from how they're set on a project to what value really means in terms of architectural design, all in service of not only good drawings but great client outcomes. Joining us from BWBR are Terri Ulrick, CEO, along with Principal Mike Boldenow, and Director and Principal Greg Fenton. Thank you all for joining us today. Thank you, matt Great. So to get the conversation started, I was hoping you could all kind of talk through some of the basics of feed development and just kind of what that means.

Greg Fenton: 0:54 

Thanks, matt. You know I think for me over the years, the most vital part has been knowing the services a client needs, you know, and either specifically requested or proposed by us. And sometimes they don't necessarily know everything that they need, and so it is on us to help them create the best road for them going forward as we serve them. So often when we don't win the work or get awarded it, it's because we missed the mark, we didn't have something included or, more likely, we had too much, so we didn't know going into it what the expectations might have been or how we could have, maybe came up short on giving them some highest thought from our side on how we could serve them.

Terri Ulrick: 1:42 

I think to add on in regards to the idea of really understanding the services that are needed. One of the things that they've been doing more frequently recently is looking at not only what are they asking for maybe putting that into the base services, particularly if it's something that's competitive but adding anything that we might see as an alternate, so that way they can fully see the value of it, as opposed to just having it in the fee, and then they can understand if it's something that maybe they hadn't thought of, that they wanted to add to the project scope.

Mike Boldenow: 2:12 

Right. I think in the wins and losses over my time. I think again the RFP is critical too. Is the RFP well-written, is it thorough or is it vague? And I think when they're well-written and specific it's pretty easy to follow the directions, you might say based on our experience. A lot of time I like to use the schedule that they provide in the RFP as a framework and then see where we land on the work effort. But back to something Greg mentioned earlier sometimes where I've gotten myself in trouble when I say trouble maybe I missed the mark on the fee is maybe assuming that our client needs more service than they really do need or they're really asking for and I think there's been some lessons learned over time that we need to pay more attention to those details in the RFP. Or if it's a negotiated situation, I think there's a better opportunity for us to sit down with our clients and really talk through that before we give them a proposal, and that usually works out a lot better.

Greg Fenton: 3:09 

Right, Mike, and understanding what their objectives are. What is success for them on this project? Asking some key questions up front really informs us and our teams here at BWBR how to best serve them, and I think you've heard it from each of us that understanding them and their prerogatives is essential to developing the right fee.

Matthew Gerstner: 3:33 

I was going to use the word critical. It sounds critical in getting the appropriate fee to the exact client, and it sounds like what's happening here is it can be very different between clients depending upon what the project is.

Greg Fenton: 3:47 

You know, a good example recently for a proposal that I provided a client was they didn't specifically ask about chemical inventory and maximum quantities and so forth that they have to follow for building code and which informs our work. A lot of clients have that as in-house services but we did propose that on kind of as an additional service which wasn't specifically noted in their list of services they were looking for and that proved to be valuable for them, as it turned out, and we were able to help them at a different level.

Terri Ulrick: 4:21 

I have a similar scenario. Several of the clients that I work with in the science and tech world might not be local. These are national clients that might be based on one of the coasts and recently we had an RFP for one of the local municipalities. Now they didn't have the full understanding of the requirements for the city process, which are much more extensive here locally than what they were used to, so we were able to outline it and give that as an ad in order for them to be able to get through that regulatory requirement.

Matthew Gerstner: 4:50 

It sounds important in that, depending upon where the client is originally based from or where they're looking to build, that there needs to be an in-depth understanding of what local compliance would be and those kinds of things, and those might fall outside of their RFPs, their requests. So it sounds like there's a lot of things that might be missed there that can be added into, as you said, an alternate into the proposal.

Mike Boldenow: 5:17 

But I think over time Matt and I'm looking at Greg and Terri too that I think that again goes back to lessons learned. We've learned because we've said, oh, they didn't understand these aspects of this very unique projects, but we're just going to include it in our fee and then we priced ourselves out versus trying to figure out more creative ways to provide them that information.

Greg Fenton: 5:38 

Our only goal is to help kind of keep them on the road, keep them out of the ditch, eliminate their risk, make the process go smooth, and sometimes that is additional services. Sometimes they realize that they need to bring those services on themselves through another vendor or partner. But again, our only goal is to make them successful.

Matthew Gerstner: 6:00 

Right, so I'm hearing there's different ways to approach this. And what about BWBR's overarching approach to fees is unique in the industry. How do we go about it differently?

