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The paper looks at issues that were agreed between both clients and consultants, considers the issues of fees from both consultants and clients perspectives, identifies the standard methods of using fees as part of a selection process, and explores particular area of concerns. It concludes with some recommendations from the HE DQF which is hoped will be adopted across the sector.
 
The paper concentrates on procurement routes where consultant appointments are independent of contractor appointments on the basis that these are the ways that are generally associated with design quality.
 

Some general points
The following points were broadly agreed between clients and consultants:

• Competition in selection processes is now a regular occurrence. In some instances institutions use either term appointments or partnering, but the selection process for these is still likely to be competitive.
  
• Fees will sometimes be a part of the competitive process of selection, and where this is the case it is important that the role they that will play in this selection is made clear from the outset.
  
• Higher education has a responsibility to be a best practice procurer in line with developing government policy.
  
• Significant reductions in fees are likely to lead to reductions in the level of service and/or quality although these may not immediately be apparent to the client institution. Reduced fees can lead to limited research and value engineering, which can mean higher costs for the project.
  
• Wherever possible fees should be established during the early stages of the project since disputes during the course of a scheme can be destructive to consultant/client relationships.

 
For some time there has been a view that we need to move away from percentage fees, but they are still extensively used as a benchmark by both clients and consultants. In an uncertain world they provide a reasonable indication of what one might expect to pay, although they are sometimes translated into lump sums, once the extent of work required is clearly defined. Some institutions define the fee they expect to pay at the outset, and this can be appropriate, provided that the fees given do not put consultants under undue pressure.
 

Points from the consultant and client perspectives
During the consultant/client dialogue in the DQF a number of points have been made which are worth recording because they contribute to mutual understanding:

• 
  
• From the consultants point of view: Where the money goes

In a typical professional office, income will be required to cover the following costs:

• Professional and technical salaries
  
• Administrative costs
  
• Partners' drawings and profit
  
• General office overheads
  
• Marketing and getting new work
  
• Professional Indemnity Insurance
  
• Information technology
  
• Continuing professional development and research
  
• Quality systems etc.

Following on from this analysis:

• Time-related costs account for 60% to 70% of all outgoings - pressure on fees will undoubtedly tend to reduce the time spent on projects.
  
• Marketing and getting new work has accounted for an increasing proportion of practices overheads - in some cases now as much as 10%. Clients can help to reduce this cost by adopting selection procedures that are cost effective.
  
• Light fees will make it difficult for practices to reinvest in information technology, CPD and quality systems all of which are ultimately essential for the level of service that can be provided to clients.
  
• Consultants are concerned about a tendency from clients to request information for shortlisting in ways that unnecessarily increase overheads. Some practices are extremely wasteful - for example some institutions have requested bank references from everybody applying for a shortlist. It would be much more appropriate to request this information only from those shortlisted.
  
• Many people find the conditions for engagement for engineers to be extremely confusing (including engineers). It is essential that very clear definitions of the level of service required are provided by clients if they want to use fee bidding as a part of selection processes in these areas.
  
• There is a tendency for clients in the HE sector to request full design team proposals, usually led by the architect. There are particular dangers in this approach if fees are used as part of the selection process because a single fee bid may conceal very low fees for some team members which in turn may impact on the service that the client will receive.

From the client perspective

• Many clients are tied by standing orders and have to stick by procedures drawn up by their institutions. It is important that those involved in construction projects ensure that standing orders are appropriate to the projects they are considering.
  
• 'It would be a lot easier for clients to make the right choice if architects did not undercut fees.'
  
• Clients are looking for as much certainty as possible and dislike time charged work for Stages A and B or any other areas that will introduce uncertainty.

Using fees as part of the selection process
There are four basic ways in which fees may be used as part of the selection process. It is essential at the outset that the client is clear about the importance that will be attached to fees and makes this plain to potential consultants.
 
Competitive fee bids
In competitive fee bidding, the client precisely defines the extent of work is required and simply adopts the lowest price for the level of service requested. On the face of it this will provide good value for the institution, but there are many difficulties associated with this route. The CPWG report specifically notes, 'Members of the project team should not be chosen simply because they are the cheapest'.
 
The following problems with competitive fee bids should be noted:

• It is extremely difficult to define precisely the level of service that will be required, and consultants who have squeezed on price may be looking for loopholes whereby they can claim additional fees during the course of the contract.
  
• If consultants are placed under undue financial pressure, they will seek design solutions that are cheapest in fee terms, rather than offer best overall value for money to clients.
  
