RESEARCH PAPER
DEALING WITH ARCHITECTS REMUNERATION IN MALAYSIA HOW DO WE MOVE FORWARD?
Prepared by:
AR RIDHA RAZAK
WHAT WHA T ARE THE ISSUES WITH ARCHITECT FEES ISSUES
APPOINTMENT
1. 2.
3.
Many client do not follow SOMF Client dic dictate the fee base on hear say low market percentage or lump sum Arc Archit hitect are force to give huge discount.
PAYMENT
1. 2. 3. 4.
5.
Late Pa Payment Don’t pay as per invoice Contra Client does not pa pay at all Client impose LA LAD to Architect or set off
MANY SAY, WHY MAINTAIN SCALE OF MINIMUM FEES WHEN NO BODY USES IT?
THE MALAYSIA MALAYSIA SCENARIO S CENARIO
Recently, I accompanied my boss to a meeting with one of his business partner. What ensued was nothing out of the norm. Quite boring actually. However, I was awakened from my daydream when the business partner lambasted my poor old boss as follows: "No! We cannot proceed la like this!" "Why not? It's a very good proposal?" "Ya la, the proposal is good but the fee is not." "Ooo.." "How much are you charging him?" "2.5%" "Hah?! That's damn low!" "I know" "Then why did you agree?" "Too much competition lor. If I refuse, they'll employ somebody else. In these times, we cannot choose what?" ..“ "Aiyah..“
WE CANNOT DISMANTLE AS IT IS PART OF OUR ACT.
SELECTED WORLD SCENARIO
WHAT WHA T ARE THE WORLD PRACTISING
FEE GUIDES
STATUTORY FEE SCALE
MANDATORY FEES/ MIN FEES
RECOMMENDED FEE GUIDE
NO FEE RESTRICTION
EMPOWERED BY ACT
EMPOWERED THROUGH RULES, BYE LAWS, NOTICES
BY INSTITUTE BY FEE BUREAU BY ASSOSIA ASSOSI ATIAN CONSULTING ACRCHITECT
GO WITH THE FLOW
EXAMPLE: KENYA THE ARCHITECT AND QUANTITY SURVEYOR ACT
EITHER ARCHITECT BOARD OR INSTITUTE IN BED IN STATUTORY ACT/BY LAW
WORLD SCENARIO Country
Type of fee scale
Fee scale
Europe
Scale or Guide by Board
UK
Recommended Fee guide
RIBA fee guide
Germany
Recommended Fee guide
HOAI fee scale
Africa
Royal Institute British Architect & Fee Bureau The Federal Chamber of Architects Board
South Africa
Mandatory Fee
Via board notice 72 / 2015
Nigeria
Recommended Fee guide
ACAN fee guide
Institute/ ACA/ Others
Institute/ ACA/ Others
South African Council for the architecture profession Nigeria Institute of Architects/ Assosiation consulting Architects Nigeria
Kenya
Statutory Fee
The Architects and Quantity Surveyors Act
Asia
Board of Registration of Architects and Quantity Surveyors Board
Singapore
Recommended Scale of fees
SIA Calculator
Malaysia
Mandatory Min Fee Scale
RULES SOMF 2010
Philippines
Mandatory Fee Scale
Thailand
Recommended Scale of fees
India
Mandatory Fee Scale
Hong Kong
Recommended Scale of fees
200 - CODE OF ETHICAL CONDUCT
Institute/ ACA/ Others Singapore Institute Architects
Lembaga Arkitek Malaysia Professional Regulation Commission
THE UNITED ARCHITECTS OF THE
and the Board of Architecture
PHILIPPINES ASSOCIATION OF SIAMESE ARCHITECT
COA- Conditions of Engagement and Scale of Charges
Council of Architecture
HKIA Scale of Professional Charges
Oceania
HONG KONG INSTITUTE OF ARCHITECTS Board
Institute/ ACA/ Others
Australia
Recommended Fee guide
RAIA practice notes
Australian Institute of Architect
New Zealand
Recommended Fee guide
NZIA Guide to Architect Charges
New Zealand Institute Architects
North America Canada British Columbia
Board Recommended Fee guide Mandatory Fee Scale
Institute/ ACA/ Others
RAIC - A guide Determining Appropriate Fees
The royal Architectural Institute of
for the Services of an Architect
Canada
Tariff of Fees for Architectural Services Services empowered under under act
Architectural Institute of British Columbia
THE UK SCENARIO HOW ARCHITECTS IN UK FAIR WITH NO SCALE OF FEES
UK HA HAVE VE LO LONG NG AGO DISMANTLE THEIR SCALE OF FEES SINCE 1982
OPINION ON FEE SCALES AND GENERIC GRAPH
1.Percentage 1.Percentage fees are great when construction costs are rising, but if they drop, as they always do in a recession, then architects’ fees decline proportionately. 2.The architects’ work stays stays the same, but the return varies depending on the contractors’ market market and performance. 3.fee from a graph may be quick and easy, but it is foolhardy to rely on fee data that does not represent your actual cost base or the specific services to provide for a particular project and client. 4.fee scales and generic fee graphs have done a great disservice to the profession. profession.
HISTORY OF MINIMUM FEE SCALE IN UK Year
Milestone on Fees
1872
The RIBA operated a mandatory minimum fee scale &
1979
the UK’s Monopolies & Mergers Commission, decided that mandatory fee scales were anti-competitive and ordered them to be withdrawn by all UK professional bodies.
1982
The RIBA’s RIBA’s mandatory fee scales were abolished and replaced by recommended fee scales
1989
RIBA work with Mirza & Nacey Ltd to conduct survey on fees ( Fee Bureau)
1992
Recommended fee scales were withdrawn and shown as sliding scale graphs for different building types
2003
Office of Fair Trading ruling against any form of fee scale and with draw indicative fee scale.
