Hello Business Owners. Other than the current state of the economy, I was wondering if you'd be willing to share what your biggest profit killers are? What are the typical problems you run into during a project that kill your bottom line? Scope creep during schematic design or other phase of the project? Mismanagement of production schedule? Errors on drawings?Thanks for any input you might provide.
Employees. Sad to say but with technology as good as it is I just dont need people anymore. Yes I can do more work with more staff, but as you asked, my profitability goes down. 2 or 3 experienced architects who know the law, the codes, construction techniques and the software can do more than a staff of 10 average architectural employees. So a small partnership is really the best way to become profitable.
the biggest is not being able to maintain the internal schedule, for whatever reasons. sometimes it's due to making our own life difficult, sometimes it comes from external places (clients, consultants, etc.).
we've seen, more recently, just plain idiotic contractors bidding on (and in one instance winning) projects of ours. i was semi-joking with the owner, after our 2nd rejection of work letter in as many weeks, that i'm imposing a 'stupid contractor tax' clause in my contracts from now on. but in all seriousness, it's a big problem and a sore point when asking for add services.
Not an owner, but from what i've seen... Clients changing their minds. When it happens too much under a fixed fee contract the profit margin gets whittled away quickly regardless of what phase the project is in.
not an owner, but agree with greg. if you can maintain an overall project schedule, there is a finite number of hours assigned to the project that can be billed against. if the overall project schedule slips (and slips and slips), you get a team billing to a project without a definite end date. from my experience this winds up being ten times worse than scope creep under a well maintained overall project schedule. my best advice is to manage the overall project schedule and accommodate the client as best you can within that schedule.
"we've seen, more recently, just plain idiotic contractors bidding on (and in one instance winning) projects of ours"
This often leads to the schedule problems. Ive always tried to avoid clients who are susceptible to hiring low cost contractors, you can usually sniff them out. They lose everyone money in the end. Although in this recession, they seem to be multiplying and becoming unavoidable.
Regarding schedule, I'm not sure if you guys are talking about your internal deliverables schedule or the overall project schedule, including construction. I'm assuming the latter. It seems to me you are saying that delays may happen in the construction that drag out the substantial completion date that then require you to attend more meetings, issue more documentation, etc. Is that what you guys are getting at regarding schedule?
wurden, that's what i was getting at in my post. it's particularly bad during the design phases. during construction, the owner and contractor have a vested interest in meeting the overall project schedule, so you don't see delays as often. but in design, especially before a contractor is involved, clients can drag out design indefinitely while they try to obtain funding or work through their own internal issues. this is where its incredibly important to set firm milestone deadlines and stick to them. again you manage the schedule and try to accommodate change within that schedule, but don't let the milestone deadlines slide. that's been my experience.
Not an owner either...but here's what I'm seeing/experiencing (largish A/E firm):
Settling for a lower fee (used to ask for 10-15% of construction; now settling for 4-10%) just to get the job & keep the lights on...
High overhead - once we plug in the OH&P factor into our topdown budgets, we're left with hardly any hours to complete the project.
No more large projects with lengthy schedules - everything nowadays is smaller and with short schedules or we're only hired one phase at a time... Those projects don't exactly mesh well with our size/business model.
Overbilling/Recognizing future revenue. Discovered this practice a few weeks ago - for example, if we're only 50% thru DD on a project, we'll invoice the client as if we are +60% complete. Seems sketchy to me and robs us of hours later on to finish the project...
Project teams constantly changing - people get moved on and off projects all the time. No continuity throughout the job and the end product is suffering big time. Huge QA/QC issues.
In a traditional design-bid-build project, you will lose money in SD and DD no matter what you do. Hopefully you recoup the losses in CD and CA, and if you are lucky few dollars on top can be called a profit.
Trick to profitability is not to offer 'design' services.
I'm serious. All the offices I worked with that only offered construction documentation and construction administration were huge cash cows.
Leave the preliminary designs to perpetual sacrificial lambs (big D designers). They will make their money through slave internships.
Rusty, in the Design Build arena it is a common practice to use the design as a loss leader to get the construction job, that is contract a designer for cost essentially, to sell the whole package. The margin on the construction can be so much greater they eat what used to be called the design fee.
if a firm is upper management heavy, all projects will suffer. Their billing rates kill budgets, which puts pressure on junior staff to finish quicker, resulting in more errors and poor coordination that kills the project timeline, budget, and quality of product down the line.
not an owner, I would like to share the story of my last office, but i think it would be quite clear who i'm talking about, and in Chicago its a small club. Sometimes I wonder if management types see how archinectors give out all these company secrets, and air ing out dirty loundry and I wonder if they would like to find us and break our legs, but I think that is one of the biggest things that makes this website special and this recession has done namely that all architecture office dirty loundry will get aired out on archinect.
lots of good stuff above. the schedule issues, wurden, are dangers at ALL phases of a job: SD, DD, CD, and CA.
there are always pressures to slow down or backtrack when our fee structure depends on keeping moving forward. and our desire to provide good conscientious service to our clients doesn't help.
there's a willingness, most of the time (and i'm talking about myself, here), to give the client what they want - to make modifications in light of cost or changed minds or ease of construction - without really wanting to trigger additional services. whether out of feelings of guilt, charity, friendliness, whatever: it's hard to tell the client 'yes, i'll do that, no problem' and then also tell them '...for the additional fee outlined in my contract'. you just want to say yes. too often we decide to call that marketing...
a recent issue for us, in addition to the things described above, is the percentage of total fee that we owe to consultants. we're out selling and hustling harder all the time, spending that marketing budget, a burden our consultants don't typically have to bear in any significant way. at the same time, our overall fees are getting squeezed. but we have not been very successful in adjusting the consultants' pieces of pie. so where a good project would have us taking home 50% - 55% of the total fee, lately we've been seeing maybe only 40% - 45%. that hurts pretty bad.