• There are a significant number of 'quality' practices who will decline to enter into pure competitive fee bidding and this restricts the number of consultants who can be considered.
  
• Straight competitive fee bidding is rarely the route to achieving genuine design quality.

2. Assessing quality and cost
A number of bodies have explored methods of achieving a balance between quality and cost. The method with the widest backing is that developed by the Construction Industry Board following the Latham Review (see below). This method goes through the following stages.

• Initial expressions of interest are requested, frequently by advertising using EU procedures.
  
• A shortlist is assembled of between six and eight practices. These practices will normally be interviewed and assessed for quality.
  
• The preferred three or four consultants will be requested to provide a fee bid within a period of seven to ten days and will be given such information as is necessary to provide this quotation.
  
• The quality and cost will be assessed using a pre-agreed formula - for higher education projects a typical emphasis would be 70% quality and 30% cost. Application of the relevant formula leads to a winning practice.

The method has a number of advantages, including striking a reasonable balance between cost of service and the fact that potential abortive work for consultants in preparing fee bids is reduced to a reasonable minimum. It also has the support of an important industry group. On the negative side it is relatively cumbersome to operate, and some clients have found that even strong weighting towards quality can be skewed by extraordinarily low fee tenders which may be considered unacceptable in their own right.
 

3. The two envelope system
This system is used fairly frequently where quality is important. Shortlisted consultants are asked to bring a fee proposal with them to interviews in a sealed envelope. Following the interviews consultants are ranked in order of merit, and the envelope relating to the fee of the preferred consultant is then opened. Assuming that the fee proposal appears reasonable to the interview panel, the commission is awarded to this consultant and other envelopes are disposed of unopened. In the event that the fee proposal is deemed unsatisfactory, the client may chose to open an envelope of the consultant ranked second in terms of quality.
This system is commonly used and quite regularly works satisfactorily. Two points should however be made:

• The extent of work required needs to be carefully defined in order to produce precise and sustainable fee quotations and this can frequently be difficult at the outset of a project. .
  
• There is a temptation for clients to be ambiguous about the role that fee will play in making appointments. Some clients will be tempted to open more than one envelope and end up juggling cost and quality in a way that cannot be audited.

 
4. The Brooks Act Method
The Brooks Act Method was developed in the USA and is now adopted as a compulsory process in most states as a result of the success that it has achieved. In this method consultants are ranked on the base of quality and negotiations are on fees are commenced with the consultant ranked highest. The level of service required is worked out jointly between client and consultant and the consultant is then asked to put forward a fee proposal. Assuming that this proposal is agreed to be reasonable, the consultant is appointed. In the event that negotiations break down, the client approaches the consultant ranked second for quality.
The success of the method in the USA is well documented (reference 3) and it is believed that it deserves wider acceptance in Britain.
 

5. Recommendations
The HEDQF makes the following recommendations:

• Selection on the basis of fee bids alone should be avoided if quality and overall value for money are both required. (Use of Ref 2 is a good approach).
  
• Clients should aim to devise simple and straight forward selection procedures that minimise abortive time for all concerned. They should aim to adopt recognised procedures for involving fees in the selection of consultants in order to be seen as best practice procurers.
  
• Clients should make clear from the outset of the selection process the role (if any) that fees will play in that process.
  
• Consultants should aim to be transparent in their fee proposals and identify any areas of uncertainty as early as possible.
  
• Appointments of the various consultants should interlock.

References
1. Procurement Guidelines for Higher Education: Building and Engineering Projects. January 1997. Available from CVCP, 29 Tavistock Square, London WC1H 9EZ. Tel 0171 387 9231. Fax 0171 388 8619.
2. Selecting Consultants for The Team: Balancing Quality and Price. 1996. Prepared by the Construction Industry Board. Published by Thomas Telford and available from the Book Sales Department, Thomas Telford Publishing, 1 Heron Quay, London E14 4JD. Tel: 0171 987 6999. Fax: 0171 537 3631.
3. Guidance for Clients on the Brooks Method of Architect Selection. 1995. Published by RIBA. Available from RIBA Publications, 39 Moreland Street, London EC1V 8BB. Tel 0171 251 0791, Fax 0171 608 2375.
4. Architectural Competitions. 1995. Published by the Department of the Environment and the Department of National Heritage. Available from RIBA Publications, 39 Moreland Street, London EC1V 8BB. Tel 0171 251 0791, Fax 0171 608 2375.