2003
RIBA negotiated an agreement with the OFT whereby it could publish fee guidance based on actual fee survey data that had been independently collected and interpreted.
2009
RIBA removes percentage fee graph from Client’s Guide
SETTING UP OF FEES BUREAU BY MIRZA & NACEY RESEARCH LTD LTD
Started since 1989 After The RIBA’s mandatory fee scales were abolished In 1982 and replaced by recommended fee scales
FEE GUIDE BASE ON MARKET SURVEY DATA
• In 2003 , The lack of any fee information was bemoaned not only by professions but also by clients seeking guidance on what they should pay their consultants. consultants. • RIBA negotiated an agreement with the OFT whereby it could publish fee guidance based on actual fee survey data that had been independently collected and interpreted. Survey data • The survey data was based on relatively small samples, particularly for smaller scale domestic projects, where the demand and reliance on this data was highest.
• The survey data also did away with the in-built in- built “front“front-loading” of the previous previous RIBA fee scales, intended to help practices’ cashflows. Fee guide outcome
Survey
outcome
As based on actual fees, rather than the ambitions of the profession
the survey data gave significantly lower fee levels than the previous “indicative” fees. A higher proportion of the fees were now shown to be in the latter work stages, reflecting real working practices
CHALLANGES ON FEE GUIDE BASE ON MARKET SURVEY DAT DATA The RIBA fee guidance graphs 2003-9 gave a simple range of fees as an average of a wide range of different types of buildings and projects with very different client demands on architects’ architects’ services. For example, there can be a great difference in the architects’ inputs required for the refurbishment of an historic listed mansion, compared with an extension to a recently constructed house, but they were all mixed up in the same fee range. Although the RIBA did carefully describe and qualify this fee information, its limitations were probably not fully understood.
ISSUES 1. RIBA concern concern that the fee guidance guidance was being misunderstood misunderstood and misapplied 2. Some members members of the profession profession consider that any form of fee guidance guidance lowers fees as clients negotiate downwards from the published information, particularly in a recession. 3. Clien Clients ts are seeking more certainty of costs and don’t see the benefit of paying more for their architects just because they have produced a more expensive building.
RIBA FEE GUIDE
ARCHITECT FEE INCOME FALLS 40% DUE TO RECESSION
AFTER EFFECT OF DISMANTLING OF SCALE OF FEES IN UK
Research by the Fees Bureau has revealed that hourly rates by sole principals, and the architects’ fees index, have both fallen for the first time in a decade due to under cutting of fees
Architects feel the loss of RIBA fee survey su rvey chart Britain’s leading architects have railed against RIBA’s decision to abandoned fee survey graphs from the official publication A Client’s Guide to Engaging an Architect , with David Chipperfield describing it as a ‘policy against quality’ ‘This decision erodes the authority and status of architects. It is completely shocking that the RIBA should be even thinking about this,’ says the London-based London-based architect. British fees are so low according to Chipperfield (pictured ) that it is impossible to deliver quality architecture within expected timescales.
‘For the last 25 years, my office has lived on the edge of financial viability – viability – if if I was a doctor or in any other profession, this would not be the case.
6 November, November, 2009 | By Merlin Fulcher
Architects feel the loss of RIBA fee survey su rvey chart
Clients see indicative fee scales as a cost to be negotiated down. down.””
THE CURRENT OUTLOOK
THE CURRENT OUTLOOK- ARCHITECTS EARNING BY FIELD OF EMPLOYMENT
TREND EARNINGS 2008-2014 BASE ON MEDIAN DA DAT TA
THE AUSTRALIA SCENARIO HOW GOVERNMENT OF AUSTRALIA HANDLES NO MANDATORY SCALE OF FEES
CHARGING ARCHITECTURAL FEES IN AUSTRALIA Australia does not have a fix scale of fees. fees. The architects are free to use any method they prefer either percentage, lump sum or time charges fee. However there is a guide prepared by AIA for its members to follow as a basis to charge its fees. Fee guide
Percentage fees for full & partial services Percentage fee graphs The graphs have been prepared in relation to various building types, classified in accordance with their degree of complexity, and the extent and nature of services required to be provided in relation to them. The graphs are based on information from the architectural services cost survey, survey, conducted twice a year by the RAIA.
Lump sum fee
• The architect may agree with the client to charge a lump sum fee for those services defined in the scope of services. • The fee charged could be derived from a percentage calculation, time charge calculation, or some other method. • Should either the scope of services, or the scope of the project defined within the written brief change, then the lump sum fee should be re-negotiated.
Time charges The charge for principal’s and staff time should be calculated by each practice (refer to AN02.02.300). Can refer to fairworks minimum wage charges for architect
AUSTRALIA FEE GUIDE FOR FULL SERVICE
AUSTRALIA FEE GUIDE FOR PARTIAL SERVICE
MALAYSIA MINIMUM WAGE
UK MINIMUM WAGES
From Thursday 1 October 2015, the adult rate of the National Minimum Wage (NMW) Wage (NMW) will rise by 20 pence from £6.50 to £6.70 per hour, as recommended by the Low Pay Commission (LPC) in March 2015 this year. Note : From 1 October 2015: •the adult rate will increase by 20 pence to £6.70 per hour •the rate for 18 to 20 year olds will increase by 17 pence to £5.30 per hour •the rate for 16 to 17 year olds will increase by 8 pence to £3.87 per hour •the apprentice rate will increase by 57 pence to £3.30 per hour •the accommodation offset increases from the current £5.08 to £5.35 This is the largest real-terms real- terms increase in the National Minimum Wage since 2007, and more than 1.4 million of Britain’s lowestlowest paid workers are set to benefit.