I'm not an owner, but for the past 3.5 years, I've been doing mostly renovation & fitout work involving selective demolition, reusing existing casework and other interior elements... basically very messy stuff. In these types of projects, it is very easy to get carried away and end up doing a lot of free work without even realizing it and in no time, you've killed your fee for the whole project before even getting sign-off on a design.
For these types of projects, you MUST establish a clear scope of work with the client very early on. This can be difficult with a messy reno job, since there is always the inevitable scope creep once you start tearing shit apart. But even if it's a drawing with a big, fat "scope of work" line on it, it helps. That way, if your client wants additional work, it is easier to negotiate additional fees. Once you do something beyond the scope of work for free, your profit is toast.
And if you're doing such work on "Historic" structures, when you're outlining your fee to the client make sure they understand that you never know what you're getting into when you open a wall. And that this could be a considerable issue. Frequently enough, I saw owners make their fees "Competitive" down low enough to get the job, but never took into account the actual nature of the work that they would actually be responsible for. Then the fee was exhausted (CA included) before the documentation was half way complete.
here's another one: project team members who are unaware of the contract requirements. in my opinion, every project team member from the pm to the pa to the gaggle of interns working on the project should read the contract and know the contract deliverables inside and out. how often have i seen someone slaving away on something that nowhere appears in the contract. again more of a design phase problem, but can be a big one.
(also, to steven's point about additional services, as the economy has tightened i've seen more and more firms turning to owners for additional services. architects need to be real careful here. yes, we are operating under thin margins, but we are also largely a service industry and need to be cognizant of the difference between providing good service and additional services.)
"a recent issue for us, in addition to the things described above, is the percentage of total fee that we owe to consultants. we're out selling and hustling harder all the time, spending that marketing budget, a burden our consultants don't typically have to bear in any significant way. at the same time, our overall fees are getting squeezed. but we have not been very successful in adjusting the consultants' pieces of pie. so where a good project would have us taking home 50% - 55% of the total fee, lately we've been seeing maybe only 40% - 45%. that hurts pretty bad. "
Steven, absolutely, 100% agree there. Last year, we finally broke down and asked our consultants, on certain proposals, to chip in towards the hard costs. All of them did. Because, you're dead on - most of them don't hardly spend a dime beyond pulling together their latest resume and profile (and I have to re-work their material most of the time because it's so bad). Throw in the fact that a lot of institutional clients drop a list 20 long of very specialized 'services' they expect to be covered and definitely end up getting less and working harder to cover everyone else.
The way we did the consultant ask was pretty straightforward: hey, we've carried you all and worked with you on quite a few projects the past couple years. That won't change but our marketing costs have. Consequently, we're asking you to help contribute to our hard costs - printing, shipping, etc. Not for the time we spend on them, though. You don't have to and we won't ask for frivolous or long-shot proposals. Each proposal we'd expect 100-200 per firm would be sufficient and will simply split it up between the firms on the team.
And, really, no one objected, we're all still friends, and it has helped.
Greg -
We used to work with a contractor who really did charge a "hassle tax" on indecisive / unrealistically demanding clients. He was a decent contractor so frankly I was on his side on that one. Later I thought about how we might structure same in the architecture field... we often got into the issue (on large renovations) of clients demanding more and more work once the walls were opened, once they went to their neighbor's and realized how much fancier their kitchen could be, etc... basically once you open up a gut reno, the client can suddenly see all the potential that they couldn't see before and they would want to add design all over the place. Because we agreed with them, like Steven Ward the temptation was very strong to just kind of give it to them without saying "now lets go back to the contract scope and talk about additional services"... especially since at that moment there's nothing constructed yet and you're dying to get the thing built & onto your website. Powerful incentive to keep the client happy at that point.
I think the biggest time sink that I've seen, in the residential side of practice, is a result of changes made during the design from the owner's side. Not that clients are at fault here, but we set ourselves up with no method of recourse, and give clients unrealistic expectations of how many times and how many different ways a decision can be made.
Nobody enjoys sticking an invoice to a client every time the phone rings, but there has to be an honest meeting of the mind between Architect and Owner when it comes to making changes beyond a certain point.
@Rusty Long: "Nobody enjoys sticking an invoice to a client every time the phone rings..."
And yet, that very same client thinks nothing of paying his/her attorney $350 per hour for every hour of legal services provided. In this regard we undoubtedly are our own worst enemy.
