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‘Competitions offer terrible odds for a pretty lean return’

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We took a close look at what we spent on entering design competitions and it was a wake-up call for the practice, writes Hari Phillips

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The recent decision to suspend work on Feilden + Mawson’s competition-winning design of the Norfolk Broads Visitor Centre pending funding once again brings the precarious nature of design competitions into sharp focus.

Like most architects, we get sucked into the excitement of competitions. How could you not? We’re passionate about what we do, and we love to design. The words ‘design’, ‘competition’ and ‘visitor centre’ are like catnip; once we see a juicy design problem and an attractive site, the mind starts wandering and we can’t resist reaching for the sketch roll and fat pens.

Last year, for the first time, we decided to look back at the bids, submissions and competitions that we’d undertaken over the previous year and analyse our success (or not), expenditure, feedback, and so on. The results were a wake-up call.

Over the year we’d bid for 18 jobs, predominantly in the housing sector, the majority for public sector clients, through a range of invited competitions, open competitions and OJEU bids.

Our average expenditure for staff costs only was approximately £9,000 per bid, coming to a total of just under £160,000 over the year.

Our win rate was a very creditable 1 in 6, and we were shortlisted for all but one of the projects that included a shortlisting process. It turns out that this is a double-edged sword, as it’s the work you do once you’re shortlisted that gets really expensive. The worst-case scenario is to be shortlisted but not win.

We then dug deeper and started to look at the potential fee income for each project in the event that we’d won, compared with the expenditure invested in the bidding process, and this made for some really uncomfortable reading.

Two projects in particular stood out. These were a pair of post-war estate masterplans for a local authority that we hadn’t worked with before. We were keen to win the jobs, win a new client and possibly win follow-up work from the masterplan and we were fortunate enough to be shortlisted for both projects.

However, when we examined the data, our expenditure on staff time alone equalled the profit that we would have earned had we won the job (assuming a profit margin of 20 per cent, which is in no way guaranteed), a total of £36,000 across both projects. This was utter madness. We didn’t win either job, by the way.

This really got me thinking. What else could we have done with £36,000 to raise our profile, develop new business, or otherwise improve the quality or efficiency of our work? We could have held 12 office parties, built a pavilion for LFA, host 72 lunches for prospective clients, take our office on seven overseas study trips, put on three exhibitions, and so on.

In another example, this time for the masterplan of a well-known school, we were again lucky enough to be shortlisted, but again we didn’t win the job, expending a total of £10,000 in staff time on the submission.

Our expenditure on staff time alone equalled the profit that we would have earned

What caught my eye on this occasion were the fees other practices were bidding. The lowest bid for the job was £29,000. Assuming they were expending a similar amount of money on the bid, how on earth were they expecting to turn a profit in the event that they won the project?

I wonder how many other practices undertake a similar analysis. Having looked at this more closely we’re now much more analytical when considering which bids and competitions to go for. We consider what the chances of winning might be; what will be the potential fee if we win; how much work the client is asking for during the bid/submission stage. Is the timescale and budget realistic? Are there other potential side benefits, for example publicity, research, creating a portfolio and so on?

Based on the answers to these questions we will take a cold, hard view on whether a job is worth bidding for and, if so, how much time and resource we should expend in the bidding process. That’s not to say that we won’t sometimes go for something riskier, but when we do, we’re very clear about what our motivations are for doing it.

Let’s look again at the Norfolk Broads Visitor Centre competition. It looks on the face of it like a really lovely project for a young practice to cut its teeth on: a great site, a nice scale and a high public profile. The stated budget for the project was £750,000, which was clearly never going to be enough for the ambitious brief. Apparently, there were 95 entries for the design competition. If one conservatively estimates that each competitor expended £5,000, that would amount to a total expenditure of circa £500,000. In other words, two-thirds of the total construction budget and many times more than the total fee available for the project. In effect all but £5,000 of this expenditure was wasted. Surely there are better ways to spend half a million quid.

And what about the potential fee if you are lucky enough to win? Let’s say, for the sake of simple maths, that one charges 10 per cent of the construction budget for a full architectural service, totalling £75,000. Let’s also say that you managed to make 20 per cent profit on this fee, resulting in a total profit of £15,000. However, you’ve already expended £5,000 trying to win the job, which reduces your profit to £10,000.