NATIONAL MINIMUM WAGE AUSTRALIA
http://www.wageindicator.org/main/salary/minimum-wage/australia
AUSTRALIA TRIBUNAL FOR FAIR WORKS ACT 2009 Commission (FWC), formerly known as Fair The Fair Work Commission (FWC), Work Australia (FWA), Australia (FWA), is the Australian industrial relations tribunal created by the Fair Work Act 2009 as part of the Rudd Government's Government 's reforms to industrial relations in Australia in lieu of work choice act. It commence Operations on 1 July 2009. FWC is an independent body with the power and authority to regulate and enforce provisions relating to : • minimum wages and employment conditions, • enterprise bargaining, • industrial action, • dispute resolution, and • termination of employment. [4] The Fair Work Act is is an attempt to create a more national system for regulating industrial relations in Australia. It is also involved in the process of determining national industrial relations policies, including setting minimum wages and regulating the award system.
http://www.fairwork.gov.au
Minimum wage Australia is reviewed by Fairworks commission commission annually
Overview • A minimum wage is an employee’s base rate of pay for ordinary hours worked, and is generally dependent on the industrial instrument that applies to their employment (for example, a modern award, enterprise agreement, transitional pay scale, or national minimum wage order).
• The minimum wages received by employees in the national workplace relations system are reviewed by the Fair Work Commission annually, with any adjustments taking effect on 1 July each year. • The Fair Work Commission is required to make a national minimum wage order each year that sets both a national minimum wage and special national minimum wage. • Employers and employees cannot agree to a rate of pay which is less than the applicable minimum wage.
http://www.fairwork.gov.au
ARCHITECTS FAIRWORK FAIRWORK MINIMUM WAGES/AW WAGES/AWARD ARD GUIDE IN AUSTRALI AUSTRALIA A Fair Work has pay guides for every field in Australia to determine its minimum wages
OTHER OTHER COUNTRIES SCENARIO 1. COUNTRIES IES WITH ITH APPROPRIATE APPROPRIATE FEES OR FEE GUIDE
SOUTH AFRICA COUNCIL FOR THE ARCHITECTURE PROFESIONAL FEE GUIDE CURRENCY : RAND
THE UNITED ARCHITECTS OF THE PHILIPPINES SCHEDULE SCHED ULE OF MINIMUM BASIC FEE CURRENCY : PESO
COUNCIL OF INDIA SCALE OF CHARGES CURRENCY : RUPEE
http://www.coa.gov.in/practice/practice.htm
NIGERIA SCALE OF FEES BY NIA & ACAN CURRENCY : NAIRA
NIA Scale
NIA Scale
ACAN Scale
NEW ZEALAND FEE GUIDE ACCORDING TO CLASS OF BUILDING NZIA: Architects’ Architects’ fees for providing agreed services may be calculated on Lump Sum, Time Charge, or Percentage Fee bases, or a combination of these appropriate to the nature nature or stage of the services agreed.
CURRENCY : NZ DOLLAR
SCHEDULE OF WORLD WIDE FEES COMPARISON STUDIES DONE BY PRESIDENT OF ACAN 2010
OTHER OTHER COUNTRIES SCENARIO 1. METH METHOD OD OF PA PAYMEN YMENT T
STAGE PAYMENT COMPARISON Collection of fee upon signing agreement
PHILIPINE ARCHITECT COLLECT 85% BEFORE CONSTRUCTION AND LESS PRIORITY DURING CONSTRUCTION
INDIA PUT PRIORITY ON CONSTRUCTION WITH 45% CLAIM DURING CONSTRUCTION
THE UNITED ARCHITECTS OF THE PHILIPPINES PAYMENT SCHEDULE
PHILIPINES PAYMENT SCHEDULE Stage % Accumulation Upon signing agreement 5 5 Schematic 15 20 Design Development Contract Documentation
35 30
55 85
CONSTRUCTION PHASE
15
100
100
COUNCIL OF INDIA SCHEDULE OF PAYMENT India % Retainer On appointment/ Signing of Agreement/ Acceptance of offer Stage 1 On submitting conceptual designs and rough estimate of cost. Stage 2 On submitting the required preliminary scheme for the Client's approval along with the preliminary estimate of cost. Stage 3 a. On incorporating Client's suggestions and submitting drawings for approval from the Client/ statutory authorities, if required. b. Upon Client's / statutory approval necessary for commencement of construction, wherever applicable. Stage 4 Upon preparation of working drawings, specifications and schedule of quantities sufficient to prepare estimate of cost and preparation of tender documents. Stage 5 On inviting, receiving and analysing tenders; advising Client on appointment of contractors.
5
Cumulation Rs. 20M* or 5% of the total fees payable, whichever is higher, adjustable at the last stage.
5
10% of the total fees payable.
10
20% of the total fees payable less payment already made at Stage 1.
15
30% of the total fees payable less payment already made at Stages 1 and 2. 35% of the total fees payable less payment already made at Stages1 to 3a.
10
45% of the total fees payable less payment already made at Stages1 to 3a.
10
55% of the total fees payable less payment already madeat Stages 1 to 4.
Stage 6 a. On submitting working drawings and details required for commencement of work at site. b. i. On completion of 20% of the work ii. On completion of 40% of the work iii. On completion of 60% of the work iv. On completion of 80% of the work v. On Virtual Completion
35
Stage 7 On submitting Completion Report and drawings for issuance of completion/ occupancy certificate by statutory authorities, wherever required and on issue of as built drawings
10 100
65% of the total fees payable less payment already made at Stages 70% of the total fees payable less payment already made at Stages 75% of the total fees payable less payment already made at Stages 6b(i). 80% of the total fees payable less payment already made at Stages 6b(ii). 85% of the total fees payable less payment already made at Stages 6b(iii). 90% of the total fees payable less payment already made at Stages 6b(iv).
1 to 5. 1 to 6a. 1 to 1 to 1 to 1 to
100% of the fees payable less payment already made at various stages and retainer.
