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Old 08-18-2012, 11:23 AM
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designer charging referral fee to contractor

I have worked with a designer on a couple of projects now, who asked for a referral fee, (8-10%), on the last project and I wonder what thoughts you all might have on whether that is ethical or not.

This is the only designer who has ever asked for that, most others just ask that we refer people to them when the opportunity arises.

Her rationale is that she will usually stay very involved with the client throughout the process, although that was not my experience on the last project, where I spent many hours consulting with the client and dealing with tweaks and change orders.

My gut feeling is that the client should know where their money is going and that the designer should charge the client for time spent on the project. I don't feel right tacking on a percentage to my quote in order to get a strong recommendation from a designer, as I feel that a designer with integrity would want the client to hire the most capable and honest installer they can find, and NOT just from a list of installers who are willing to pay a kickback.

I've seen other threads where this has come up but want to see if anyone else will chime in.
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Old 08-18-2012, 12:09 PM
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So I'm a little confused... You've worked with her a few times in the past with no referral fee, and now she's dropping this on you for a new project? Did she mention that this was a new fee that she would be charging in advance of the project, or did she drop it on you as the project was underway?

If she dropped it on you as the project was underway/and/or/contracted, then no go on the fee. You can't just add on a new fee once the ball is rolling.

If she mentioned it to you in advance of a new job starting, then I guess she has that right, just as you have the right to say no thanks. Did the homeowner find you independently, or through the designer. If the designer referred you to the client, then she has the right to a finders/referral fee (Although personally I'd be thinking that it's not worth it for me to be in bed with somebody who is asking for a finders fee, I'd rather build a positive relationship where we each feed each other leads and business). If the client hired you direct and independently of the designer, then the designer really has no grounds to ask you for more $.

As for her level of involvement, if she really is making a point about how "hands-on" she is in the process, and if that hasn't been your experience, then I'd politely tell her that you haven't witnessed a high enough level of involvement to justify any additional fees.
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Old 08-18-2012, 12:39 PM
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Just how much installtion experience does she have?
As designer and builder, I find that many changes are made on the spot with the client as we're building. As the installer, you know what will work and what won't work as you're building.
Unless that was an agreed upon price before the work started, I'd be inclined to say thanks but no thanks.

For instance, we're building a 12' long beverage center out of CMU and stone. The drop in beverage coolers needed some drainage hooked up that conflicted with our supports for the flagstone tops. So, we had a little extra time to change the way we built the unit. In addition, the client added 2 sets of double doors to the front after we had the block work done. Mortar was still wet so it wasn't much of an issue but we were able to redesign on the fly and add the openings for the doors.
Then we started looking at the large ( 14" high ) backsplash and decided to add some built in low voltage wall lights. No problem, space them as we see fit and cut out some block.
If I had to wait for a designer to come over any time we wanted to make some simple changes, my down time would be enormous and I would probably back charge someone.
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Old 08-18-2012, 02:20 PM
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If she is charging the client for project management and is not disclosing to the client that she is getting money from the contractor, it is not only unethical, it is illegal.

I would let her know that he only way that you would do that is if it is in writing and that the client was informed of it. All liability to the client should be on her in that case.

Heck, you'll be doing well to make 10% profit on any job, I certainly would not give it to her unless you knew everyone else is required to bid knowing that they need to pay the designer. Many designers here that other designers or LAs are getting 10% of the job as part of their fee, but most of them don't realize that it is a contract administration fee which means they take full responsibility for the job, hire the contractors, manage the job, inspect, approve, and pay the contractors - the property owner does nothing but pay the designer who pays everyone else. ... there is a huge difference between that and a finders fee (kick back).
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Old 08-18-2012, 05:44 PM
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To be clear, I did a small project for one of her clients, on her referral, with no real design, just a wall rebuild. On this second job, she notified me of the fee at the beginning of the process so I was able to raise my price by the 8%. It was a 25k job so the fee was pretty good size.

The designer made a total of 1 site visit at about 85% completion.

I was under the impression that she was going to act as a buffer between us and the client and be available to solve minor issues without having to get the client involved.

