Dear Dakota | How to Structure Design Fees for Multi-Unit Housing Projects

Dear Dakota,

I am struggling with my fee structure proposals whereby I make good profit but also retain clients, make them happy, and get repeat business.

For instance, I’m bidding on a ground-up assisted living residence. Rooms will be replicated (cookie-cutter) and public spaces aren’t vast. I don’t yet know the budget and this is my client’s first time with a project like this. 

Help!

Thank you for your email and for submitting a question via The Weekly Install! This is a great question, and one that any residential designer who wants to branch out into commercial or multi-unit housing projects can relate to. It’s not always easy to translate established billing structures into new project types. I applaud you for branching out into a new niche! There are similarities among all types of design projects, but a multi-unit housing project will be at a significantly larger scale.

The first consideration is the extent of the work you will be doing. Will your responsibility on this project be to provide just design and specifications? Or, will you additionally be involved in the implementation — that is, will you be doing procurement, order tracking, construction oversight, furniture placement, and administration (troubleshooting, tracking, communication) during construction and installation? AND, working backward, will you also be involved in the space planning for the building layout?

Whether you are providing the design only (selecting all the finishes and furnishings) versus if you are involved in space planning the building layout AND/OR if you are providing project management throughout construction and installing each room when the furnishings arrive — your level of involvement and responsibility at each phase will greatly impact your fee. 

My advice is to propose a flat fee for the design portion (with or without space planning), and then — if you are also involved in the implementation phase — to bill hourly for project management, construction administration, and installation. In establishing the flat fee for planning, design and specifications, you will be able to rely on pricing structures you have established for your residential work, as you will design a limited number of spaces, some of which will be replicated. So: you will be able to massively leverage your time and won’t be penalized for efficiency. 

But a note of caution: as far as pricing, do not consider the development of a prototype for one unit as just one space. Make sure to account for the fact that you may have to accommodate slight variations to conditions in separate units. It is rarely the case in multi-unit facilities that one size fits all relative to prototyping. Take this into consideration with your fee.

You didn’t say whether your client was the general contractor, or a property management representative. But you did say that a senior housing facility was a first for this client as well. That means there may be a learning curve with some aspects, which means the process could be more time-consuming than expected. Take this into consideration in setting your proposed fee. And, do also consider how many decision-makers there will be. Do you need to get approval from your client in addition to other stakeholders (perhaps facility manager, leasing company, investors) as well? That all translates into additional time requirements. 

Thankfully, YOU will be able to manage the design process for the prototypical room design, and the limited public spaces, including material and furnishing selections. With your experience as a residential designer, you should be able to forecast time allocations, and how to manage/control the time needed for the design portion.

Which again is why I recommend billing flat fee for the portion YOU can control, then moving hourly to the phases of the project that are out of your control. 

There is a wide range of commercial project types. I often see commercial design work billed hourly. But for this project you have described, I feel that a flat fee for the design phase, plus hourly billing for project management is the best of both worlds for you and your client. 

Another cautionary note that I often espouse to designers: don’t set your fees based on the budgetary constraints of your clients. You should always base your fees on the complexity of the project and the work you are doing for the client, your time involvement, your expertise, and your company established minimums. This is true regardless of project type or client considerations. Your revenue needs to support you and your company, and needs to reflect the high level of expertise you bring to the table. Your client budget only determines if they are a good fit for your firm or not - NEVER the fee. 

Good luck with this new project!!!

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