Chicago Tries to Clawback Fees from Contractors

Chicago Tries to Clawback Fees from Contractors

About one in three architects in Chicago is out of work according to AIA Chicago estimates, and many of those still hanging on are doing so just barely. This is why the chapter is particularly alarmed by a recent request from the Daley administration that firms doing business with the city reduce their fees by 10 percent, a move that would be retroactive, no less.

The request, made in a letter sent out to firms on April 22, presents them with a number of difficult decisions. They could choose not to comply, as the city insists the request is voluntary, though this could also imperil future civic work, which is one of the few sectors still providing employment for firms in the Windy City.

“The public sector is the major arena for anyone in construction or architecture right now,” Walter Street, the chapter president, said in an interview. “We’re hoping it will serve the purpose of stimulating the rest of the economy.” Street would not go so far as to criticize the administration. “It was a request, it wasn’t a mandate, so I’m not going to erect any tiny barriers or problems before they occur. We’re not in a position to speculate on what the city might do.”

Still, the request comes at an unwelcome time, just as the industry is beginning to recover from a recession. The Department of Labor even found that last year, more architects lost their jobs than any other non-farm workers. And while billings in the Midwest have been improving for the past three quarters, making it the strongest performing region, they dipped slightly in April according to the national AIA, a worrisome sign.

“We don’t have a lot of wiggle room,” Street said. “Most of our people have made all the cuts they can to keep the work within budget while still delivering an excellent product.” He also noted that architects are beholden not only to the city but also to the end user, and must maintain certain standards, which can cost money.

The administration’s request is directed at all businesses contracting with the city, from printers to security guards. Part of the argument behind the request is that city employees have already been asked to take a roughly 10 percent pay cut in their salaries.

While acknowledging the plight of all vendors, Zurich Esposito, executive vice president of AIA Chicago, argues that architects are especially susceptible to the reduced fees. Not only is the instability of the industry a compounding factor, Esposito argues, but there’s the labor-intensive nature of the work. One particularly troubling provision of the request is that firms are asked not to pass on their fee reductions to sub-contractors and consultants. This would put a disproportionate burden on architects because of the prevalence of consultants used in design work.

“It’s an intimidating request,” Esposito said. “What should happen if you don’t accept it?”

Despite the voluntary nature of the request, some are seeing it as a threat, and one passage in particular from the letter stands out: “We must remind you that compliance with this request is voluntary, but that the city always seeks to do business with vendors that offer the most competitive prices.”

The mayor insisted that the decision remains up to the firms, though it would certainly help the city if they assented. “You’re not going to threaten them,” Daley told the Tribune at a press conference. "This is a good thing. This is a good concept. We’re trying to keep government going.”

According to the Tribune, $760 million out of the $6.1 billion budget goes to contract work. Last year, vendors were asked to take a 2 percent cut, and about 30 percent did so for a saving of $4 million.