Museum Fees Stable to Slightly Down

June 15, 2003 · by DesignIntelligence

A sampling of firms working on art museums in the United States shows fee levels are stable to slightly down during this continuing recessional economy.

A sampling of firms working on art museums in the United States shows fee levels are stable to slightly down during this continuing recessional economy. One of the significant difficulties many museums are having is with fund raising and development. Projects have been put on hold or delayed pending decisions of their governing boards. In related arts organizations there are over a dozen civic orchestras reporting financial instability—with several expected to close entirely.

Full-service A/E fees on museums range from slightly below 10 percent of construction to slightly above 20 percent. There is considerable variation depending on the scope of services and the nature of the new building or addition. There are also major differences by type of firm with “modern masters” and “star firms” taking the high end, billing fees in excess of 16 percent. Some museums have “patron” like budgets and others have signed up patrons to supplement the budget to pay architects fees that they currently demand.

At least a dozen firms reported some very “satisfying and favorable” fee stories to DesignIntelligence. Richness in scope of services, including more pre-project planning is also an area where full service firms can stake out highly satisfying professional contacts. It is no surprise that nearly every firm reports that they are in some way involved in helping raise money for their clients but that in most instances the time spent in this area outside traditional “scope of services” is not recovered in fees. But as one firm reported, “we see this as an area for growth and we’ll be offering development and financial feasibility services as standard in the near future.”

This represents another growth area of non-traditional strategic service to the governing boards of the museums. Firms are customizing scope and fees to match each project’s unique nature and are segmenting and phasing services to ease financial stress points. One firm reported a new tendency toward lump sum fee agreements with their clients. Generally there continues to be downward pressure on hourly fees. Each museum project is different, of course. Every client and opportunity is unique.

Firm profit margins (ranging from 6 percent to over 20 percent of net service revenues, pre-tax, pre-bonus) are usually higher in those firms with the strongest design talent. The best-managed firms are consistently profitable in a zone around 15 percent. This benchmark has slipped in the last year as firms elect to keep staff size proportionate to future opportunities rather than to current work. This management strategy can work short term only.

Greenway Consulting Analyst Services

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