Instead, she was unavailable, and I wound up solving quite a few issues with the client, which can be tricky when there is a designer involved but not present.

Most of the time an absent designer is fine with me, but on this one I felt like I was paying for her help at the beginning, and by the end it definitely felt more like a kickback.
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Old 08-18-2012, 08:20 PM
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1 site visit at 85% completion for $2000 would make me pretty angry.
She probably charged for the design as well?
Either way, she didn't provide a service that was worth the money you spent.
I'll be lucky to make a couple hundred bucks off some of my subs and with most of them we just trade out work. In the end, however, it's my responsibility what my subs do and it seems like I still have to mop up behind them in one way or another.

Even I feel ripped off just reading this thread!!!!
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Old 08-19-2012, 12:07 AM
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1 site visit on a $25K project using a contractor she's never really worked with before, tells me she didn't care much about how the job got done.

I have never charged a fee, and won't, but I will say, however, that I have never yet, in 5 years, had an installer refer a client to me, even after sending them multiple clients. They are happy to get a job from me, but when they get a client, they find they don't need a design, and even go so far as to send the client to the wholesale nursery to pick out their own plants.

So, I can see why she is doing this.
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Old 08-19-2012, 09:53 AM
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Quote:
Originally Posted by Terre View Post
1 site visit on a $25K project using a contractor she's never really worked with before, tells me she didn't care much about how the job got done.

I have never charged a fee, and won't, but I will say, however, that I have never yet, in 5 years, had an installer refer a client to me, even after sending them multiple clients. They are happy to get a job from me, but when they get a client, they find they don't need a design, and even go so far as to send the client to the wholesale nursery to pick out their own plants.
You are right about this, unfortunately it's the nature of the beast in a way. Clients who are interested in, or open to, paying the cost to have a project designed usually contact a designer first. If they contact a contractor, (unless it's a design/build firm), it can be difficult to steer them toward a designer when, really, what they want is a description of the work and a pencil sketch.

I'm in an awkward position in that I do offer design services, so I can handle some of the smaller design projects. It's hard to imagine handing that off to a designer when I can have the opportunity to design the project the way I want to build it. If I were to be contacted by a client for a larger project in need of a design that was way over my head, I would love to give a referral, but it just never seems to happen. I see what you are saying, though, and you are right, there are probably some situations where I could refer a designer and it would probably benefit the relationships I have with designers.

At the end of the day, my guess is that a design-only firm charges the client for services rendered. When the design is paid for, it's in the designer's best interest to have the project turn out well, and if the contractors they recommend deliver the goods, it's a nice ending to a successful project.

By asking for a referral fee the designer is, in effect, secretly double-charging the client, and not acting in their best interest. What if only hacks are willing to pay kickbacks?

Also, she may have had only limited work experience with me, but she's familiar with my work and my past clients, so I'm reasonably sure she knew we would not disappoint.

She wants to work with me again now and so this is why I started this thread. My gut says the whole arrangement is wrong.
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Old 08-19-2012, 11:25 AM
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You are very right she is double charging and the ethics of it are questionable at best. I would think it would be a short step to asking for a fee and giving the project to whooever would pay her the most whether or not they were qualified to do the install.

Casting no aspersions on your work it just struck me as negligent to only make one site visit.)

I would never expect a referral from a design build firm but I've been promised quid pro quo from hardscapers and concrete people many times. But then I find they just sell half a job (their half) or worse, send the client to pick out their own plantings with no knowledge of soil types, exposure, and in some cases not even an understanding of the difference between annuals and perennials.

I would never charge a referral, indeed I have declined that from one concrete guy. Wouldn't that put you in the same position as being a general contractor and leave open the question of liability for their work?'
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Old 08-19-2012, 04:31 PM
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Who's initial lead is it? Her,s or yours?
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Old 08-22-2012, 05:08 PM
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My first question would be, did she provide all the drawings that were needed for you to complete the job? Construction details? Installation guides?