Interesting point quizzical. Recently there have been articles pointing out that legal grads are in a very tough job market too. I recently needed a lawyer and their rates were all still very high. I am wondering if the oversupply hasn't affected market rates yet, or if they just refuse to work for less than a certain rate.
They also bill you for phone calls and rounded to 6, 10, or 15 minute increments depending on the lawyer.
How did lawyers manage to create a system where every minute of their time is billable? Can you imagine an architect who invoiced for calls and emails?
Regarding consultants, have any of you done consultant selection based on invited competitive bidding? Invited meaning you are letting the 3 or 4 or 5 consultants, who you have confidence in, bid on the project and not opening it up to the whole world. I'm wondering if this would work to help bring down the cost of their fees or do you do this anyways?
Construction and contract administration. It can be a black hole if you have a problematic builder. I won’t bore you with details, let it suffice to say there were once three builders required to complete a project.
CAD (I’m fully expecting to take some heat for this). A great tool for visualization with simple modeling software but hugely inefficient for contract documents. I’ve seen cadmonkeys waste hours trying to figure out how to input something that could be drawn by hand in a matter of seconds. Add to that the cost of software, updates, training, hardware, maintenance, etc.
CAD is not a waste. I've done the hand drawing and spent the time with eraser shield and trace and poche and there is no question the computer is faster. not even remotely. Maybe you just ha d partiuclrly difficult problem or a particularly incompetent cad monkey in front of you? either that or the work was so small that plans were not required to begin with. These I understand but cad being a profit killer doesn't make any sense to me. To be honest if it was cheaper to do it by hand we all would be.
anyway, back to OP, our experience agrees with much of the above. we do too much for free and would make a shit load more if we just refused to design. but then we would not really be interested in the work, in which case why bother. not sure how to get around that side of things. this is a job that includes messy design process and predicting time it takes to get to a good point is not easy all the time. I suspect it is simply part of the job description. ?
“Faster” is not necessarily better. Neither is cheap. Poor drawings cause a multitude of problems which always have an adverse effect on the bottom line.
You would “make a shit load more if we just refused to design”? LOL Are you a cadmonkey?
Design is not only the single most profitable part of my practice it is the very basis of my business. All other services provided only exist to implement design.
no i own/run a small office in tokyo. we are in our own minds at least design oriented and make the effort to keep it about design.
i don't think design earns us more profit in the short term but long term we feel it will get us where we want to be so we don't deviate from the plan. but it is clear to me that our profits would be higher if we just didn't care. the balance between making the money and making the design better is still a tough one for us since we need to pay the rent and staff, and lets face it we do want to earn some kind of living for ourselves too.
hand drawings were still normal when i started working in the 1990's so i get your point but if your staff cannot do dwgs to a minimum quality then i would say it is on them, not a problem with the cad.
As a former Monkey, I can offer for owners in a hierarchical office setup, you should make sure your project managers aren't wasting your monkey's time. I cannot count the number of times I (as a monkey) was given some scribble by a project manager to put into a project that was incorrect. They either didn't know how the specific building was being built or they didn't know how to build buildings, just in general.
Registered Architects (the ones that I was supposed to be learning from) gave me numerous things to draw that were unbuildable or incorrect in some form or another. Or the "Architects" would have the monkeys draw up a number of details - and then turn around and have the monkeys delete that work and redo the same detail but in a different way because they changed their mind.
The rub is that when it came time to point the finger, the owner had no idea where the inefficiencies in the project took place - and the familiar refrain of "The Monkey Don't know nuttin'" was bellowed through the chain of command.
So Owners, keep an eye on your projects. No one ever points the finger at themselves, so when there are budget overruns and your project manager says that the Monkey doesn't know what he's doing... maybe ask a few more questions about that. They actually do teach some things in architecture school.
My small design/build firm isn't large enough to have a hierarchical organization with a dedicated production department. Staff are responsible for a variety of functions. In this setting, the commitment in both time and money to run CAD simply does not pay off.
I'm not arguing that a good cad monkey (or production department) isn't worth its weight in vellum in the right situation, just that in my particular case (small office, custom residential design / build) it is far more cost efficient not to use CAD.
Maybe the biggest problem is that I’m old school. Drawing is my process, direct feedback. The act of drawing makes me consider the meaning of every line in terms of function, construction, materials and connections. With CAD I have to think about HOW to draw, which distracts me from thinking about WHAT I'm drawing.
@ Menona, the points you make about efficiency apply to all firms. The difference with sole practitioners is there’s nobody else to blame when something blows up.
"Regarding consultants, have any of you done consultant selection based on invited competitive bidding? Invited meaning you are letting the 3 or 4 or 5 consultants, who you have confidence in, bid on the project and not opening it up to the whole world. I'm wondering if this would work to help bring down the cost of their fees or do you do this anyways?"
re: jump's comment about how to balance caring about the betterment of the design vs. profitability, how about this as a contract clause:
"After the scheduled completion of each design phase, a change requested by the owner/client that requires revisiting finished work will be subject to the architect's design judgement as follows: If the architect deems the change to make the project meaningfully better, the architect may waive the cost of inclusion at their discretion. If the architect deems the change to offer no improvement in the design, or that the change is for the worse -- but the client insists nonetheless -- then the architect will charge for additional fees as per..."
lol. that is a tough one subtect. i don't mind client changes so much. we see it as part of the process. depending on where we are in the design we charge for the extra work (or not). sometimes frustrating though, no question.
