MOVING FORWARD WITH OUR MANDATORY SCALE OF FEES By Ar Ridha Razak Introduction
The practice of Architecture in Malaysia is governed by Board of Architects (LAM) with the enactment of Architects Act 1967 (Act 117). The Architects Scale of Minimum Fees, Rules were made mandatory in 1986 under the provision of the Act. The latest revision to the Architects Scale of Minimum Fees, Rules 2010 was gazetted and came into force in March 2010 and supersedes the previous rules.
The mandatory Scale of Fees are to be adhered by all Architects practicing in Malaysia. The Scale of Fees set the minimum standard for Architects Fees, and Architects can charge higher than this Scale of Fees but not lower.
However in reality many Architects are having difficulties to follow the Architects’ Scale of Minimum Fees and in collection of fees, especially at the final stages. There should be a mechanism to ensure that the mandatory minimum Scale of Fees is followed.
With the recent amendments to the Architects Act to allow for liberalization and opening up the profession, there are more challenges to be faced by Architects with regards to fees and remuneration. Therefore there is an urgent need to address the issues and challenges on procurement and fees faced by Architects. This article is written in response to the Professional Practice Forum (PPF) 2015 conducted recently and to look at various challenges faced by other countries and to explore the way forward for Malaysian architects in handling fees and its recovery.
History of Malaysian Architect’s Mandatory Fee scale
The year 1967 was a historic year for Malaysian Architects. It was the year when Pertubuhan Akitek Malaysia was formalised under registrar of society led by Dato’ Hisham Al Bakri. Subsequently the 1
architect Act 1967 was gazetted in Parliament in 1973 . With joint effort by PAM members, the PAM Architect Rules, PAM Code of Professional Conduct, Conduct, Standard PAM Form of Contract 1969 (1970) and 2
PAM 'Scale of Professional Charges' (1978) we re put to use to assist architects practicing in Malaysia.
Contrarily, in 1980’s , while UK and other European countries have abandoned its ’ mandatory scale of fees for architects due to fair trade agreement, PAM Scale of Professional Charges was withdrawn by 1
Warta LAM 1993 Panduan Arkitek 1978, Architects Directory Pertubuhan Akitek Malaysia KDN0744/78
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PAM and made mandatory through the inclusion in Architects (Scale of Minimum Fees) Rules 1986 by the Board of Architects (LAM). The move was essential as it was found that some architects were 3
providing inadequate scope of work & unsatisfactory service to third parties . Over the years, various challenges were found in the Scale of Minimum Fees 1986 and in 2010, the scale was amended to suit latest market trends and needs. Global Scenario
Different countries treat Architectural practices differently. differently.
Each country has its own customised
Architect’s scope of work, fees and scheduled method of payment. This can be summarised in 3 categories:
Category 1: Countries having mandatory scope work and fees via its act, rules or by laws for 4 5 6 7 example Malaysia , India , Philippines , Kenya , Sri Lanka, Turkey, Bolivia Category 2: Countries having indicative scope and fee guide guide in the form of scale of fee guide or 8 9 10 11 12 fee graph example Australia , New Zealand , Canada , Nigeria , South Africa Category 3: Countries that have left it to open market market to decide its fees for example Singapore, UK
While each country has its own reasons for adapting to any of the above approach, every country has the same issues of architect trying to get its appropriate remunerations and dealing with its fee recovery.
The UK scenario
The UK mandatory scale of fees was implemented since the year 1872 by RIBA. In 1979, the UK’s Monopolies and Mergers Commission, decided that mandatory fee scales were anti-competitive and ordered them to be withdrawn by all UK professional bodies. This has led to the abolishment of RIBA’s mandatory fee scales and replaced by recommended fee scales. In 1989, RIBA worked with Mirza & Nacey Ltd to conduct a survey on fees (now conducted by Fee Bureau).
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In 2009, RIBA removed all forms of fee guide due to Fair Trade ruling. This action was widely commented in Architects journal UK by David Chipperfield, a renowned British Architect who described it as a policy 3
Board of Architect Malaysia General Circular 3/1987 Architect(Scale of Minimum Fees) Rules 2010 5 Condition of engagement and scale of charges preamble , Council of Architecture India 6 Architects National Code Standards of Professional practice, The united architects of the Philippines 7 The Architects and Quantity surveyors Act, Law of Kenya 8 Australia Fee guide no 8, AN 03.02.100 9 The New Zealand Architects incorporated , guide to architects charges 10 The Royal Architectural Institute of Canada, Determining appropriate fees for the service of an Architect 11 2009 Associating Consulting Architect Nigeria Scale 12 South African council for architectural professional fees guideline 34(2) 13 http://www.bdonline.co.uk/why-has-the-riba-ditched-its-fee-scale-graphs?/3153524.article 4
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against quality. “It is completely shocking that the RIBA should be even thinking about this,” said the London-based architect. British fees were so low that it was impossible to deliver quality architecture 14
within the expected time scales . In 2012, it was reported in BDonline that two-thirds of architects polled in a BD survey said the RIBA should bring back fee scale. “The undercutting phenomenon needs to be reversed.” In 2014, it was reported in BDonline that according to new data from the RIBA’s Insurance Agency, Architects’ fee income has fallen 40% since the start of the recession in 2008. The news came shortly after BD’s employment survey found that 22% of architects were currently unemployed, with a third of them 15 having lost their job within the last six months of the survey.
The Australia scenario
While Australia has long ago abandoned its scale of fees, its Architects have always practiced with a fee guideline in various forms. Architects are free to choose whether to charge using a fee scale, graph, lump sum, time cost, or partial services. This has always been clear with the publication of practice notes 16 guide on the scopes and fees.