SOUTH AFRICA COUNCIL FOR THE ARCHITECTURE PROFESIONAL APPORTION OF FEES BETWEEN WORK STAGE
AFRICA PROFESIONAL FEE GUIDELINE Stage % Stage 1 : Inception 5 Stage 2: Concept & Viabiliity 15
Cumulation 5 20
Stage 3: Design Development Stage 4: Documentation & Procurement
20 30
40 70
Stage 5: Construction Stage 6: Close out
27 3 100
97 100
ROYAL INSTITUTE OF BRITISH ARCHITECT
SO IS MALAYSIA READY TO DISMANTLE SCALE OF MINIMUM FEES AND FOLLOW UK OR AUSTRALIA, OR OTHER COUNTRIES?
PROS AND CONS OF DISMANTLING FEES
Various speculative risk will happen when the t he fee scale is dismantle: Positive risk
1. 2. 3.
4. 5.
Comp Compet etit itio ion n betw betwee een n arch archit itec ectu turral firm and increase competency Enco Encour urag age e mer merge gerrs bet betw ween een sol sole e prop & partnership Comp Compet etit itiv ive e fee fee ben benef efit itss clie client nt and and may lower the property prices ( risk developer might absorb as profit) Parti artial al serv servic ices es will will be mor more via viabl ble e Emergen gence of new spe speci cial aliist profession
Negative risk
1. 2.
3. 4. 5. 6. 7.
Possi ossibi bili lity ty of Fees ees wil willl be be low lower er Only Only the the str strong ong wil willl sur survi vive ve.. Non Non competitive firm will have to close down Demo Demoti tiva vatte youn young g arch archit itec ectt to to pursue architecture Harrd for Ha for new new pr practi actice cess to to sta start rt up Wages ages of empl employ oyee ee will will be reduc educe e Inc Increase ase unem nemplo ploymen ymentt in Architectural industry Arch Archit itec ectt will will star startt redu reduci cing ng scop scope. e.
PRACTICE EFFECT OF DISMANTLING FEES
Situation
Effect
1. Situation when LOA given to client and unable to obtain his signature. Work done by conduct as per COE 7
Architect will have to prove his fees rather than the basis of SOMF. Fee will be base on quantum meruit.
2. Currently there are clients who calls architect to bid for the lowest fees.
Architect will compete fee with each other until the fees be very low just to get the project and maintain its client. Company with good cashflow will be at an advantage. advantage.
3. When fees are too low, company will not be able to hire or sustain good staff.
Jeopardize the quality of work by architect firm.
4. The rules in SOMF 2010 which has been improve due to various practice problems will be obsalete
Old practice issues will occur. Example: when big omission occur during construction. construction. The omission will impact all stage when SOMF is dismantle.
RIA REGULATORY IMPACT ANALYSIS
Source : MPC
Pertubuhan Akitek Malaysia
• To address the gaps in the management system for regulations; • To standardise regulatory and rulemaking process with emphasis on public consultation and measurement; • Consistent with International development on regulatory coherence; and • Recommendation by World Bank that Malaysia to have GRP embedded in its regulatory development process
51
The process of examining the likely impacts of a proposed regulation and a range of alternative options which could meet the government s policy objectives ’ ’
are intended to achieve better regulation by supporting: i. Sound an analysis ii. ii. In Info form rmed ed De Deci cisi sion on Maki Making ng iii. iii. Tr Tran ansp spar aren ency cy
1.
Identify the Problem or Issues
2.
Explain th the Ob Objectives
3.
Identify a Range of Alternative Options (Regulatory and Non Regulatory)
4.
Provide Ad Adequate Im Impact An Analysis (Cost, Benefits and Risks)
5.
Describe Ho How Co Consultation wa was Conducted
6.
Clearly State Co Conclusion and Recommended Option
7.
Provide Strategy to to Implement and Review
RIA ANALYSIS RIA CRITERIA
OPTION 1 – FOLLOW AUSTRALIA
Problem or Issues
Public feels that Architect SOMF is considered overcharge overcharge and not following market market pricing
Objectives
To provide more competitive market
Alternative
Dismantle mandatory fees LAM Fee guide in a form of percentage, lump sum, time cost
Yearly survey on market fee. Fee determine by market survey.
Impact Analysis
1.
Arch Archit itec ectt will will stil stilll foll follow ow SOMF SOMF 2010 2010 as a fee guide. 2. Gove Govern rnme ment nt jobs jobs belo below w 40 40 mil mil which uses SOMF will be change to man month. 3. Clie Client nt wil willl trea treatt fee fee guid guide e as a maximum fee to mark down. 4. Arch Archit itec ectt und under ercu cutt peer peerss to to get get the lowest price in order to secure the job
Business will be as usual 1. Some Some will will use mar market pe percen centag tage rate base on common practice. 2. Some ome will ju just fo follow what th the client give.
Consultation
LAM, PAM, MINISTRY HUMAN RESOURCE
LAM, PAM
Conclusion and Recommended
If fee is to be dismantle, various strategic and execution plan to minimize the impact to all stake holders
Strategy to Implement
OPTION 2 – FOLLOW UK
Establish Fee bureau
ARE WE READY TO FOLLOW UK AND AUSTRALIA?
TO BE LIKE UK
1. LAM MUS MUST T BE READ READY Y TO TO STEP STEP UP AND CONDUC CONDUCT T VARI VARIOUS OUS TYPE OF FEE SURVEY TO DETERMINE THE BASELINE FEES FOR EVERY TYPE OF DEVELOPMENT. 2. LAM CAN CAN EMPL EMPLO OY OTH OTHER ER PER PERSO SON N TO TO BECO BECOME ME THE THE MALAYSIAN FEE BUREAU TO CONTINUOUSLY PROVIDE REPORT AND ADVISE ITS MEMBERS. TO BE LIKE AUSTRALIA
1. TO EST ESTABLI ABLISH SH A DET DETAIL MINIMU MINIMUM M WAGE WAGE SCALE SCALE BY BY INDUSTR INDUSTRY Y FOR MALAYSIA OR LAM MINIMUM WAGE SCALE. 2. ALLOW ALLOW FOR FOR MARK MARKET ET FOR FORCE CES S TO TO FIND FIND ITS ITS LEV LEVEL. EL.