@miles, if you are doing design build then it makes sense to do by hand, especially since you aren't comfortable with cad.
personally i do about 50% of my work in a sketchbook on the subway or on site so hand drawing is coolio with me. but we need to do proper dwgs as well to tender bids. we work out a lot in cad too, just as much as you do doing by hand. we also learn a lot from physical and from 3d computer models.
we are quite careful about the dwgs i expect like most architects out there and take time to work the designs out. it takes time to do look at a project in that much depth though. which is why i think we could make more money if we just copied and pasted our way through DD. but could you imagine the quality of architecture if we all did that? yikes.
Changes in design/build are not as problematic as they are in a client/architect/builder relationship.
@jump, judging from the general quality of architecture today I think most do cut and paste. And because of CAD too much architecture is now "because we can" (Gehry).
"Regarding consultants, have any of you done consultant selection based on invited competitive bidding? Invited meaning you are letting the 3 or 4 or 5 consultants, who you have confidence in, bid on the project and not opening it up to the whole world. I'm wondering if this would work to help bring down the cost of their fees or do you do this anyways?"
I only have experience in larger companies, but isn't this how it's generally done on most job of bigger size? That's how we did it on two recent jobs where I'm at now; at my former job, though I wore a different hat, I saw the same process take place a few times. Makes sense on a smaller job to just go to the people you know, but when you're working on a big project, you need to shortlist consultants and have them put a proposals together for the client. Of course, just because someone is "low" doesn't mean they've included everything or that they're the right people for the job.
Regarding profitability and billing, the way I've seen it done (and am currently doing) you bill w/ a portion of your hours going towards profit. You set milestones, put together a report to show what's been done and bill the client. If they want to back-track on the design later, you send them a revised fee to redo your work and have them sign and agree to it before going forward. On smaller residential jobs I can see how this would be much more tricky and things could slip more easily. Interesting how different it is to practice at a large or small scale. I'm finding out how different the skill sets are that you need to work in both settings.
Hand drawing? CAD? I say Revit for the win. Even on small residential jobs, it's so fast once you get past concept / schematic design. Hand drawings / sketchup (or rhino "because you can") for the early stages and Revit after that. It's scary how productive it is.
jump, hand drafting and some detailing on site. It’s a fluid process. I use Sketchup for visualization but production drawings and detailing are by hand. Staff and most consultants draw by hand. The few times I’ve used consulting architects for CAD production the results have been disastrous, once almost resulting in the loss of a client.
I have no respect for Gehry, his buildings are functionally problematic in a multitude of ways. "Because you can" doesn't mean you should. Deconstructivism is a bunch of pseudo-intellectual bullshit that is at odds with the basic requirements of architecture.
I've been meaning to ask you how things are in Japan --- rather than clog up this thread, if you go to my site you can contact me from there.
the issue of additional fees is critical. everybody wants a happy client, and we in particular want the design as developed as possible. however, with conditions as they are for architects, the client is dealt a massive upper hand in the power dynamic, emboldening them to push knowing that an architect is more likely to be thankful for the work than to push back...
re: billing for services in architecture vs. law. I've always heard that architecture is unique among accredited professions for its practitioners undercutting competing practitioners. as far as I know, no other profession succumbed to that plague, and one would think that of the priorities of a professional association, putting mechanisms in place to prevent it would be near the top of the list...
interesting about the cad thing miles. i don't know anyone here, not even builders, who work by hand anymore when it comes to drafting. on site it can be pretty fluid for us too because the culture allows it which i quite like. i guess the problem in your case was you subcontracted the drafting which is pretty tough to do. apparently big companies are able to do it to save money (so maybe they agree with you that cad is a loss maker) but hell if i can figure out how it is done. we do so much of our design during DD, especially with the details, and that can only be done in house and have any kind of quality.
i get that alot from gehry haters and understand the opinion. he would agree most likely. he ain't never been one to theorise very much and just lets it be what it is. guggenheim is a masterpiece as far as i can tell and it really was a good thing that he could do it and did do it. such a loss if it had never happened. i just read a book on his complete works starting in the 60's and i really don't see great planning flaws. he is pretty vanilla with the planning really, and very functional. it doesn't seem to be something he ties to the aesthetics really.
maybe that explains a bit about how he is able to be successful as an architect financially. i wonder what he would say is the biggest money loser? probably taking on projects that never are reailised, or competitions with low fees....
Profit Killers
Hello Business Owners. Other than the current state of the economy, I was wondering if you'd be willing to share what your biggest profit killers are? What are the typical problems you run into during a project that kill your bottom line? Scope creep during schematic design or other phase of the project? Mismanagement of production schedule? Errors on drawings?Thanks for any input you might provide.
