B101 Compensation: Methods, Phase Billing, Reimbursables, and Payment Terms (Article 11)

How AIA B101 Article 11 structures architect compensation through stipulated sum, percentage, or hourly methods, establishes phase-based billing, defines reimbursable expenses, and sets payment timing requirements.

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Overview

Article 11 of AIA B101 is where the money lives. It defines how the architect gets paid, when invoices are due, and what counts as a reimbursable expense versus what is absorbed by the firm's overhead.

Three primary compensation methods appear in B101: stipulated sum (a fixed total fee), percentage of construction cost, and hourly billing. Each method allocates risk differently between the architect and the owner. The choice depends on the project's scope clarity, the owner's budget certainty needs, and the level of risk the architect is willing to absorb.

Phase billing ties compensation to the design phases in Article 3. The architect invoices based on the percentage of work completed within each phase. This structure links revenue to project progress and protects the architect from front-loading or back-loading disputes.

Reimbursable expenses are costs the architect incurs on behalf of the project that are passed through to the owner. Under B101, these are typically billed at a multiplier (commonly 1.1 times the direct cost) to cover the architect's administrative handling.

Payment terms matter more than many candidates realize. B101 requires the owner to pay within 30 days of receiving an invoice. If the owner fails to pay, the architect has remedies including suspension of services. The 2017 edition also added provisions requiring the architect to carry specific insurance types, with additional insurance costs reimbursed by the owner.

For the PjM exam, understanding these compensation structures and their risk implications is tested frequently. You need to know the differences between fee methods, how reimbursables work, and what happens when payments are late.

Essential

Article 11 is the financial engine of B101. Every dollar the architect earns on the project flows through the structures established in this article. Understanding these structures is not just an exam topic; it is the difference between a profitable engagement and one that drains the firm's resources. ## Compensation Methods ### Stipulated Sum (Fixed Fee) A stipulated sum is a fixed total fee for the architect's services. The architect and owner agree on a number at the start of the project based on the defined scope. This amount does not change unless the scope changes. Risk allocation: the architect bears the risk of underestimating the effort required. If the project takes more hours than anticipated, the architect absorbs the loss. Conversely, if the architect is efficient, the firm keeps the savings. The owner gets budget certainty. When to use it: projects with well-defined scope, clear programs, and stable requirements.

Professional

Consider a firm evaluating three potential projects simultaneously. Each demands a different compensation approach. Project A is a 60,000 SF office building for a repeat corporate client. The program is well defined, the client's standards are documented, and the firm has completed three similar buildings for this client in the past five years. A stipulated sum works well here. The firm's historical data provides confidence in the effort estimate, and the client values budget certainty. Project B is a research laboratory for a university. The program is still evolving because the principal investigator's equipment needs are changing quarterly. Hourly billing with a not-to-exceed cap is the better fit. The scope uncertainty makes a fixed fee risky for the architect, and hourly billing allows the fee to adjust as the scope crystallizes. The cap gives the university a budget ceiling.

TLDR

Three compensation methods: stipulated sum (fixed fee), percentage of construction cost, and hourly billing
Stipulated sum: architect bears efficiency risk, owner gets certainty. Best for well-defined scopes.
Percentage fee: fluctuates with construction cost. Prohibited on federally funded projects.
Hourly billing: owner bears scope uncertainty risk. Often used with a not-to-exceed cap.
Phase billing allocates the fee across design phases. Typical: SD 15%, DD 20%, CD 40%, Bidding 5%, CA 20%.
Reimbursable expenses are billed at 1.1 times direct cost (standard multiplier covers administrative handling)
Additional insurance costs required by the owner are reimbursable under 2017 B101
Payment is due within 30 days of invoice receipt. Late payment triggers suspension rights.
Billing rate includes salary, overhead, and profit. Break-even rate excludes profit.
Work performed below the break-even rate results in a loss for the firm.

ELI5

Imagine you are a freelance graphic designer. A client needs a logo. There are three ways you could charge them. Way 1: "The logo will cost $2,000." That is a fixed fee, or in architecture language, a stipulated sum. You know what you are getting. The client knows what they are paying. Simple. But if the client keeps asking for revision after revision, you are doing extra work for the same $2,000. You eat the cost. Way 2: "I charge 10% of whatever you spend producing the logo on merchandise." If the client spends $50,000 on merchandise, you make $5,000. If they only spend $10,000, you make $1,000. Your pay goes up and down with their spending. In architecture, this is a percentage-of-construction-cost fee. And by the way, the federal government will not let you use this method because it does not encourage you to keep costs down.

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B101 Compensation: Methods, Phase Billing, Reimbursables, and Payment Terms (Article 11)

2 min read262 words

Getting Paid: How Article 11 Structures the Architect's Compensation

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