Mike Boldenow: 6:15 

My first thought is BWBR has a reputation for top quality design and documentation. So when I'm building or working with a project manager and developing a work plan, we have to make sure we have the right team members and the right steps and the right processes internally to make sure we're delivering a BWBR quality project, right? That to me is a baseline and I think that's where maybe I see our approach being or at least our baseline approach to fees. Beyond that, it's applying the unique aspects of the RFP now to overlay and to add to that very standard baseline.

Greg Fenton: 6:58 

I think ultimately our approach to compensation or fees is to provide a fair figure for both parties, an equitable number for both sides, and we are tremendously blessed to have clients who know the design process is not necessarily a straight line from A to B and that it's a little bit of art and science involved and that occasionally you need to pivot along the way and look at maybe another facet of something or explore something new as a result of news and information or something. But we anticipate that, as Mike talked about, a baseline in terms of just a level of quality and that's just like our daily modus operandi, so to speak. But we also want to provide an overarching fee and proposal that's equitable to both. In the end, that's going to give the highest and best service as well as create the right experience for the client.

Terri Ulrick: 7:57 

Well, and we were mentioning earlier, we were talking about understanding the scope, and one thing with our work plans is we do tie them to the scope, besides looking at our baseline quality and design, really looking at what's the work plan, what's required for the scope of services that are required or additional services that we may see that are required. And the reason why I think that's important is that we've all had times when the client afterwards they see the fee and they want to talk through it. Then we can clearly delineate what we have and what we don't have in the fee. So that way, if it is higher than perhaps what they might have budgeted, there are ways to be able to cut it down by reducing services or reducing scope, as opposed to just arbitrarily throwing out a number.

Greg Fenton: 8:55 

You know, Like I mentioned our clients are sophisticated generally, but in different ways and they want value because they’ve seen our team deliver some incredible results. We may not have been the cheapest, we don’t strive to be the cheapest.

Matt Gerstner: 8:55 

Cheapest does not always mean better or best.

Greg Fenton: 8:55 

It does not necessarily translate that way. Absolutely, matt, but because we bring our experience, we bring our questions to make them better, and often they see the value of our services when we I think we've been labeled as great listeners with our clients and something that stands unique. Well, that ability to listen brings incredible value and our clients realize that it only takes one or two of those good ideas from listening and our experience to not only bring better results but also potentially offset if we aren't the cheapest.

Mike Boldenow: 9:35 

Well, that gets down to the value. What is the number? How does that equate to value? And I think the savvy clients out there understand that cost and fee is definitely a huge part of their investment. But also the right team, the right process, also has to be considered in making that selection during a competitive RFP process.

Terri Ulrick: 10:00 

If you look at an overall project cost, right, the design services are a fraction of the overall construction and all the other soft costs that a client might have, whether it's furnishing equipment, other vendors that they might have working for them. You know the design fee is actually just a small, small percentage of that. But the value of a good design process can really go a long ways when you're looking at construction. If you have documents that are quality, documents that the contractor doesn't have to guess on, that results in less change orders. So overall that value ends up compounding itself. So not really looking at that first cost, if you will, but looking at the overall value of what the process is.

Greg Fenton: 10:39 

And you can even extrapolate that over the life of the building, over 40, 50, 60 years. 

Matt Gerstner: 10:39 

In down-the-road cost.

Terri Ulrick: 10:46 

Yeah, quality documents, the right materials, looking at sustainable efforts when it comes to mechanical systems, I mean there's so many things to look at.

Mike Boldenow: 10:49 

Looking at sustainable efforts when it comes to mechanical systems, I mean there's so many things to look at, and not just in the architectural and infrastructure side, like Terry just mentioned, but in the operational solutions. You know, design and documentation. Quality isn't just about whether the flashing kept the water out, it's whether the facility, no matter what the service line is, can operate efficiently in that space, and it's flexible in that space and it's flexible.

Greg Fenton: 11:22 

It's well known that, as Terri noted, that design fees play a small portion of the total cost of owning a building or operating a building over decades. But every dollar is important and we take it very seriously, and we at BWBR have architects and interior designers as well as a multitude of other design professionals in our company. But we also wear our buyer's hats when we're going out and looking to partners, and that perspective is invaluable for our clients, I believe, to make sure that when we're putting a proposal in front of you and we have partners with us, that proposed compensation is appropriate. But we understand that every dollar counts on your side. So, again, we sit in that seat and we're asking those questions to make sure our full team compensation is the right number or the best number for you, and we take it very seriously that your money is a big part of what you need to manage and control and for you to be successful.

