Do You Pay Spec Fees?
by Michael Collins
Would you offer a lavish gift in hopes of turning up in
an architect’s spec? If you say no, others are saying yes. In recent months
we’ve encountered stories from several manufacturers in the industry regarding
architects and specification fees, or “spec fees.” These are fees given
to an architect by a building product manufacturer. They are paid in exchange
for the architect specifying the manufacturer’s products. Such product
specifications usually bear the “no equal” qualifier. This means the specified
manufacturer’s product must be used and no substitute will be accepted.
That type of spec is appropriate if it generates from the architect’s
genuine belief that the specified product is without peer and is the optimal
solution for the project at hand. The problem arises, however, when a
conflict of interest exists and the architect has essentially offered
for sale the highest opinion he can pronounce on a building product.
Spotting Spec Fees
These spec fees can consist of readily identifiable items, such as cash
or gold watches. They can also come in a form that makes it difficult
to differentiate from thorough professional due diligence. For example,
if an architect is flown to the Bahamas to inspect a manufacturer’s doors
or windows in the field, who would know whether they could have inspected
a similar product installation in their own city? Such trips can represent
a soft spec fee and can lead to conflicts of interest.
The notion of a “conflict of interest” as a legal term is relatively new.
According to a 2009 study by Michael Davis and Josephine Johnston, it
was in 1949 that “conflict of interest” made its first appearance in a
court case involving its modern meaning. Ten more years passed until any
federal legislation addressed the term and its meaning.
"If an architect
is flown to the Bahamas to inspect a manufacturer’s doors or windows in
the field, who would know whether they could have inspected a similar
product installation in their own city?"
The National Council of Architectural Registration Boards (NCARB) and
the American Institute of Architects have made their position on conflicts
of interest very clear. The NCARB rules state that an architect “shall
not accept compensation for services from more than one party on a project
unless the circumstances are fully disclosed to and agreed to … by all
parties.” The concept behind such disclosure is that if the client is
aware of the potential conflict and still proceeds, buyer beware is the
Everyone involved in a building project, especially the client, assumes
that the architect’s loyalty is staunchly to the primary client compensating
them. If this trust erodes, consumer confidence will deteriorate quickly,
adding mistrust and inefficiencies to the building process. Who among
us wouldn’t question an architect’s specification of a given product with
no possible substitutions if we knew the architect had received lavish
perks from the manufacturer of that product? As economic creatures, we
would all have a tendency to gravitate toward specifying the products
that were associated with such rewards.
As in most professions, the vast majority of architects likely would refuse
to accept a spec fee or similar kickback from a manufacturer. The fact
that some of them are doing so, however, suggests that others might or
will. There is a particularly high risk because the slowdown in construction
has directly impacted architects’ revenues. It is incumbent on architects
to adhere to the clear and firm rules put forth by their professional
organizations – that conflicts of interest must be avoided or disclosed
fully. Door and window manufacturers must refuse to take part in such
payments and should probably sever ties with architects that demand them.
Left unchecked, spec fees would become a race to the bottom in which every
industry participant’s integrity would be questioned by consumers. We
owe it to ourselves to adhere to time-honored standards of conduct so
this will remain an industry of which we can be proud.
Michael Collins is a Chicago-based investment banker with a specialized
merger and acquisition practice in the door and window industry.
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