How to Write a Contractor Design Agreement: What to Include and How to Price It

Four documents get confused, and they do different jobs.

A feasibility study comes first when the questions are about the site or the money rather than the design: existing plans that need a budget check, setbacks, variances, code problems, environmental issues, or whether the customer can afford what they want. Michael C. Stone, a builder and remodeler with more than six decades in the industry and the author of Profitable Sales, the book this guide draws on most, treats it as a separate paid stage. Plenty of jobs skip it and go straight to design.

A design agreement is not the construction contract and does not authorize construction. Signing one commits the customer to planning, and nothing more.

Every design agreement needs five things, and most need several more.

Stone describes the agreement as one or two pages that identify the parties, the work, the price and the timeframe, and limit the scope. Short is fine. Vague is not.

The language below is a drafting example, not legal advice. Have a lawyer in your state review your final form.

Scope, fee, credit

The saved agreement

A design agreement in Clamp: the deliverable, the fee and the credit policy on the form, then the saved agreement. Demo lead; the $2,390 fee is the worked example in step 4.

There are three ways to set the number, and each fits a different product. The paid-estimating guide sets out the ladder from a free fit conversation to a full design package. The design agreement is near the top of it.

Hourly is planning hours times a rate that covers your labor, overhead and profit. Flat is a fixed fee for a defined package, usually built from the hourly estimate. Percentage is a share of the expected construction price: Stone puts a design agreement at 4 to 8% of the total sales price in Profitable Sales. That is his method, not a survey of what contractors charge.

The $132.80 rate comes from that published solo-business model. It is not a recommended design rate for every contractor.

As a cross-check against the percentage method, on the published $40,000 average project from What a Solo Contractor Has to Charge, 4 to 8% is $1,600 to $3,200. The hourly fee lands at 6.0%. That is a sanity check, not a rule. Use your own hours, your own rate and your own average project.

Stone also recommends one practice worth knowing: when subcontractors or suppliers are asked to do design work beyond a normal quote, they should be paid too. If you are being paid for planning, so are they.

Say it in the agreement, not in a conversation after the customer asks.

The practice this guide uses, following Stone, is that the contractor keeps ownership of the plans and specifications and gives no right for another builder to use them. That is the clause in step 3. It is the cleanest answer to "can I take your drawings to someone else?", because the customer agreed to it before you drew anything.

Copyright, architectural licensing and state law can all affect how ownership and use rights work, so have the final clause reviewed in your state.

When the customer goes ahead with construction, the fee can either come off the construction price or stand on its own.

Stone shows both approaches. His worked example credits the fee, and he notes that many contractors treat design as a separate service and do not. This guide recommends no credit, because the planning work has real labor and real value of its own. If the construction price is calculated independently and the design fee is then credited without being built into that price, the credit reduces the money available for overhead and profit. What a discount really costs shows how fast that adds up.

Older practice used a different tool: one design fee if you build the job, and 1.75 to 2 times that if the customer takes the plans elsewhere. Stone recommended it to stop contractors being used as low-cost designers. A clear ownership clause, in step 5, addresses the same concern from a different direction: it defines who may use the work product, instead of changing the fee depending on who builds the project.

Whichever you choose, write it down before any work starts.

The planning deliverables become the basis of the construction proposal. The final scope, specifications, selections and price are carried into the proposal or attached to it as needed.

With no credit, the proposal is priced on its own, at your normal markup, with no planning fee to subtract. If the customer does not go ahead, the planning relationship ends under the agreement's terms: the fee for completed work was earned, and the drawings stay yours.

Most objections are answered by something the agreement already says.