Employees. Sad to say but with technology as good as it is I just dont need people anymore. Yes I can do more work with more staff, but as you asked, my profitability goes down. 2 or 3 experienced architects who know the law, the codes, construction techniques and the software can do more than a staff of 10 average architectural employees. So a small partnership is really the best way to become profitable.
the biggest is not being able to maintain the internal schedule, for whatever reasons. sometimes it's due to making our own life difficult, sometimes it comes from external places (clients, consultants, etc.).
we've seen, more recently, just plain idiotic contractors bidding on (and in one instance winning) projects of ours. i was semi-joking with the owner, after our 2nd rejection of work letter in as many weeks, that i'm imposing a 'stupid contractor tax' clause in my contracts from now on. but in all seriousness, it's a big problem and a sore point when asking for add services.
Not an owner, but from what i've seen... Clients changing their minds. When it happens too much under a fixed fee contract the profit margin gets whittled away quickly regardless of what phase the project is in.
paying interns
not an owner, but agree with greg. if you can maintain an overall project schedule, there is a finite number of hours assigned to the project that can be billed against. if the overall project schedule slips (and slips and slips), you get a team billing to a project without a definite end date. from my experience this winds up being ten times worse than scope creep under a well maintained overall project schedule. my best advice is to manage the overall project schedule and accommodate the client as best you can within that schedule.
"we've seen, more recently, just plain idiotic contractors bidding on (and in one instance winning) projects of ours"
This often leads to the schedule problems. Ive always tried to avoid clients who are susceptible to hiring low cost contractors, you can usually sniff them out. They lose everyone money in the end. Although in this recession, they seem to be multiplying and becoming unavoidable.
Thanks for all your input. Very eye opening.
Regarding schedule, I'm not sure if you guys are talking about your internal deliverables schedule or the overall project schedule, including construction. I'm assuming the latter. It seems to me you are saying that delays may happen in the construction that drag out the substantial completion date that then require you to attend more meetings, issue more documentation, etc. Is that what you guys are getting at regarding schedule?
wurden, that's what i was getting at in my post. it's particularly bad during the design phases. during construction, the owner and contractor have a vested interest in meeting the overall project schedule, so you don't see delays as often. but in design, especially before a contractor is involved, clients can drag out design indefinitely while they try to obtain funding or work through their own internal issues. this is where its incredibly important to set firm milestone deadlines and stick to them. again you manage the schedule and try to accommodate change within that schedule, but don't let the milestone deadlines slide. that's been my experience.
Not an owner either...but here's what I'm seeing/experiencing (largish A/E firm):
Settling for a lower fee (used to ask for 10-15% of construction; now settling for 4-10%) just to get the job & keep the lights on...
High overhead - once we plug in the OH&P factor into our topdown budgets, we're left with hardly any hours to complete the project.
No more large projects with lengthy schedules - everything nowadays is smaller and with short schedules or we're only hired one phase at a time... Those projects don't exactly mesh well with our size/business model.
Overbilling/Recognizing future revenue. Discovered this practice a few weeks ago - for example, if we're only 50% thru DD on a project, we'll invoice the client as if we are +60% complete. Seems sketchy to me and robs us of hours later on to finish the project...
Project teams constantly changing - people get moved on and off projects all the time. No continuity throughout the job and the end product is suffering big time. Huge QA/QC issues.
In a traditional design-bid-build project, you will lose money in SD and DD no matter what you do. Hopefully you recoup the losses in CD and CA, and if you are lucky few dollars on top can be called a profit.
Trick to profitability is not to offer 'design' services.
I'm serious. All the offices I worked with that only offered construction documentation and construction administration were huge cash cows.
Leave the preliminary designs to perpetual sacrificial lambs (big D designers). They will make their money through slave internships.
This works on mid to large projects only though.
Rusty, in the Design Build arena it is a common practice to use the design as a loss leader to get the construction job, that is contract a designer for cost essentially, to sell the whole package. The margin on the construction can be so much greater they eat what used to be called the design fee.
I have suspected that every advance in software will eliminate positions. 2steps post suggests this is true.
I keep waiting for the day that incompetent software will eliminate incompetent people.
if a firm is upper management heavy, all projects will suffer. Their billing rates kill budgets, which puts pressure on junior staff to finish quicker, resulting in more errors and poor coordination that kills the project timeline, budget, and quality of product down the line.
not an owner, I would like to share the story of my last office, but i think it would be quite clear who i'm talking about, and in Chicago its a small club. Sometimes I wonder if management types see how archinectors give out all these company secrets, and air ing out dirty loundry and I wonder if they would like to find us and break our legs, but I think that is one of the biggest things that makes this website special and this recession has done namely that all architecture office dirty loundry will get aired out on archinect.
ps. Bad leadership
work truck and tools breaking
lots of good stuff above. the schedule issues, wurden, are dangers at ALL phases of a job: SD, DD, CD, and CA.
there are always pressures to slow down or backtrack when our fee structure depends on keeping moving forward. and our desire to provide good conscientious service to our clients doesn't help.
there's a willingness, most of the time (and i'm talking about myself, here), to give the client what they want - to make modifications in light of cost or changed minds or ease of construction - without really wanting to trigger additional services. whether out of feelings of guilt, charity, friendliness, whatever: it's hard to tell the client 'yes, i'll do that, no problem' and then also tell them '...for the additional fee outlined in my contract'. you just want to say yes. too often we decide to call that marketing...
a recent issue for us, in addition to the things described above, is the percentage of total fee that we owe to consultants. we're out selling and hustling harder all the time, spending that marketing budget, a burden our consultants don't typically have to bear in any significant way. at the same time, our overall fees are getting squeezed. but we have not been very successful in adjusting the consultants' pieces of pie. so where a good project would have us taking home 50% - 55% of the total fee, lately we've been seeing maybe only 40% - 45%. that hurts pretty bad.