WHY SHOULD WE ENFORCE MINIMUM SCALE OF FEES?
REASON FOR A MINIMUM SCALE
Scale minimum fee is important 1. Prev Preven entt inadequa inadequate te remune remunera ratio tion n to profess profession ional al archit architect ect 2.
Prev Preven entt inad inadequ equat ate e serv servic ice e prov provid ided ed
3. Prev Preven entt Ma Mallprac practi ticce.
KNOWING THE HISTORY HISTORY OF SCALE OF MINIMUM FEES IN MALAYSIA MALAYSIA
PRIOR TO 1987 1. The credi credibil bility ity of of the prof profess ession ion was was being being plac placed ed in jeop jeopard ardy y as a result of actions of a few delinquent Architects specifically to residential projects. 2. Arch Archit ite ect ign ignorin ring th the PAM Scale of professional Charges fee structure or finding ways to circumvent it, 3. Archi Archite tect ct viol violat ated ed provi provisio sions ns of the the Archi Archite tects cts act and provi provide de unsatisfactory unsatisfactory service to third parties.
4. IN 1986 , SOMF 1986 WAS INTRODUCE BY LAM, SUBSEQUENTLY CAUSING PAM FEE STRUCTURE TO BE WITHDRAWN. 5. IN 2010, AMENDED TO TO SOMF 2010 TO SUIT MARKET CONDITION.
DERRIVA DERRIV ATION OF SCALE OF MINIMUM FEES (SOMF) ( SOMF)
1. The Scale Scale of of Fees Fees was was deriv derived ed after after takin taking g into into acco accoun untt the fact fact that it is a necessity for every human activity to be profitable, 2.
This This has has tak taken en into into cons consid ider erat atio ion n
•
years of research and work to provide the minimum level of remuneration minimum level of professional services required in the t he public interest, to satisfy both the legal requirements requirements of the relevant building legislations the stage certifications under the SPA. SPA.
• • •
SCALE OF FEES COMP COMPARISON ARISON WITH OTHER PROFESSION PREPARED BY BAR COUNCIL PROFESSION
Accountants
GOVERNING BODY
Malaysian Institute of Accountants
STATUTORY DISCOUNT SCALE OF ALLOWED FEES
No
REMARKS
MIA has set out a recommended basis for determining audit fees based on Not time charge, and the value of total assets applicable or gross turnover or operating expenditure.
Architects Scale of Minimum Fees 2010
Board of Architects
Yes
Doctors
Malaysian Medical Association
No
Engineers Scale of fees
Board of Engineers
Yes
No
Land Surveyor Scale of fees
Board of Land Surveyors.
Yes
No
Lawyer Solicitors remuneration order 2005
Bar Council
Yes
No
No
Fee is based on cost of works and a regressive yardstick ranging from 10% to 3.5% is applied.
Not MMA has set out guidelines on charges applicable payable. Fee is based on cost of works and a regressive yardstick ranging from 8.25% to 2.28% is applied. Fees are paid to Board before commencement commencement of work and will be paid out by Board in accordance with work done. Scale of fees for non contentious matter
MEMBERS SURVEY 2012 BY PAM Members Direction The feedback received from the members attended the PAM Professional Practice Forum 2012 show the direction that the Scale of Minimum Fees should not be abolished. The Scale of Minimum Fees is very much needed by the profession, government and members of public. A few members recommended recommended that the Scale of Minimum Fees should be revised and not to be made mandatory, mandatory, instead, to be implemented as a fee computation guides. However, However, 84.6% of the respondents respondents insisted the Scale of Minimum Fees should be made mandatory and more than a quarter of them insisted that the rules have to be enforced. The summary of the feedbacks from the respondents are as follows:
CONCLUSION TO MEMBERS SURVEY 2012 BY PAM It is concluded that the industry should maintain to have the Scale of Minimum Fees with some improvements need to be done to the scale. A mechanism need to be established to enforce the implementation of mandatory Architect (Scale of Minimum Fees) Rules. Conclusion
The Need for the Scale of Minimum Fees
Improving the Scale of Minimum Fees
1. 1. The Sca Scale le of Minim Minimum um Fees Fees will will guide architects in computing the architectural services fee to charge their client; and 2. The Scal Scale e of Minim Minimum um Fees Fees shall shall be a mutual reference for for both architects and developer in establishing the architectural services fee. 3. It can can also also be a guide guide for developer to estimate architectural consultancy cost in their development.
The Scal Scale e of Minimu Minimum m Fees Fees must must be reasonable and justifiable that can be justified when were were questioned by other parties.
2. It has has to be relev relevant ant to the base base cos costt and profit for the services to be provided.
Enforcement for Implementation of Mandatory Scale of Minimum Fees
1. A mecha mechanis nism m needs needs to be be set set up to ensure that architects follow to the Scale of Minimum Fees; 2.
Firm Firm actio actions ns mus mustt be tak taken en against Architect who contravene contravene Architect (Scale of Minimum Fees) Rules;
3. To expedi expedite te the implement implementation ation of LAM as stakeholders stakeholders of Architect’s Fees;
AWARDED PROJECT IN MALAYSIA 2012-2014
WHO SAYS NO BODY DON’T USE SOMF ???? PUBLIC SECTOR STILL USES SCALE.
MINORITY PRIVATE DEVELOPER FOLLOWS SCALE OF FEES PAM PAM SURVEY 2012 – 6% Arch paid SOMF SOMF
HOW DO WE ENFORCE THE SCALE OF MINIMUM FEES TO PRIV PRIVATE PROJECTS? PROJECTS? AND SECURE OUR CLAIM?
