What is the common payment method in construction design contracts where the architect receives a percentage of total project costs?

In construction design contracts, the method where the architect receives a percentage of the total project costs is known as a percentage of construction cost. This approach provides the architect with a fee that is directly tied to the overall cost of the construction project, which can be beneficial for both parties.

When using this payment method, as project costs increase, the architect's fee increases proportionately. This aligns the interests of the architect with those of the client, as it incentivizes the architect to manage the project's scope and expenses effectively. Clients may prefer this method because it can provide assurance that the architect is motivated to make cost-effective decisions throughout the design and construction phases.

In contrast, different payment methods such as cost-reimbursement might involve more complex calculations and can lead to disputes over what costs are reimbursable. Fixed fee arrangements offer certainty about the total cost upfront but may not motivate the architect to control costs like the percentage of construction cost does. Direct billing refers to billing for the specific services rendered without a connection to overall project costs, which lacks the proportional incentive structure inherent in percentage-based arrangements.