I'm not an owner, but for the past 3.5 years, I've been doing mostly renovation & fitout work involving selective demolition, reusing existing casework and other interior elements... basically very messy stuff. In these types of projects, it is very easy to get carried away and end up doing a lot of free work without even realizing it and in no time, you've killed your fee for the whole project before even getting sign-off on a design.
For these types of projects, you MUST establish a clear scope of work with the client very early on. This can be difficult with a messy reno job, since there is always the inevitable scope creep once you start tearing shit apart. But even if it's a drawing with a big, fat "scope of work" line on it, it helps. That way, if your client wants additional work, it is easier to negotiate additional fees. Once you do something beyond the scope of work for free, your profit is toast.
I will second Medusa's comment.
And if you're doing such work on "Historic" structures, when you're outlining your fee to the client make sure they understand that you never know what you're getting into when you open a wall. And that this could be a considerable issue. Frequently enough, I saw owners make their fees "Competitive" down low enough to get the job, but never took into account the actual nature of the work that they would actually be responsible for. Then the fee was exhausted (CA included) before the documentation was half way complete.
here's another one: project team members who are unaware of the contract requirements. in my opinion, every project team member from the pm to the pa to the gaggle of interns working on the project should read the contract and know the contract deliverables inside and out. how often have i seen someone slaving away on something that nowhere appears in the contract. again more of a design phase problem, but can be a big one.
(also, to steven's point about additional services, as the economy has tightened i've seen more and more firms turning to owners for additional services. architects need to be real careful here. yes, we are operating under thin margins, but we are also largely a service industry and need to be cognizant of the difference between providing good service and additional services.)
"a recent issue for us, in addition to the things described above, is the percentage of total fee that we owe to consultants. we're out selling and hustling harder all the time, spending that marketing budget, a burden our consultants don't typically have to bear in any significant way. at the same time, our overall fees are getting squeezed. but we have not been very successful in adjusting the consultants' pieces of pie. so where a good project would have us taking home 50% - 55% of the total fee, lately we've been seeing maybe only 40% - 45%. that hurts pretty bad. "
Steven, absolutely, 100% agree there. Last year, we finally broke down and asked our consultants, on certain proposals, to chip in towards the hard costs. All of them did. Because, you're dead on - most of them don't hardly spend a dime beyond pulling together their latest resume and profile (and I have to re-work their material most of the time because it's so bad). Throw in the fact that a lot of institutional clients drop a list 20 long of very specialized 'services' they expect to be covered and definitely end up getting less and working harder to cover everyone else.
The way we did the consultant ask was pretty straightforward: hey, we've carried you all and worked with you on quite a few projects the past couple years. That won't change but our marketing costs have. Consequently, we're asking you to help contribute to our hard costs - printing, shipping, etc. Not for the time we spend on them, though. You don't have to and we won't ask for frivolous or long-shot proposals. Each proposal we'd expect 100-200 per firm would be sufficient and will simply split it up between the firms on the team.
And, really, no one objected, we're all still friends, and it has helped.
Hello, retainers!
Greg -
We used to work with a contractor who really did charge a "hassle tax" on indecisive / unrealistically demanding clients. He was a decent contractor so frankly I was on his side on that one. Later I thought about how we might structure same in the architecture field... we often got into the issue (on large renovations) of clients demanding more and more work once the walls were opened, once they went to their neighbor's and realized how much fancier their kitchen could be, etc... basically once you open up a gut reno, the client can suddenly see all the potential that they couldn't see before and they would want to add design all over the place. Because we agreed with them, like Steven Ward the temptation was very strong to just kind of give it to them without saying "now lets go back to the contract scope and talk about additional services"... especially since at that moment there's nothing constructed yet and you're dying to get the thing built & onto your website. Powerful incentive to keep the client happy at that point.
All are interesting points. I've seen so many times that people over promise and under deliver. Both sides suffer.
I think the biggest time sink that I've seen, in the residential side of practice, is a result of changes made during the design from the owner's side. Not that clients are at fault here, but we set ourselves up with no method of recourse, and give clients unrealistic expectations of how many times and how many different ways a decision can be made.
Nobody enjoys sticking an invoice to a client every time the phone rings, but there has to be an honest meeting of the mind between Architect and Owner when it comes to making changes beyond a certain point.
@Rusty Long: "Nobody enjoys sticking an invoice to a client every time the phone rings..."
And yet, that very same client thinks nothing of paying his/her attorney $350 per hour for every hour of legal services provided. In this regard we undoubtedly are our own worst enemy.
Interesting point quizzical. Recently there have been articles pointing out that legal grads are in a very tough job market too. I recently needed a lawyer and their rates were all still very high. I am wondering if the oversupply hasn't affected market rates yet, or if they just refuse to work for less than a certain rate.