PROPOSE WAYS TO ENFORCE & RECOVER FEES There are many strategies to enforce scale of fees: Fee enforcement Legislation change • Period of honoring claim • Partial services increase fees • Determine Prolongation time cost
Securing & Recovery of fees Legislation change • Architect COE- Payment upon signing
Establish SOMF Enforcement Committee Prosecute Architect • Suspend/ Deregister • Advertisement public apology Prosecute developer • General penalty under Architect Act
Late payment interest Late payment invoice compounded interest
Building an electronic system • Architect Stakeholder management system for fee collection
CIPAA • Prohibited paid when paid condition • Right to suspension without breach of contract
Awareness • Fee calculator • No discount rule campaign
Debt collection agency • LAM debt agency vendor
INTRODUCE NEW ARCHITECT ACT PROVISION
RECENT AMENDMENT TO ARCHITECT RULES INCLUDES: NEW ADDITION TO THE MOA CLAUSE FOR PERIOD OF HONOURING CLAIM, CLAIM, GIVING A DEFINITE PERIOD FOR ARCHITECT TO SUSPEND AND TERMINATE TERMINATE WORK WHEN NOT PAID. PAID. FOURTH SCHEDULE PART ONE [Subrule 29(1)] MEMORANDUM OF AGREEMENT BETWEEN THE CLIENT AND THE PROFESSIONAL ARCHITECT FOR ARCHITECTURAL CONSULTANCY SERVICES ………………………………… NOW IT IS HEREBY agreed as follows: 1. The Cli ent hereby appoints the Professional Architect to provide architectural consultancy services for the Project subject to and in accordance with the Conditions of Engagement of a Professional an Architect as prescribed in the Architects Rules 1996 and th e Professional Architect hereby accepts the appointment for the purpose of providing architectural consultancy services for the Client, subject to and in accordance with the Conditions of Engagement Engagement for Professional Architect. 2. This Memorandum of Agreement, the Conditions of Engagement Engagement of a Professional an Architect and the Architects (Scale of Minimum Fees) Rules 2010 shall together constitute the Agreement between the Client and the Professional Architect. 3. In consideration of t he Professional Architect providing the architectural consultancy consultancy services required, the Client hereby agrees to pay the Professional Architect in accordance with the Architects (Scale of Minimum Fees) Rules 20 10. 4. The intervals of payment shall be *monthly / ………………… beginning from the commencement commencement of the Professional Architect’s appointment. 5. The period of honorary of fees claimed by the architect shall be …………..days (if non standard 28 days) from the date of receipt receipt of the fees claimed.
PROSECUTE & IMPOSE PENAL PEN ALTY TY TO DEVELOPER & ARCHITECT ( JOINT LIABILITY CONTRAVENING THE LAW)
34. General General penalty penalty (1) Any person, sole proprietorship, partnership or body corporate who contravenes or fails to comply with any of the provisions of this Act or any rules made thereunder shall be guilty of an offence and where no penalty is expressly provided shall, on conviction, be liable to a fine not exceeding ten thousand ringgit or imprisonment for a term not exceeding two years or to both. (2) If a sole proprietorship, partnership or body corporate contravenes or fails to comply with any of the provisions of this Act or any rules made thereunder, the sole proprietor or every partner, director, manager, secretary or other similar officer thereof shall be guilty of the same offence and be liable to the same penalty as the sole proprietorship, partnership or body corporate is guilty of and liable to, unless he proves that the offence was committed without his knowledge, consent or connivance or was not attributable to any neglect on his part.
DEALING WITH ARCHITECTS FEE ISSUE
PROPOSE DEVELOPMENT OF LAM STAKEHOLDER MANAGEMENTSYSTEM LAM stakeholder management system (LAM-SMS) is an integrated software system that integrates : 1. 2. 3. 4.
Upda Update ted d Par Parti ties es Data Databa base se and and inf informa ormati tion on Verif erific icat atio ion n & Push Push Noti Notifi fica cati tion on opt optio ions ns Manage Managed d via via integr integrat ated ed cloud cloud syst system em for for incr increas eased ed stability and scalability Archi Archite tects cts Fee Fee calc calcula ulato torr in in sys syste tem m and and in apps apps form form
ALLOW PARTIAL SERVICE TO ACCOMMODATE FEE REDUCTION
USE PARTIAL SERVICES AS A MEAN TO ENFORCE SCALE OF MINIMUM FEES. IF A CLIENT REQUEST TO REDUCE FEE, ARCHITECT ALLOWED TO REDUCE SCOPE. THE SCOPE WILL BE PRORATED AGAINST ARCHITECT MINIMUM FEE
PUBLIC AWARENESS AWARENESS OF MALA MALAYSIA YSIA ARCHITECTS FEE USING MEDIA APPS
1. FEE CALCULA CALCULATO TOR R IS BECOMIN BECOMING G A TREND TREND IN THE APPS MARKET. 2. TO DA DATE, THE THE USE OF OF FEE CALC CALCUL ULA ATOR TOR IS WIDELY USE FOR CALCULATING • BUYING OF A HOUSE, MOT, STAMP DUTY, CAR LOAN FEE FOR WEB DESIGN, DESIGN FEE AND • MANY MORE
ARCHITECT INSTITUTE IN SINGAPORE, UK AND SOUTH AFRICA ALL HAVE THEIR OWN FEE CALCULATOR GUIDE IN A FORM OF EXCEL OR WEB BASE.
