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The value of plain speaking

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The Economics of Architecture - and more specifically the concept of added value - was discussed at the AJ/RIBA conference last week. Austin Williams reports

'Add value' is the clarion call of most current business strategies and, as businesses, architects are no exception. At a time of increasing competition, architects are having to seek new ways to differentiate themselves from the rest of the pack. At The Architects' Journal's conference, The Economics of Architecture, sponsored by Union, Cadtest and Kalzip, 180 people gathered at the RIBA's Jarvis Hall to discover a few tricks of the trade.

First up was Ted Cullinan - who did a very good impression of Ted Cullinan. Musing on life while he sketched on his acetates and rambled coherently about his interest in, and his enthusiasm for, design, he began his one-hour talk with a slide of the prehistoric settlement of Scara Brae in Orkney. In a style reminiscent of Dad's Army's Frazer, he told the tale of a wild and stormy night in 1850 when the sandy dunes of the bay were pounded by the winds to give up their hidden secret that had lain undisturbed for 400 years. Aye! Seventy-five years later and careful excavation revealed a Neolithic settlement of family homes, 'granny flats' and interstices, which Cullinan raved about as 'truly designed objects.' This, he said, gives lie to the notion that 'prehistoric man was simply a sweaty, hairy beast how could anybody think about questioning the value of design after so beautiful a place'.

The first of three of his own projects reviewed was the reinstatement of Bristol's Brunel mile - the link between Isambard Kingdom Brunel's Temple Meads station and the SS Great Britain (AJ 11.7.02). He said it reflected a 'way of thinking about buildings for a purpose in a situation and responding to it poetically - beyond comfort and usability, but as a response to a situation.'

Marco Goldschmied discussed 'Construction industry finance and the role of architectural practice within it'. Admitting that the title was too complicated, he proceeded to talk about the Centre Beaubourg and the impact of the design on traffic patterns and urban flows: how the project had created new 'value' by opening up undiscovered uses and spaces. It was this 'added value', he suggested, that had put them into pole position for the scheme.

Similarly, putting the escalators on the inside of the building would have been cheaper, but would have lowered the tourist returns on the investment which had come from putting them on the outside. The enhanced local VAT on the project, he said, had recouped the cost of the Beaubourg 100 times over since it was built. He then said that it might be 10 times or 1,000 times or probably will be by 2050.

Mercifully, while Goldschmied is adding aesthetic value, someone else is doing the accounts.

Moving on to a slide marked 'Creative Lewisham', Goldschmied proceeded to talk about his proposals for a 40-acre waterfront site in Deptford. He explained the catch-22 of having to justify schemes in terms of employment opportunities created, and he showed a graph of the history of the site, comparing built area of employable space with the actual number of employees.

With the decline in heavy industry, fishing and related trades, the site has seen a dramatic natural decline, from about 100 jobs per acre to about 0.25 jobs per acre; that is, there are currently around 10 people over the whole site employed in security jobs to stop people coming in.

When the planners requested an ideal job creation plan of 10,000 new jobs, Goldschmied expressed his exasperation at the mismatch between desirable objectives and what is in the gift of an architect to deliver.

'We are completely stuffed, ' he said, referring to the generic rather than the site-specific problem, 'unless we can unlock the conundrum'.

From the Bartlett School of Architecture, Graham Ive boasted that, in 25 years teaching economics at an architecture school, he had never once used a slide of a building.

This presentation was an attempt to understand the concept of value and value engineering. Some over-the-top calculations masked a straightforward proposal: that architecture is a business, and using the Micawber maxim, incomings should exceed outgoings at all times. Or as Ive put it, while Vi may be less than Vm (the mean value), V (revenue minus running costs) should exceed I (the construction cost+land opportunity cost+design fees+price of equipment).

He ended on a footballing note, with an explanation of the Nationwide League and the Premiership, where those practices in the former have low returns, but work on lower risk projects producing safe solutions. The Premiership players, on the other hand, have higher returns, their clients get greater NPV (Net Present Value - pay attention at the back! ), but they have to settle for more risk.

To start to play with the big boys in the Premiership, architectural firms will have to build up repeat clients and begin to invest in 'learning how to deliver'.

Julia Barfield rounded off the morning session by recounting how she invented the wheel - or at least, the London Eye.With the audience interested in the quantification of value, her Economic Impact Study of the project showed that it had contributed to 1.5 per cent of London's tourist income.

Sometimes cause and effect issues mean it is difficult to interpret the figures, but the iconic status of the wheel might have been less if Mitsubishi's accounts-led proposal for fairground-style capsules had gone ahead.

BDP director Richard Saxon made the interesting observation that value, or 'worth', means different things to different people, citing the difference that healthcare design has in France and the UK.

Peter Rogers of Stanhope also noted that value engineers are not always the best people to understand the issues, since they often don't understand 'the product'. In their view, he said, they will understand that fewer hinges on the door will save money, but an architect should be asking whether the door is needed at all.

John Smith, director of finance, property and business, the man who has driven through the major new procurement packages for upgrading the BBC, celebrated the Reithian attention to detail in the old BBC building stock and condemned the 1970s and '80s when 'design became subservient to detail'. However, while the BBC is currently going through an identity crisis of programming, Smith wanted to have value added so that people would identify with the BBC brand as something - like Bill and Ben - that would stick with you for life. He is keen therefore to encourage open, transparent and permeable spaces for the public to engage with the BBC as a corporate Auntie.

'You can't put a value on that, ' he said.

The problem is, he continued, that 'the public' is alienated, even by the security guards (cue slide of burly authoritarian-looking bouncers in Broadcasting House). To this end, they are having a Peter Bazelgette-style makeover. Their uniforms - if they will be called uniforms - will be designed by Prada and they will be taught to stand differently (in a non-intimidating way).

Finally, in a roundtable debate, architectturned-developer Crispin Kelly of Baylight Properties complained that 'the system is against us', since 'the appeals system is less of a help (than it used to be) because the UDPs are too thorough'. Roger Zogolovitch of AZ Urban Studio design management practice argued from a client/developer perspective that architects should be mindful of the number of staff they take to meetings, and that fees based on construction costs as opposed to service and value offered were unacceptable.

John Weir, another ex-architect, was blunt about volume builders: they understand net profit and that's it, he said.

While he, as a past managing director of Wilson Connelly Homes, might be swayed by an impressive track record of a top-quality architect, he would still make the equation: how much extra to employ a 'name' to add value? - answer about 10 percent; how much increased monetary value does that put on the property in the market?

- answer, about 3 per cent. As a businessman, 'seeing that comparison, I would say thanks but no thanks and go back to what I know would keep the margins up', he said.

All in all, this was an interesting day's debate and will probably need a rematch to tease out the real driving force between the aspirational business interests and practical reality.More plain talking is needed.

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