They also bill you for phone calls and rounded to 6, 10, or 15 minute increments depending on the lawyer.
How did lawyers manage to create a system where every minute of their time is billable? Can you imagine an architect who invoiced for calls and emails?
Regarding consultants, have any of you done consultant selection based on invited competitive bidding? Invited meaning you are letting the 3 or 4 or 5 consultants, who you have confidence in, bid on the project and not opening it up to the whole world. I'm wondering if this would work to help bring down the cost of their fees or do you do this anyways?
Profit killers ?
[Custom Residential]
Construction and contract administration. It can be a black hole if you have a problematic builder. I won’t bore you with details, let it suffice to say there were once three builders required to complete a project.
CAD (I’m fully expecting to take some heat for this). A great tool for visualization with simple modeling software but hugely inefficient for contract documents. I’ve seen cadmonkeys waste hours trying to figure out how to input something that could be drawn by hand in a matter of seconds. Add to that the cost of software, updates, training, hardware, maintenance, etc.
just to fulfill the prophecy miles...
CAD is not a waste. I've done the hand drawing and spent the time with eraser shield and trace and poche and there is no question the computer is faster. not even remotely. Maybe you just ha d partiuclrly difficult problem or a particularly incompetent cad monkey in front of you? either that or the work was so small that plans were not required to begin with. These I understand but cad being a profit killer doesn't make any sense to me. To be honest if it was cheaper to do it by hand we all would be.
anyway, back to OP, our experience agrees with much of the above. we do too much for free and would make a shit load more if we just refused to design. but then we would not really be interested in the work, in which case why bother. not sure how to get around that side of things. this is a job that includes messy design process and predicting time it takes to get to a good point is not easy all the time. I suspect it is simply part of the job description. ?
@ jump
“Faster” is not necessarily better. Neither is cheap. Poor drawings cause a multitude of problems which always have an adverse effect on the bottom line.
You would “make a shit load more if we just refused to design”? LOL Are you a cadmonkey?
Design is not only the single most profitable part of my practice it is the very basis of my business. All other services provided only exist to implement design.
no i own/run a small office in tokyo. we are in our own minds at least design oriented and make the effort to keep it about design.
i don't think design earns us more profit in the short term but long term we feel it will get us where we want to be so we don't deviate from the plan. but it is clear to me that our profits would be higher if we just didn't care. the balance between making the money and making the design better is still a tough one for us since we need to pay the rent and staff, and lets face it we do want to earn some kind of living for ourselves too.
hand drawings were still normal when i started working in the 1990's so i get your point but if your staff cannot do dwgs to a minimum quality then i would say it is on them, not a problem with the cad.
As a former Monkey, I can offer for owners in a hierarchical office setup, you should make sure your project managers aren't wasting your monkey's time. I cannot count the number of times I (as a monkey) was given some scribble by a project manager to put into a project that was incorrect. They either didn't know how the specific building was being built or they didn't know how to build buildings, just in general.
Registered Architects (the ones that I was supposed to be learning from) gave me numerous things to draw that were unbuildable or incorrect in some form or another. Or the "Architects" would have the monkeys draw up a number of details - and then turn around and have the monkeys delete that work and redo the same detail but in a different way because they changed their mind.
The rub is that when it came time to point the finger, the owner had no idea where the inefficiencies in the project took place - and the familiar refrain of "The Monkey Don't know nuttin'" was bellowed through the chain of command.
So Owners, keep an eye on your projects. No one ever points the finger at themselves, so when there are budget overruns and your project manager says that the Monkey doesn't know what he's doing... maybe ask a few more questions about that. They actually do teach some things in architecture school.
My small design/build firm isn't large enough to have a hierarchical organization with a dedicated production department. Staff are responsible for a variety of functions. In this setting, the commitment in both time and money to run CAD simply does not pay off.
I'm not arguing that a good cad monkey (or production department) isn't worth its weight in vellum in the right situation, just that in my particular case (small office, custom residential design / build) it is far more cost efficient not to use CAD.
Maybe the biggest problem is that I’m old school. Drawing is my process, direct feedback. The act of drawing makes me consider the meaning of every line in terms of function, construction, materials and connections. With CAD I have to think about HOW to draw, which distracts me from thinking about WHAT I'm drawing.
@ Menona, the points you make about efficiency apply to all firms. The difference with sole practitioners is there’s nobody else to blame when something blows up.
Any thoughts on?
"Regarding consultants, have any of you done consultant selection based on invited competitive bidding? Invited meaning you are letting the 3 or 4 or 5 consultants, who you have confidence in, bid on the project and not opening it up to the whole world. I'm wondering if this would work to help bring down the cost of their fees or do you do this anyways?"
re: jump's comment about how to balance caring about the betterment of the design vs. profitability, how about this as a contract clause:
"After the scheduled completion of each design phase, a change requested by the owner/client that requires revisiting finished work will be subject to the architect's design judgement as follows: If the architect deems the change to make the project meaningfully better, the architect may waive the cost of inclusion at their discretion. If the architect deems the change to offer no improvement in the design, or that the change is for the worse -- but the client insists nonetheless -- then the architect will charge for additional fees as per..."
oh and BTW, the bob the builder graphic is awesome.
lol. that is a tough one subtect. i don't mind client changes so much. we see it as part of the process. depending on where we are in the design we charge for the extra work (or not). sometimes frustrating though, no question.