BAR COUNCIL ACTION ON DISCOUNTING & NO DISCOUNT RULE CAMPAIGNC
HOW TO RECOVER OUR FEES
ARCHITECT FEE DISPUTE
SINCE 1980, THERE HAVE BEEN OVER 20 REPORTED CASES CASES RELA RELATING TING TO ARCHITECTS SEEKING LEGAL RECOUSE AGAISNT FEE. THIS HAS NOT TAKEN TAKEN INTO ACCOUNT ACCOUNT THE NUMBERS OF CASES WHICH HAS BEEN SETTLED, THROUGH ARBITRATION OR SETTLE OUTSIDE COURT
CASES ON ARCHITECT FEE UP TO HIGH COURT
Year Case 1979 Soon Nam Co Ltd v Archynamics Architects (1979)1 MLJ 212 (Singapore) 1983 Taylor- vs - Udachin Development Sdn Bhd
High court High court
1991 Akitek Tenggara Sdn Bhd - vs - Mid Valley City Sdn Bhd 1997 Hasbullah Chan & Associates Architect - vs - Rahika Development Sdn Bhd 1999 LAWRENCE K.L. CHIN (practising under the name and style of L.C. Chartered Architect) vs SRI SOMAHA (S) SDN BHD 2001 ABDUL KARIM BIN HUSSEIN v MAJLIS UGAMA ISLAM SABAH 2004 CHONG SU MEE @ ESTHER vs C.H. & SONS DEVELOPMENT SDN BHD BHD (311388-D) (311388-D) … 1ST DEFENDANT AKITEK BILLINGS LEONG & TAN SDN BHD (098120-V) (098120-V) … 2ND DEFENDANT 2004 AR HJ ZULKIFLI BIN HJ A KARIM ( KAZ ARKITEK) vs 1. GERBANG PERDANA SDN BHD 2. ARKITEK MAA SDN 2005MAIMUNAH 2005 MAIMUNAH BINTI DERAMAN (Practising as an Architect under the name of D’Mai Architect) ... PLAINTIFF AND MAJLIS PERBANDARAN KEMAMAN … DEFENDANT)
High court High court High court
2006 Hock Seng Lee Realty Sdn. Bhd. v. Teo Ah King @ Teo Cho Teck and Others (2006) MLJU 455 (Malaysia) (Malaysia )
High court
2008 NG POH KWANG KWANG VS 1. TAN CHUAN YONG YONG 2. CHAN SOCK MUN 3. TETUAN TAN TAN CHUAN YONG & S M CHAN
High court
2009 KUMPULAN PERUNDING (1988) SDN BHD.. PLAINTIF (No. Syarikat: 163318-V) DAN WEE FONG MO... DEFENDAN DEFENDAN (Didakwa sebagai Wasi dan Pemegang Amanah Bagi TAN LIAN THIAN, Simati)
High court
2010 1. Adrian Tio Sii Hoong 2. Christina Tiong Lea Hung practicing and/or trading under the style and firm name of ATCT Architects (a firm) vs 1. Kementerian Kesihatan Malaysia Malaysia 2. Government of Malaysia
High court
2010RASHID 2010 RASHID KADER ARKITEK … PLAINTIF DAN KISWIRE SDN BHD…DEFENDAN
High court
High court High court High court High court
CASES ON ARCHITECT FEE UP TO COURT OF APPEAL OR FEDERAL FEDER AL COURT
Year Case 1991 North South Properties Sdn Bhd - vs - David Teh 2000 Sami Mousawi & Utama Sdn Bhd - vs - Sarawak 2012SDA 2012 SDA ARCHITECTS … APPELLANT (sued as a firm) AND METRO MILLENNIUM SDN BHD … RESPONDENT 2009 SA ARCHITECTS SDN BHD v. MARINA SDN BHD [2009] 1 LNS 853
Year Case 1980 Lim, K C and Assocs. Sdn. Bhd. v Pembenaan Udarama Sdn. Bhd. [1980] 2 MLJ 26 (Malaysia) 1984 TR Hamzah & Yeang - vs - Lazar Sdn Bhd 1985 Khin, C. S. Development Sdn. Bhd. v Chung Yoke Onn [1985] 1 MLJ 319 (Malaysia) 2001 AKITEK TIMOR v. TAI KIAN CHEONG
Court of appeal Court of appeal Court of appeal Court of appeal
Federal court Federal court Federal court Federal court
THERE THER E IS A NEE NEED D TO LOO LOOK K AT HOW TO TO PROTECT ARCHITECTS FEE AND ITS RECOVERY
SECURING OUR CLAIM
1. PAYM YMEN ENT T UPON UPON SIGN SIGNIN INGG- NOT A NEW THING AS PHILIPINE, INDIA, SOUTH AFRICA PRACTISE THIS 2. CHARGING CHARGING LATE LATE PAYMENT INTE INTERES REST T – INTEREST SHALL BE CHARGE FOR LATE PAYMENT OF ARCH FEES 3. Debt Debt co coll llec ecti tion on ag agen ency cy – Use of good debt collector agency 4. DEVEL DEVELOPE OPER R PERIO PERIOD D OF HONO HONOURA URAR RY OF FEES FEES (PHF) (PHF) IN MOA & CIPAA 20122012 - DEVELOPER TO HONOUR CLAIM WHEN INVOICE IS GIVEN OR NOT HAVE TO GO THROUGH ADJUDICATION ADJUDICATION
PAYMENT UPON SIGNING OF AGREEMENT
SOUTH AFRICA INSTITUTE OF ARCHITECT CLIENT- ARCHITECT AGREEMENT
Covers Covers issues of • late payment via interest • Disputed invoice • Prolongation • Set off
PROPOSE AMENDMENT TO ARCHITECTS COE
Propose new addition for for recovery recovery of fees Condition of Engagement of An Architect (Rule 29) Suggestion to add the following clause
Recovery of Professional Fee 26(1) In the event the client fail to make payment to the architect a rchitect within period of honorary claim, the Architect shall be entitled to claim to a minimum monthly charges of 1.5% or as agreed percentage percentage with the client. 26(2) The client shall be responsible for any any cost incurred in the process of recovering fees inclusive of lawyers’ fees, court charges, debt collection or claiming agency fees and any related charges
LAM TO ESTABLISH ESTABLISH CONNECTION WITH DEBT COLLECTION AGENCY EXAMPLE DEBT COLLECTING COLLECTIN G COMPANIES COMPANIES
Collection method 1. Invo Invoic ice e Stat Statem emen ent. t. 2. Teleph ephone. ne. 3. Lett Letter er - Autom Automat ated ed or or Sele Select ctio ion. n. 4. Lett Letter er Telep elepho hone ne.. 5. Perso Personal nal visit visit to custom customer er.. 6. In-H In-Hou ouse se Lit Litig igat atio ion. n. 7. Outside Outside Agenc Agency y - Debt Reco Recover very y Agent Agent or or Solicit Solicitor or
