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Topic: Guidance for establishing a fee basis for a "licensing fee" type compensation arrangement between Owner and Architect. as stipulated in B101 section 11.9. 

1.  Guidance for establishing a fee basis for a "licensing fee" type compensation arrangement between Owner and Architect. as stipulated in B101 section 11.9.

Posted 7 days ago

I'm looking for any guidance for establishing a fee basis for a "licensing fee" type compensation arrangement between Owner and Architect. as stipulated in B101 section 11.9. This arrangement is also sometimes referred to as a "termination fee". 

 

"If the Owner terminates the Agreement for its convenience, or the Architect terminates the Agreement due to the Owner's suspension of the Project, B101 provides at Section 11.9 for the Owner to pay a licensing fee to the Architect for the Owner's continued use of the Architect's Instruments of Service. "

 

Please pass on any useful information you may come across. Thanks. GS



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Gerard Sullivan AIA
Principal
Gerard Sullivan Architect
Paris
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2.  RE: Guidance for establishing a fee basis for a "licensing fee" type compensation arrangement between Owner and Architect. as stipulated in B101 section 11.9.

Posted 6 days ago
Gerald,

First, a caution to the group.  AIA was involved in an anti-trust lawsuit a number of years when members and/or AIA were discussing setting of fees.  For the group, it's probably best not to discuss specific fees or specific ways to set a fee, but more philosophical approaches.  Don't get in trouble.

Unlike a termination fee, where effectively an architect is trying to cover anticipated profit, lost opportunities or the carrying costs for staff until they can be placed on another project, a licensing fee is really a gut feel and negotiation between an owner and architect. This fee is pretty much the fee agreement that takes the place of an owner demanding that they own and control the copyright and use of your professional documents at the end of a project. Most likely, your agreement for the use of the documents limits the use to an owner's maintenance, information for remodeling or an addition, etc. and not the reuse for a new project using the same design. 

Because of that limited use, we often do not see either any or any substantial fee proposed. The architect has been fully paid for their services under the regular contract already, so don't blow a deal by padding profits. 

Thanks,

Arlen

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Arlen M. Solochek FAIA
Maricopa Community Colleges
Associate Vice Chancellor for Capital Planning & Special Projects
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3.  RE: Guidance for establishing a fee basis for a "licensing fee" type compensation arrangement between Owner and Architect. as stipulated in B101 section 11.9.

Posted 2 days ago
Thanks Arlen & Joel,

Yes, I'm only looking for guidance and conceptual approaches along the lines of what is dispensed re. fee approaches in AIA's Best Practices white papers. I'm hoping to go beyond my individual "gut".and, if it exists, base an approach on an industry standard rationale that addresses what is considered fair compensation for the value that such an arrangement provides to the owner. Well defined licensing fee arrangements exist in other design professionals. Simply, I'm hoping to find someone who may have had successful experience with these negotiations in particular as stipulated in B-101, section 11.9. .

Thanks again for your insights.

Best,
Gerard

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Gerard Sullivan AIA
Principal
Gerard Sullivan Architect
Paris
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4.  RE: Guidance for establishing a fee basis for a "licensing fee" type compensation arrangement between Owner and Architect. as stipulated in B101 section 11.9.

Posted 6 days ago
Gerard,
If your "Paris" address is indeed the one near Versailles, then perhaps the AIA-US Department of Justice anti-monopoly, anti-"price fixing" agreement won't apply to you.

Otherwise, don't expect any formal acknowledgment of fees, or even willingness to discuss actual numbers, from AIA.

That swept aside, I would consider:
1.  What happens, over time, to your insurance premium due to the left-over liability due to you not being involved during the conclusion of the project?  Cover yourself for that.
2.  Were you planning on making money out of the job?  And, if so, does terminating impact your cash flow for the rest of the job? [alternatively, not continuing to spend money on the job might be a savings to you]
3.  Does the termination fee go up if the Owner doesn't provide a satisfactory release of responsibility form to you?  And can your lawyer be the one who prepares it, for them to sign?

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Joel Niemi AIA
Joel Niemi Architect
Snohomish, WA
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