An upturn in construction means more work for architects, but many are still struggling to translate this into higher fees. An AJ panel of experts discussed how to tackle this challenge
With the gloom of the recession fading into the horizon, the UK is building again, not just in London but across the country. This means more work up for grabs, but how best to capitalise on the opportunities of a growing economy?
Has the upturn led to increased fees? Have architects developed a more business-oriented working culture to make the most of improved cash flow? And does the industry have the necessary skills to meet demand?
The AJ, in partnership with professional services software provider Deltek, invited key members from nine AJ120 practices to Tower 42 to discuss these key challenges facing their businesses.
‘Fees continue to be suppressed,’ said Ryder Architecture partner Tim Jeffery who opened the discussion. The key problem that needed addressing, he said, was the way architects calculated their fees. ‘People will put together a resource plan based on how long they think it will take to do it rather than selling any value propositions,’ Jeffrey said. ‘We are prepared to give away our unique ability too readily and too cheaply.’
HOK director David King agreed, saying there had to be almost special circumstances for the practice to be suited to a job in the UK. ‘We are monitoring opportunities more than we are receiving them,’ he said. Overall, there was a feeling that practices needed to break the recession mentality, which was leading the industry to price jobs too low.
If you go around buying jobs, you know that’s not a sustainable position
King continued: ‘I know a couple of projects where we did bid and we were way off the mark in terms of the fee that was actually agreed. The feedback we got was that the winning bidder had actually bought the job. Now if you go around buying jobs, you know that’s not a sustainable position. If you don’t value your own service, how are you going to sell it?’
The general feeling was that architects needed to better assert their value, but the legacy of the recession is biting hard. Levitt Bernstein director Jo McCafferty believed that many architects were locked into framework agreements signed in ‘very tough times’ and were still working to those fees. Christian Male, practice partner at SimpsonHaugh & Partners, spoke of a ‘new baseline’. In this scenario, said McCafferty, the importance of repeat clients could not be underestimated as they were more receptive to fee increases.
Jo Bacon, a partner at Allies and Morrison, agreed and added that some clients would use the practice to achieve planning, then switch to a cheaper practice for construction. ‘In the end the value is in the quality of the built product,’ she said, ‘not the drawings that got approved by the local authority.’ However, both King and AHMM associate director Ceri Davies said their practices avoided this by carving up the pricing structure in a more efficient way. King recounted: ‘With a new client, a Chinese developer, we completely reprofiled the fee so a big chunk of it was delivered by the time the planning application was submitted.’
The discussion led some to question whether we were seeing a nascent royalty-based fee system, particularly when it came to housing. Rob Sargent of Stride Treglown described a recent conversation with a developer who was looking to the car industry model when it came to house building. ‘We have got to get away from traditional fee scales for something like that,’ he said. ‘You are talking about intellectual property rights, and it might be more about licensing.’
Peter Gamble, senior partner at Holder Mathias, cited his practice’s lodge design for the Forestry Commission, which was being rolled out across the country. ‘We are being paid a royalty on each one,’ he said. ‘I think that’s a future model for the housing industry.’
Whichever the model of payment, the panel was unsurprisingly unanimous that fees had to increase or, with wages suppressed, staff may begin to look elsewhere for work.
Though the recession caused fee reduction, for Sargent it turned out to be a blessing in disguise, forcing his practice to ask some hard questions regarding the efficiency of its working culture. ‘It might mean we don’t need to produce 300 drawings,’ he said. ‘What’s wrong with 200?’
This kind of ‘optioneering’, as Davies dubbed it, where architects do more than is required, had to be guarded against as it inevitably stretched the resources allocated to a project. Architects had to be better at setting parameters, however unnatural that was to a profession driven by its desire to deliver its best for a client. Jeffery called it a ‘boy scout’ mentality that was leading architects to over-deliver in terms of proposals.
Compounding this is the reticence with which architects address change-management.
‘We are really bad at claiming fees for change,’ said Bacon, who thought the profession would do well to learn from Design and Build contractors regarding what needs to be delivered. ‘They bring a great discipline in terms of identifying exactly the drawings you are going to hand to them at a certain point in time and that is good for architects.’
The accuracy in allocating resources to certain projects became more complex when architects tried to balance a desirable one-off commission against more straightforward work by streamlining resources on the latter. With one project funding another, Sargent noted, the quality of data feeding back from the project management system was crucial to success. ‘It’s the classic case with any database system,’ he said. ‘It’s garbage in, garbage out. We discovered huge flaws in our system when we realised it was double counting holiday for instance. Now we have three rates: a timesheet rate, a break-even base rate, and a rate we want to target in the market because that’s the only way to deal with the foibles in computer land.’
But overall, architectural practices were less afraid of hard data then they used to be, said Davies, and perception was the key to this. ‘Rather than seeing it as cracking the whip, you start to use the information – perhaps for a fee on another job,’ she said.
We are really bad at claiming fees for change
In developing a strong business culture among new recruits, Jeffery revealed that, as part of their training, Part 1 students at his practice were included on commercial review meetings with the finance director. ‘What we say is: the profit and your profit share is tied up with you in the project.’ Indeed, instilling a sense of ownership into each project was pivotal to making it work and in turn be profitable. It tapped into current debate regarding ‘oven-ready students’ and whether there was sufficient talent coming through to plug a burgeoning skills shortage.
McCafferty said architecture was losing highly skilled women owing to the difficulty of returning to work part time.
‘There is a whole knowledge base out there that is not coming back into the profession because the incentives just aren’t great enough,’ she said.
It wasn’t only skilled architects that were in short supply, the panel thought, but a set of skills around the peripheries of the industry, which were nevertheless fundamental to delivering a building. For the most part, universities were failing to teach skills such as BIM coordination, BIM modelling data and data input, said Sargent. ‘Someone that’s got the Revit skills is just non-existent in the academic world,’ he said. King, however, said that overseas staff from Asia, New Zealand, Australia and South Africa proved highly skilled in programs such as Revit, filling a skills gap left by their UK counterparts.
That said, he added that establishing closer ties with universities such as the Bartlett paid dividends in identifying and recruiting talent. ‘We are willing to sponsor them through their Part 1 or Part 2, or give Part 3s the needed site experience,’ he said. ‘If you are willing to actually put something into it, most schools I think will reciprocate.’
Ultimately, the skills shortage might be the factor that forces a boost in fees. At a very basic level, without sufficient personnel to meet the demands of the market, practices will have to turn work away. ‘This will be one of the fundamentals that will start to realign fee levels,’ Gamble concluded.
Jo Bacon, partner, Allies and Morrison
Ceri Davies, associate director, Allford Hall Monaghan Morris
Peter Gamble, senior partner, Holder Mathias
Tim Jeffery, partner, Ryder
David King,director, HOK
Christian Male, practice partner, SimpsonHaugh & Partners
Jo McCafferty, director, Levitt Bernstein
Rob Sargent, board director, Stride Treglown
Kevin Van Kirk, architect, Deltek
Blair Pringle, business director, Deltek