Mike Boldenow: 12:24 

But again similar to our situation, Greg. We evaluate those consultants for that project not just based on fee, but do they have the right team, do they have the right experience? And we have to leverage all of that to picking the right partner. And sometimes it is a fee base. If we know the situation about how the project is going to be evaluated or how the proposals, I should say, are going to be evaluated, that weights how we evaluate our consultants at the same time.

Greg Fenton: 12:53 

We certainly have had some long. We have long-term relationships, just like we seek with our clients. We have long-term relationships with consulting partners such as engineers of all sorts, and we think that brings value. But we are also wanting to bring the best, and that may include talking about them and their services or looking for new partners. There's always something being developed that we need to be responsible for bringing that forward to our clients.

Matthew Gerstner: 13:25 

I can see what the variation in project types and the partners that we do have, that we are carefully looking at who we are bringing on and making sure we're bringing on the best engineering partner, say, for this particular project, because of those long-term relationships that we've had.

Mike Boldenow: 13:46 

Correct.

Greg Fenton: 13:46 

Every project is different. Every project requires a different solution, and that may or usually requires careful analysis of who is the team that we'll be proposing.

Matthew Gerstner: 13:57 

How does selecting the project team play into all of this? Then? We've talked a little bit about selecting our engineering partners, and we're also looking in-house then as well, about who is the project team going to be correct?

Terri Ulrick: 14:13 

That is correct. Most of our projects here at BWBR are not simple projects. We specialize in complex projects in our science and tech, in our health care and in our education markets specifically, and because of that, we have different experience level and expertise amongst our staff, and so making sure that we're looking at what does this project need? Does it need a specialized attention to chemicals? So who have we had in our office that have had exposure and experience with chemicals and making sure that they're the ones who are on the project?

Terri Ulick: 14:43 

We are blessed with a lot of very talented individuals here within the office, and so being able to select and put together the best team for the client that is definitely key. One of the things that I've noticed is that if you tie everything back together, it all comes back to the idea of clear communication. Right, with our clients, it's not just the understanding and the clear communications they're giving us when they're talking whether it's within the RFP or it might even be if it's an email from a client that we have a long-term relationship with is being able to clearly understand, have them communicate what is the scope, and then us to be able to clearly articulate with them what we see as far as the services that are required. It's also the same thing with our consultants. It's all about really clear, open, honest communication.

Greg Fenton: 15:31 

You know, on that topic of communication, I think it is very, very important to develop that understanding. I think we've all very important to develop that understanding. I think we've all seen in the last few years a development of more, may I say, transactional purchasing of services, and I think that might be for more than just design services and maybe for other professional services, especially at the larger companies and organizations. But it's and I think I've experienced it something gets shortchanged in that, you know, it's that transparency's never established and misunderstanding or missing the mark is likely to ensue. And besides not necessarily being called back to the table to ask questions and inquire about something we may have proposed, it's hard not to believe that the highest results for the client aren't achieved when it is based on less of a value proposition and more of a transactional, maybe even truly just a financial number lowest number.

Mike Boldenow: 16:43 

Here's where I'm seeing a little bit more of the transactional justification from our clients, and that is, let's say, we and two or three other firms are part of a pre-approved vendors list. We've already qualified. They're familiar with all of us. Pre-approved vendors list We've already qualified, they're familiar with all of us. There's an opportunity out there. They feel like we're all qualified. Let's ask for more of a transactional fee-based proposal, and I'm seeing a little bit more of that. There still is an opportunity for a miss, I think, unless your proposal still can identify some of the unique characteristics of your process, your approach, your team, which most of the time they do. But that's one example of where I see a little bit more of the transactional RFP process actually with the potential of being successful.

Matthew Gerstner: 17:31 

Check me if I'm wrong here, but when I'm hearing transactional, I'm also hearing a little bit of what Terri said about communication. As in like there's probably not as much good communication happening when it's a transactional experience as opposed to when we're really doing a full value conversation.