@miles, if you are doing design build then it makes sense to do by hand, especially since you aren't comfortable with cad.
personally i do about 50% of my work in a sketchbook on the subway or on site so hand drawing is coolio with me. but we need to do proper dwgs as well to tender bids. we work out a lot in cad too, just as much as you do doing by hand. we also learn a lot from physical and from 3d computer models.
we are quite careful about the dwgs i expect like most architects out there and take time to work the designs out. it takes time to do look at a project in that much depth though. which is why i think we could make more money if we just copied and pasted our way through DD. but could you imagine the quality of architecture if we all did that? yikes.
Changes in design/build are not as problematic as they are in a client/architect/builder relationship.
@jump, judging from the general quality of architecture today I think most do cut and paste. And because of CAD too much architecture is now "because we can" (Gehry).
"Regarding consultants, have any of you done consultant selection based on invited competitive bidding? Invited meaning you are letting the 3 or 4 or 5 consultants, who you have confidence in, bid on the project and not opening it up to the whole world. I'm wondering if this would work to help bring down the cost of their fees or do you do this anyways?"
I only have experience in larger companies, but isn't this how it's generally done on most job of bigger size? That's how we did it on two recent jobs where I'm at now; at my former job, though I wore a different hat, I saw the same process take place a few times. Makes sense on a smaller job to just go to the people you know, but when you're working on a big project, you need to shortlist consultants and have them put a proposals together for the client. Of course, just because someone is "low" doesn't mean they've included everything or that they're the right people for the job.
Regarding profitability and billing, the way I've seen it done (and am currently doing) you bill w/ a portion of your hours going towards profit. You set milestones, put together a report to show what's been done and bill the client. If they want to back-track on the design later, you send them a revised fee to redo your work and have them sign and agree to it before going forward. On smaller residential jobs I can see how this would be much more tricky and things could slip more easily. Interesting how different it is to practice at a large or small scale. I'm finding out how different the skill sets are that you need to work in both settings.
Hand drawing? CAD? I say Revit for the win. Even on small residential jobs, it's so fast once you get past concept / schematic design. Hand drawings / sketchup (or rhino "because you can") for the early stages and Revit after that. It's scary how productive it is.
i agree intotheloop on the computer side.
do you draft by hand then Miles, or do you mean that you work things out a lot on site?
i have super respect for gehry. it is more true to say he builds it because HE can. not sure that the idea goes much farther than him....
jump, hand drafting and some detailing on site. It’s a fluid process. I use Sketchup for visualization but production drawings and detailing are by hand. Staff and most consultants draw by hand. The few times I’ve used consulting architects for CAD production the results have been disastrous, once almost resulting in the loss of a client.
I have no respect for Gehry, his buildings are functionally problematic in a multitude of ways. "Because you can" doesn't mean you should. Deconstructivism is a bunch of pseudo-intellectual bullshit that is at odds with the basic requirements of architecture.
I've been meaning to ask you how things are in Japan --- rather than clog up this thread, if you go to my site you can contact me from there.
For the really fiddly renos, those who are really good at it in London, (UK) charge hourly rates in particular for site visits whatever the reason.
the issue of additional fees is critical. everybody wants a happy client, and we in particular want the design as developed as possible. however, with conditions as they are for architects, the client is dealt a massive upper hand in the power dynamic, emboldening them to push knowing that an architect is more likely to be thankful for the work than to push back...
re: billing for services in architecture vs. law. I've always heard that architecture is unique among accredited professions for its practitioners undercutting competing practitioners. as far as I know, no other profession succumbed to that plague, and one would think that of the priorities of a professional association, putting mechanisms in place to prevent it would be near the top of the list...
interesting about the cad thing miles. i don't know anyone here, not even builders, who work by hand anymore when it comes to drafting. on site it can be pretty fluid for us too because the culture allows it which i quite like. i guess the problem in your case was you subcontracted the drafting which is pretty tough to do. apparently big companies are able to do it to save money (so maybe they agree with you that cad is a loss maker) but hell if i can figure out how it is done. we do so much of our design during DD, especially with the details, and that can only be done in house and have any kind of quality.
i get that alot from gehry haters and understand the opinion. he would agree most likely. he ain't never been one to theorise very much and just lets it be what it is. guggenheim is a masterpiece as far as i can tell and it really was a good thing that he could do it and did do it. such a loss if it had never happened. i just read a book on his complete works starting in the 60's and i really don't see great planning flaws. he is pretty vanilla with the planning really, and very functional. it doesn't seem to be something he ties to the aesthetics really.
maybe that explains a bit about how he is able to be successful as an architect financially. i wonder what he would say is the biggest money loser? probably taking on projects that never are reailised, or competitions with low fees....
will shoot you mail about japan separately.
Gehry’s biggest money loser is probably defending the $300 million dollar lawsuit for negligence by MIT over multiple failures at the Stata Center.
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