Although this is treated as a freedom to charge, the Australian professional industry was protected by the existence of its acceptable minimal wage and Work Relation Act 1996, now known as Fair Works Act 2009. The architect’s fee is somehow influenced by the minimum compensation under the Fair Works Act which defines minimum compensation by field in lieu of national minimal wage. On 3rd September 2010, The Fair Work Ombudsman Om budsman launched a prosecution against a Perth architect for allegedly failing to 17 provide employment records for a former employee who claimed he had been underpaid.
The Singapore scenario
In 1985, the industry had a fee scale developed by the Singapore Institute of Architects (SIA) primarily for private sector projects through the 1st Edition of the Conditions of Appointment and Architect's Services and Mode of Payment. In 2004, Anti-Competition Act required the industry to abolish all fee scales and guidelines where SIA has complied with this requirement. In 2013, it was reported in Asiaone news that SIA had conducted a self-audit to review the present fee scale with a view of formulating an updated (consumer) guideline.
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Among the findings was that the
industry witnessed an unprecedented and unhealthy imbalance of fee undercutting compounded with 14 http://www.architectsjournal.co.uk/news/daily-news/-architects-feel-the-loss-of-riba-fee-surveychart/5210537.article 15 http://www.bdonline.co.uk/architects-fee-income-falls-40/5052288.article 16 RAIA fee guide 8 (2001) 17 http://www.fairwork.gov.au/about-us/news-and-media-releases/2010-media-releases/september-2010/20100903-finetune-holdingsprosecution 18 http://news.asiaone.com/news/mailbox/fee-guideline-vital-architects-institute
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the reality of ever-increasing professional responsibilities, liabilities and increasing demands from consumers. Service standards, especially especially arising from manpower resource allocation, allocation, have generally generally been compromised, leading to unhappy scenarios for architects and clients alike. SIA had urged the relevant authorities to reinstate the guideline approach. To date the initiative is still on going.
Existence of the mandatory fee scale is to protect the Public or the Architect?
The general misconception is that the mandatory fee scale was to protect the professional rather than the public. The Architects Act 1967 & Rules 1996 intention was to regulate the practice of architecture in interest of the public. This was presented by Ar Ezumi in the PPF 2015 which explains that the Architect Act protects the public through var ious ways as follows:
1. Sec 7: Registering qualified persons to practice architecture in the country in order to assist the public to get to know their architec ts. 2. Sec 8: Establishing standards for registration to restrict only qualified persons serve the public. 3. Sec 15: Investigate complaints against architects and enforce regulations through disciplinary process to keep only the good architects to serve the public whereas noncompliant architects are liable for prosecution. 4. Sec 33: Enforcement of the law against imposters to protect the public from being cheated by imposters pretending to be architect. 5. Sec 10A: Addressing illegal practice by non-architects so that the public can choose to have legal buildings.
While the Architect Act 1967 was meant to protect the public, it is undeniable that an Architect needs to be remunerated in order to provide good services and hold unlimited liability. In Ar Thirilogachandran presentation during PPF, he mentioned that over the years, it was found that during agreement stage many clients did not want to follow the mandatory scale, negotiating the fee to be based on market fee pricing, pitting architects against each other to get the lowest price and many more. Architects are pushed to the wall to secure jobs while accepting lower fees in order to survive in the market. The general assumption is that the easiest way to reduce the development cost is to reduce the consultant’s fees.
During payment stage, among the common issues faced by architects are client not paying as per invoice, late payment, request for contra, not paying at all, and some even imposed set off to Architect. In a PAM survey conducted in 2011, more than 95% of projects undertaken in the private sector do not follow the mandatory Scale and many architects have difficulty collecting their fees especially at the final
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stage. Many architects are dissatisfied with the current scenario since the problem has been accumulating since early 90s. The way forward
From the various global scenarios above, it is quite clear that the mandatory Scale of Minimum Fees should be enforced in Malaysia. Malaysia. In 2015, PAM has set up a Fee sub-committee sub-committee under its Professional Practice and Building Legislation Committee. Committee. There are various steps and measures that can be taken to enforce the mandatory fees to prepare prepare our local Architects to compete compete for liberalisation. Among the suggestions are: 1. Public awareness program through ‘no discount rule ’ by LAM/PAM and the introduction of Architect Fee calculator mobile Apps. 2. Enforcement on contravention of the Act for discounting of fees on its members and soliciting parties through penalties provided under that act. 3. Introduce new legislation change such as to make LAM as Architect’s fee stakeholder. 4. Introduce Electronic Appointment Letter system to ensure minimum scope & fees are met. 5. Develop a cloud base system ie ‘Electronic Management System’ for related parties & project registration, monitoring project stage progress, manage Architect fee collection and disbursement. On the areas of recovery fees, among the suggestions are: 1. Introduce new legislation changes such as inclusion of a period of honoring fee claim in letter of appointment, retainer fee upon appointment, interest on overdue invoice and prolongation cost. 2. Recovery of fees through debt collection agencies. 3. Educate & Encourage Architect for fee recovery through CIPAA 2012
In conclusion, the issue on Architects remuneration and fee recovery can be overcome through collaborative joint effort between LAM, PAM and its increasing members. For these suggestions to materialise, Malaysian Architect’s will have to stand united and face the market to exercise their rights which has been long compromised. With better fees and mode of payment Malaysian Architects will also be better equipped to face liberalization.
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PAM Report - Survey on procurement 2012
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