Was she the one that got the ball rolling and took the client, made the product choices and plant material suggestions? I can see the value there, as well her education if any?

She maybe charging them for design, however she may say it is rolled into the cost of the project at a fee. That is common among many design companies. If it was me, I would ask, or that place it on the bottom of the contract with it clearly labeled out, here is your "design fee".

As a veteran design professional, I see today there are too many companies giving away design, which is ruining our industry. Every where you look, guys are offering free design, however what the uneducated homeowner does not understand that these are just schematics. A true landscape design, illustrates and points out the various aspects of the project, outlines the products, and details how they should be built.

I just walked into a six figure pool job that to me had way too many unanswered issues at hand. More on the "free landscape designer" they were refered to. The pool was to be installed in two days. I was brought in to consult. After sitting down with the client, and reviewing their "plan or design", a installation company may have lost a job for their lack of planning in design. A simple sketch can not be suffcient to build any substantial project let alone a 25k project.

I guess I can see her point, if you offer no kick back for doing most of the leg work to get the client to install. If it was all laid out for you to install, she should not have to show up and be a mediatior. She has had you do a project trusts your installation, and quality, therefore you as a professional should see the plan and right away bring up any discrepancies that you may have. And if when, installed, any problem arises, a change order should be written, and that I would consider not for her to add on an 8% fee, unless you are provided with the required design to do so.

There may be more to the story, however that is my thoughts as a designer.

Quote:
Originally Posted by matt in maine View Post
I have worked with a designer on a couple of projects now, who asked for a referral fee, (8-10%), on the last project and I wonder what thoughts you all might have on whether that is ethical or not.

This is the only designer who has ever asked for that, most others just ask that we refer people to them when the opportunity arises.

Her rationale is that she will usually stay very involved with the client throughout the process, although that was not my experience on the last project, where I spent many hours consulting with the client and dealing with tweaks and change orders.

My gut feeling is that the client should know where their money is going and that the designer should charge the client for time spent on the project. I don't feel right tacking on a percentage to my quote in order to get a strong recommendation from a designer, as I feel that a designer with integrity would want the client to hire the most capable and honest installer they can find, and NOT just from a list of installers who are willing to pay a kickback.

I've seen other threads where this has come up but want to see if anyone else will chime in.
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Old 08-22-2012, 08:58 PM
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There were no drawings. It was a dry stone retaining wall rebuild, a clay brick patio re-lay, and there was no planting design.

I was introduced to the client and never saw the designer again until we were almost completed. The client was very pleased, but the designer was unavailable and I had to ok the layouts with the client at every step, go over each part of the project as it was happening so the clients could be informed, and since there was no design drawing, I had to suggest and lobby for every small "tweak" and modification necessary to upgrade the finish product from the original so-so install into a high quality outdoor space

In the end, the client was very, very happy with the results and with my crew. The plants were done by others after we were gone.

Here's a picture
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Old 08-22-2012, 09:03 PM
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here's the before, for comparison.
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Old 08-23-2012, 07:50 AM
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I not sure that I have a problem with a referal fee in this case, but that is excessive. If the designer was not involved in the project and just hooked you up with a customer, I think it is not unethical. I do think the fee is excessive and I also think it is bad policy for a designer to do this - I would not.

I think it is a better idea to take care of your subs and when an opportunity to pass on some work to one that has been good for you in the past, you should do it. What goes around comes around. I know that I'd like to have a mason call me with a design referal from time to time a lot more than to piss off a good sub by taking advantage of a situation. Just because you can do something, does not mean that you should.

I think $100 would have been alright. I would not looked for the kick back, but I don't think it would have been wrong unless the designer was supposed to be the project manager or contract administrator which appears not to be the case.

On the other hand, when things like this occur outside a contracted job, they still taint the professional relationship when there are other contracts later on. That corrupts the designer whether they realize it or not.
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Old 08-23-2012, 11:05 AM
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With the project that you show, I would say a 3% or maybe a $500.00 kick back would suffice.

Did you approach the client with the estimate or did you give those to the designer, which in turn discussed the estimate with the client?
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