Example companies in Malaysia 1. Mill Millik iken en & Crai Craig g (M) (M) Sdn Sdn Bhd Bhd 2. Debt Debt Coll Collec ecti tion on Servi Service ce Mala Malays ysia ia 3. Tish Tish & Math Mathes eson on (M) (M) Sdn Sdn Bhd Bhd 4. TGS & PA PARTNER ERS S 5. HUP HUP LIK LIK DEBT DEBT COLL COLLEC ECTI TION ON (M) (M) SDN SDN BHD BHD
SUSPENSION OF ARCHITECT DUE TO DEBT COLLECTOR COLLECTOR ACTION ON CLIENTS CAR
RECOVERY OF FEES THROUGH CIPAA
DEFINITION:
AN ACT TO FACILIT FACILITA ATE REGULAR AND TIMELY TIMELY PA PAYMENT , TO PROVIDE A MECHANISM FOR SPEEDY DISPUTE THROUGH ADJUDICATION, ADJUDICATION, TO PROVIDE PROVIDE REMEDIES FOR THE RECOVERY RECOVERY OF PAYMENTS IN CONSTRUCTION INDUSTRY AND TO PROVIDE FOR CONNECTED CO NNECTED AND INCIDENTAL I NCIDENTAL MATTERS. MATTERS. APPLICATION
EVERY CONSTRUCTION CONTRACT MADE IN WRITING RELATING TO CONSTRUCTION WORK CARRIED OUT WHOLLY OR PARTLY ARTLY WITHIN WITH IN THE TH E TERRITORY TER RITORY OF MALAYSIA MALAYSIA INCLUDING INCLUD ING A CONSTRUCTION CONTRACT ENTERED INTO BY THE GOVERNMENT. NOT APPLY TO
a construction contract entered into by a natural person for any construction work in respect of any building which is less than four storeys high and which is wholly intended for his occupation.
PAID WHEN PAID IS PROHIBITED IN CIPAA
35. Prohibition of Conditional Payment 1) Any conditional payment provision in a construction contract in relation to payment under the construction contract is void.
Example conditional provision
• obligation of one party to make payment is conditional upon that party having received payment from a third party; or • obligation of one party to make payment is conditional upon the availability of funds or drawdown of financing facilities of that party. party.
SPECIAL DEFAULT PROVISION KICKS IN 36. Default Provisions in the Absence of Terms of Payment
Default provision right of payment from basis value
1)
Unless otherwise agreed by the parties, party has the right to progress payment at a value’ calculated by reference to— to— a) The contract price for the construction work or construction consultancy services; b) Any other rate specified in the t he construction contract; c) Any variation agreed to by the parties to the construction contract d) The estimated reasonable cost of rectifying any defect or correcting any non-conformance or the diminution in the value of the construction work
2) In the absence of any of the matters referred to in paragraphs (1)(a) to (d), reference shall be made to: a) The fees prescribed by the relevant regulatory board under any written law; or b) If there are no prescribed fees referred to in paragraph (a), the fair and reasonable prices or rates prevailing prevailing in the construction industry at the time o f the carrying out of the construction work or the construction consultancy services. Frequency of payment
3) The frequency of progress payment is: a) Monthly, for construction work and construction consultancy services; and b) Upon the delivery of o f supply, for the supply of construction materials, equipment or workers in connection with a construction contract. 4) The due date for payment under subsection (3) is thirty calendar days from the receipt of the invoice.
PAYMENT DISPUTE RESOLUTION THROUGH CIPAA
ENFORCEMENT OF ADJUDICA ADJUDICATION TION DECISSION 28. Enforcement of adjudication decision as judgment
party may enforce an adjudication decision by applying to the High Court for an order to enforce the adjudication decision as if it is a judgment or order of the High Court.
RIGHT TO SUSPENSION 29. Suspension or Reduction of Rate of Progress of Performance 1) A party may suspend performance or reduce the rate rate of progress progress of performance performance of any construction work or construction consultancy services under a constructio n contract if the adjudicated amount pursuant to an adjudication decision has not been paid wholly or partly after receipt of the adjudicated decision under subsection 12(6).
2) The party intending to suspend the performance or reduce the rate of progress of performance under subsection (1) shall give written notice of intention to suspend performance or reduce the rate of progress of performance performance to the other party if the adjudicated amount is not paid within fourteen calendar days from the date of receipt of the notice. 3) The party intending to suspend the performance or reduce the rate of progress of performance under subsection (1) shall have the rig ht to suspend performance or reduce the rate of progress of performance of any construction work or construction consultancy services under a construction contract upon the expiry of fourteen calendar days of the service of the notice given under subsection (2). 4) The party who exercises his right under subsection (3) — a) Is not in breach of contract;
HOW DO WE MOVE FORWARD
DECIDE WHICH ROUTE WE WANT TO TAKE
TO DISMATLE SOMF 2010 OR TO ENFORCE SOMF 2010
TO DISMANTLE: WHICH WHI CH SYST SYSTEM EM WE WE WANT WANT TO FOLLOW? UK OR AUSTR AUSTRALIA ALIA OR FREE FOR ALL
TO ENFORCE: LAM AN LAM AND D PAM HA HAVE VE TO WORK TOGETHER TO UPHOLD UPHO LD THE LA LAW W AND PREPARE THE STRATEGIC & ENFORCEMENT PLAN
THE END