Greg Fenton: 17:51 

I think the chances are increased when you don't have a chance to engage On the flip side, it's the owner's prerogative to do that and we want to work for their people and their company to make them better. So we have to approach it that way, and we certainly do. We don't shy away from that. But we may ultimately be more clear and succinct and maybe offer some more qualifications when we do that. When we know that a lower number is the biggest evaluator.

Mike Boldenow: 18:32 

I think being succinct to your point, Greg is something we need to do better at times. Looking around the room here, in other words, especially if an owner is looking at our fee and then looking backwards at the proposal because the fee is always on the last page, to say what are they providing for this? And I think sometimes our point gets lost in a lot of words and I think sometimes we can do better with being more specific and, again to your point, Greg, more succinct and encouraging them more to dig into what we're proposing.

Greg Fenton: 19:10 

We recently heard from a large client that contracts with several design firms Mike, to your point of having several firms at their ready that our fees are typically not the lowest initially but by the end of the project they're in line with other peer firms and we take that as kind of a pat on the back in some ways that we made the process smoother for them in not having to go through all the requests. There are certainly times when requests for additional compensation is warranted, but we try to initially understand, like we've all been talking about, as best we can to give them an equitable number up front and make it smooth.

Mike Boldenow: 19:55 

Yeah, and Greg, you're talking about fees at the end of the project. I'm talking about overall project cost. I think it gets back to what I mentioned, and we don't just say this. We really do know that we produce great sets of documents, which saves our clients, our owners, dollars at the end of the project, in other words, less change orders and …

Matt Gerstner: 19:55 

Far fewer back end fees. 

Mike Boldenow: 19:55 

That's right. So I think it's all part of what we put into our proposals as value. It's just the fee and the services is one thing, but then the quality, which equates to better bids and less change orders by the end of the project.

Terri Ulrick: 20:38 

One of the things that I think sets BWBR apart is that the group of individuals that work here we really care. People here really care about our client success when it comes to making sure that the documents are thoroughly coordinated to make sure that the client is getting the product that they deserve. We care about their success when we're putting together our fee and our process. We care about their success when we look at our approach to the design, really looking at what is it that the client, again, what is it that they need in order to meet their ultimate goal? At the beginning, Greg had mentioned that one of the things we like to talk about with clients is really, what is your goal for this project? So let's make sure that we're setting it up for success and when you have a group of individuals that care, that's when you get a really good quality project at the end.

Greg Fenton: 21:27 

Design. For us, in addition to what Mike has talked about in terms of documents and good kind of the objective part of what we do as architects and interior designers, there's that subjective piece, and design can bring so much more value, not only for those folks that are investing their lives eight or 10 or 12 hours a day within a space, but bring value to companies to recruit and retain and have lower churn or greater outputs. A lot of that is the subjective thinking that when we are building proposals, we are building that in, we have to build in and we do build that into our thinking of the design process and the schedule to make sure that those outcomes are very high.

Matthew Gerstner: 22:16 

Absolutely. I mean, it's so important in today's labor market when you're looking at the churn, when you're looking at employee retention, attraction in general too, it's just a good design will go a long way to helping a client with that.

Terri Ulrick: 22:30 

When it comes to a well-designed or a good designed space. A lot of individuals might not be able to put their finger on what makes a space good. Right?  Those in the design profession can, but you all know when you've been in a space that isn't designed well.

Terri Ulrick: 22:44 

It feels uncomfortable, it may just, it just feels off. And I know one of the things that we really look at from the clients that we work with is we really look at what can make the space work well and then and be comfortable and pleasing for those who are working within the area. Particularly, I do a lot of work in clean rooms and historically clean rooms have always been well because they're clean. They end up being white spaces with no character in the bowels of a building and we've been introducing daylight into those areas and with the clients that have had these clean rooms that have daylight, they've actually noticed that the performance of their staff is up because that daylight adds to mental health.

Terri Ulrick: 23:21 

And when people are happy and healthy mentally, that actually translates to a bottom-line expectation.

Greg Fenton: 23:27 

But it's that thinking, it's that out-of-the-box thinking that is part of the value we bring, part of the effort and time we put into a design process that gets translated into a proposed fee or level of compensation that we need to make sure we're getting across in our documents when we're asked to provide a proposal or respond to an RFP request for proposal.

Matthew Gerstner: 24:00 

So if you've got a client that hasn't done a lot of construction if you will, they haven't done a lot of remodels, they haven't even maybe they haven't built a new facility in 50 years and it's all new people doing it, how do you create that confidence for them, because it is a huge investment, and take some of that weight off their internal team? 

