A client comes to an architect with a project. During the process, the client agrees to the design and budget and signs a contract with the contractor for a stipulated sum. While under construction, the client says they are unable to afford the project and reduces scope. What is the team supposed to do?
Unfortunately, this is a bit of a gray area and a very tricky situation. At the time of construction, the contract between the owner and contractor is based on a stipulated sum-that which is set by the cost of work issued via the schedule of values. That is the basis for their contract and, if the architect's fees are a percentage of cost of construction, that serves as the basis for the architect's fees as well.
It is the right of the contractor to request that the owner provides proof that they can financially support the cost of the project; however, that often does not happen on smaller projects.
There are instances when the client, after the contract is signed, says they want to reduce scope-not only to lower construction costs but often to avoid architect's fees as well. I wish this was the exception in the industry, but I have seen it time and time again. What to do?
First and foremost, this is considered a breach of contract, as it should be. The client has not only committed to a contractual cost via the bidding and negotiation phase but has committed to a scope of work. Contracts aside, an architect has set aside time and could be missing out on potential work due to the commitment to this project. Should a project not live up to its promise (or contractual duties), the risk reaches further into the architecture firm, allocating additional resources (money) to cover work being performed, etc. The AIA contracts provide verbiage concerning the termination of the contract, but that is just that-the contract termination, which the client can do for no apparent reason.
If the client does not terminate the contract, they are obligated to adhere to the agreed-upon conditions. They essentially have two options: to stay the course and fulfill their contractual duties, or to terminate the contract. In terminating the contract, they may very well end up with an unfinished project and increased costs due to restarting the work after it has been stopped. It may be in their best interest, then, to continue with the project and stay on track. The unfortunate part of contracts is that the architect and contractor can only terminate the contract if the client does not pay within due notice. They are not allowed recourse in this situation, whereas the client can terminate the work at any time for any reason.
Should this happen, it is best to educate the client on the issues that arise from reducing scope and fees, as they may be unaware as to how it affects an architect's business.