When one looks at that in the round, architects entering this competition were investing £5,000 on a 1 in 95 chance to win a £10,000 return on a project that had a suspiciously low budget set out at the outset. Those are terrible odds for a pretty lean return.

So while we can rail against these sorts of competitions and demand that the RIBA does more to support and organise well-run competitions for serious projects, there is also an obligation on us, as architects, to be smarter about understanding our own motivations for entering competitions and to be intelligent about the relative risks and rewards of investment on competitions and bids versus other routes to generating new business.

Hari Phillips is a founding director of Bell Phillips Architects

  • 9 Comments

Readers' comments (9)

  • An excellent article well stated. Public clients have also been shown to spend c. 25% of total competition economic costs. This accumulates rapidly to staggering sums that might better be spent on what’s being built - with more and better value quality projects, and better working conditions for those employed on them.
    Because such competition processes aren’t required in the private sector, where any appointment process can be considered, there is no level playing field. Consequently, those seeking to provide much needed public service and investment are at an economic disadvantage which disincentivises public work, and public bodies from being able to afford it.
    For far too long outsourcing of public service design has been plagued by competition(s) and its time to question this model’s fundamental logic. Processes are expensive and complex, competitions threshold values are far too low, and there is a predisposition towards the ideology of competition that’s frequently skewed to cost and not value, rather than collaboration. Are such proscribed competitions necessarily at the heart of everything that’s good, fair, accessible and delivers best value?
    The profession and RIBA urgently need to move forward this matter.

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  • Excellent article and whilst I support the RIBA running more competitions the recent change to their competition format to include elemental cost plans (no matter what the level of design) has further increased the workload imposed on architects. It also raises confusion - how do we engage a Quantity Surveyor on a competition that they will have no chance of getting a commission out of (good will / payment / further cost to the architect)? and how is there a level playing field between the varying advice received by teams from different Quantity Surveyors. Come on RIBA, please think about this...!

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  • I sympathise but ever since architecture and design competitions became the best way to do really creative work with no risk (unless you won), to try things out without having to convince your client and in the knowledge that your best work may be stolen, this had been the dilemma. I don’t have an answer but as an urban design practice we saw it as a marketing and creative process that enabled us to look beyond the brief and get known. Also international competitions have been a valuable source of work for many practices.

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  • Well done Hari for opening up the accounts on this and expressing what is a collective problem so clearly. We too have taken a hard look at the mounting expenditure on fee bids, which are becoming increasingly onerous, invited bids to do design work for a small fee, and competitions. We discovered about 10% of turnover was spent on bidding. It doesn’t take a genius to see this isn’t sustainable.

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  • I should have said that when it came to competitions we did ones that had a fee for competing after getting through to the shortlist. Bids for jobs without a design input are a different matter.

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  • Heartening to see such rigorous analysis - we take a similar view. We see feasibilities as a more manageable and tailored route to work. Looking at the combined industry cost wasted on competitions though - let's say 50 practices at £30k each - that's £1.5million. Who benefits here and do they then pay a premium for the winning design or is there a further grinding down of the architects fee? The mind boggles....

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  • Best bit of evidence-based architectural business advice I've read Hari. 'Think before you enter' might be a new motto for the profession - rather than Dr Johnson's aphorism 'the triumph of hope over experience'...

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  • Hopefully the craze for visitor centres is coming to an end. All they do is attract visitors, who tend to ruin the peaceful site they have come to see.

    I would never enter a competition. If someone wants my services, they can pay for them.

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  • Well said Murphy. Tellingly, the dilemma of how to get a QS to cost the speculative competition entry pro bono is broached by Emma above...it is unlikely that they would, as the liability is too much. I suspect that the new requirement for costing is driven by the recent Riva v Foster legal case, in which the latter lost and paid £3.6m damages to a client in receipt of a design that cost twice his budget of £100m.

    This fascinating case, laid out in a judgment running to 100 pages, with the judge invoking fundamental tort law case precedents halfway through (such as the ‘snail in a bottle’ case that is the basis of modern tort law...Donoghue v Stevenson, 1932) should be on the shelves of all architects. A working knowledge of the case is essential for practitioners. It is extraordinary that the architects allowed the dispute to get into the public domain.

    As for competitions, they are best avoided like the plague, as they are now even more dangerous for your financial health than ever. You will still be sued when your adventurous competition winning design comes in at twice the budget.

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