Mike Boldenow: 24:31 

And sometimes we can as a team, even with the CM partner or the construction partner, step in and say I think the CM has some resources, they can help you with some of this.

The design team has some other resources, they can help you out with these other services. But again, there is a level of service which equates to a different level of fee in those situations too.

Greg Fenton: 24:43 

You know, one of our greatest impacts as designers happens when we're brought in early and, to Mike's point, very early with a client or an organization or a public entity, even at that stage of them not knowing what their next steps need to be, our value, particularly in the markets that we are in, to Terri's point of complex, sophisticated, highly regulated one of the greatest things we can bring early on is helping them determine their problem statement, their value proposition, their definition of success, as well as helping them. Often For some of our clients in rural settings, at critical access hospitals, for example, this is once in a generation project for them and many of them haven't gone through a full-scale renovation, expansion or new building. And asking some critical questions up front and helping them create their roadmap is that value proposition that we think we do better than most. And understanding that and how does that fit into compensation and services, is important to have that early on and sometimes that may mean that they may not do a project. Yeah, yeah, right, can help them solve it Correct.

Mike Boldenow: 26:21 

The data shows that you don't really need to do this renovation or expansion. The data shows that there might be an operational solution that we can help you with and reduce, not eliminate, the potential scope of the project.

Matthew Gerstner: 26:42 

Absolutely, and that's a huge value to a client.

Terri Ulrick: 26:45 

Yes.

Greg Fenton: 26:45 

It has been the case on occasion where we help them not do a project.

Matthew Gerstner: 26:51 

Yeah, so there's been a lot of projects that have happened with the group that we've got in this room today. Through the years. There's a lot of experience in this room, so what advice do you have for clients as they enter into their selection process when they're looking for a firm like us?

Mike Boldenow: 27:09 

Well, I'll answer that first, and I think it goes back before they even decide on the scope and then the RFP. They even decide on the scope and then the RFP. I think they need to bring in partners that they trust to sit down with them to evaluate the need and then put together a proposal that represents a process that is going to make them successful, making sure that the proposal isn't too vague and leaves too much open-ended that raises too many questions when all the proposals are delivered.

Greg Fenton: 27:57 

We at BWBR have many, many clients who have been decades-long partners of ours and we hope we're their trusted advisor over those years and I would encourage potentially new clients of ours to think that way that find someone that you can work with or you feel comfortable. That will lead you over the years to come. I might even go for clients looking to work with us for the first time. Check our references. I think those folks will share who we are, demonstrate some of the value that we've brought to them over the years and how we've led them on one or many projects. But in general, look for a partner, look for an organization or design firm that can take you to the next level.

Terri Ulrick: 28:55 

I don't know if I can beat that one to tell you the truth.

Matt Gerstner: 28:55 

That was good.

Mike Boldenow: 29:01 

Well, this is a cliche, but if you can identify a good fit, that's something we haven't talked about yet. Fee is always going to be a component Team and experience is always going to be a component Team and experience is always going to be a component. But a lot of times, what I hear from our clients, upon being selected or not, is that the team we selected we just felt comfortable with. We seemed to share the same culture, we seemed to share a lot of the same values and we really connected.

Greg Fenton: 29:24 

30-some years ago and I know, mike, you remember that and Terry, you've heard this the old adage of the journey should be as enjoyable as the destination, or something like that. Right, we always kind of smiled under our breath about that cute phrase. But you look back and those folks were pretty wise in saying that. And there is something to that. To Mike's point about who do you feel comfortable with, who do you think is going to take you to the next level. That's the journey.

Terri Ulrick: 30:06 

One client that Mike and I worked with. They work with many different architects, right, they are open and they have to, because they're a public entity. They have to spread the wealth, and the one comment that they had made was that there are a lot of very talented architects out there. But why they liked working with us is they had the utmost confidence that we would get them there, and we made it fun.

Matthew Gerstner: 30:28 

Thank you all so much for your time and insights today. I know you've given potential clients a lot to think about. Thanks for being here today. This has been Side of Design from BWBR, brought to you without any paid advertisements or commercials. If you found value in what you've heard today, give us a like, leave us a comment or, better yet, share us with your network. You can also reach out to us if you'd like to share an idea for a show or start a discussion. Email us at sideofdesign@bwbr.com.