Category Archives: Architecture

Architecture and Design Fees: Why hours?

money by fedee P, on FlickrWhy is it, that in an age where the value of a company is no longer based on assets or staff numbers, but on ideas – that architects still charge by the hour?

Once upon a time, the value of a company and the number of staff it employed had some correlation, but today this is no longer the case. In 1979, GM employed 853,000 people and had a turnover of $66 billion, today Google turns over a similar amount but with only 60,000 people.  The stories for Microsoft, Apple, Facebook and many other companies are the same.  Making money is no longer tethered to staff and hours.

In architecture, interior design and engineering however, hourly rates are still the norm. “When they choose to strike out on their own, architects tend to follow the outdated model of trading hours for dollars. One of the consequences of this mindset is the fact that clients continue to perceive architectural services as a cost rather than a value.” (Quote from Architizer) Even if, as is commonly the case, a lump sum fee is being generated, this is usually based upon hourly charge out rates of staff multiplied by a guess (educated or otherwise) as to how many hours a task will take. (I’ve written about traditional fee methods previously here) Clients commonly expect a detailed breakdown of the number of hours allocated to each staff member across different project phases. Why are we charging this way when it both limits our ability to increase profit as well as our flexibility in how we deliver services? If I can reduce my hours either by the selection of staff or by automating part of the process, shouldn’t I as the business owner be able to chose if I pass this saving onto my customers (clients) or if I achieve a higher margin? Why is is that clients seem to think that architects and designers are trying to rip them off with higher margins.  Architectural margins are  very low, and in some sectors fees have effectively shrunk over the last 15 years.  We need to make money where we can in order to stay in business.

Obviously at some point there is a minimum fee a company with employees has to charge in order to pay costs, overheads and salaries – although perhaps salaries also need not reflect hours. If architects don’t charge by the hour, what could the alternatives be?

Charging by  the deliverable

In some senses we already charge by deliverable – the lump sum fee essentially considers the building to be the deliverable. While it’s important we don’t lose sight of this fact, the truth is that not every building requires the same amount of work. A great article on this topic is the story of 3 bike sheds by Dimase Architects  which clearly explains that architectural services are not just about building types or construction budgets but about desired outcomes.

Outside if the residential sector, it is also very common for client organisations to dictate deliverables, meeting schedules, required reviews and documentation standards. Frequently these requirements have very little to do with delivery of the building, but are to meet the client’s managers or user group expectations. Sometimes they come with extensive time and cost impacts. How do we charge for a video walk through? The hours in producing the video itself might be very low, but should the cost of software licenses necessarily be considered an office overhead if only used on some projects? Maybe only 1 or 2 people in the office are capable of this work. Should the fee structure for this work take these factors into account?  This leads to the idea of value based fees.

Value based fees

How valuable is your service to your client?  This is a concept I find really interesting, the idea that you change a client based upon the value they place on your services or even the value you create for them. A residential complex is the most obvious example, if you can design to fit in an extra apartment, the developer client makes additional profit, so why should the architect not benefit from this via some kind of bonus? Some would suggest that the architect might compromise design quality at the expense of profit, but I’d say if you are working for a developer – you probably already feel like you are doing this but not getting paid anything for it. In some ways this would be align the architects and the developers interests better.  Most architects would still value good design and their own names and developers would realise that at the point when the architect said no more apartments would fit, they really had reached the sensible limit.

I can see how this kind of fee structure could apply to many kinds of development – car parks, childcare centres or nett lettable area of office buildings. The challenge would be how to apply value to the more difficult to measure or immeasurables like productivity in an office or the positives such as mental wellbeing coming out of good quality design.

I can also see the potential that this fee structure could perhaps backfire – some clients would only want to pay based upon achieving targets or would impose fee penalties for not meeting targets.  But possibly they are the types of clients who already try to get free work or push fees down that we would all rather not work for anyway!

Architect as developer

If you search the Internet for blogs about architect entrepreneurs, the architect as developer is the most common model. Instead of working for the developers, why not become one yourself? So far, the examples I have seen generally relate to small to medium scale residential developments or small commercial premises (you can find lots of examples at Archipreneur). It’s certainly true that the profit margins are higher in development than architecture, although the risks are obviously greater too. However, this model will only ever work for certain project types.

A similar model that has recently emerged is architect as one investor rather than as developer.  This model seems to be emerging in non-traditional development sectors such as The Commons in Melbourne or SWARM in the UK. What both these two initiatives have in common, is the idea of quality development for the good of the community.  Again, this is a potentially higher risk model than traditional architectural practice, but could allow architects interested in working on projects with a social conscience a lot more scope for both work and potential income.  Again, this model won’t apply to projects where there is no development to invest in (eg an educational facility or a client workspace).

Creating proprietary products

Architects often create designs as part of their commissions, they may work with suppliers for one off custom elements to be incorporated into the project.  Very few architects get paid for this.  Apparently Renzo Piano does.  He was involved in developing a new glass louvre system developed for Aurora Place in Sydney and now he gets paid when the product is used on other projects.

So what about our salaries?

One of the things that any model of fees has to take into account is how we pay ourselves and our staff. If our project fees are no longer based upon hourly rates, should the way architects are employed and paid also change? The idea of the gig based economy, where freelancers sign up for a set fee to a specific project (similar to a movie production) is often mentioned in the context of architecture and the economy of the future more generally. Whilst I can see that this could work for larger projects where architects may be involved for 2 years or more, would it be as well suited to smaller projects which may only run for a few months and frequently don’t require full time involvement? Perhaps this is only my current bias or perception, as the idea of piecemeal freelance work continues to grow more common for projects and tasks both large and small, and as technology and co-working allow different options for working together maybe this will be feasible. If we do move towards this model, payment structures would need change, likely increasing to assume that people don’t always have a forty hour work week. An industry structured this way could be a good or bad thing – potentially better work-life balance through time off between projects but potentially more stress about where the next job is coming from.

Maybe our employment structures don’t need to change all that much.  The idea of bonuses or profit sharing isn’t a common one in architecture and interior design but there is no reason this couldn’t be change very easily.

There are a lot of other ways that architects and designers are making money through non-traditional structures, but many of these are quite limited in their applications or potential to earn – for example internet competitions, although the guy who runs the site probably does quite well from it.  But this takes us into non-traditional services, offering services for other architects and designers, which is becoming relatively common on the web (examples include ArchSmarter and EntreArchitect).

I’d like to think there will be a viable model for fees for designing buildings and interiors for other people and organisations, which recognises and pays for the value of design.  We have to remember that“Concept design is not a loss leader. It is our most precious commodity.”  Design is what our clients value us for, and its not something that can be calculated by the hour.

I’d love to hear from anyone working with non-traditional fee structures, or with other ideas about how architects and designers can structure their fees.  Has anyone worked on a value based fee project?  Or even a project which included a bonus for the architect?

Ceilidh Higgins

Image Credits: “money” (CC BY-NC-ND 2.0) by fedee P

Is design ever ‘finished’?

Finish it by Pedro Travassos, on FlickrOne of the greatest challenges of architecture and design is the fact that there never seems to be enough time.

From student projects onwards there never seems to be enough time to finish designing, detailing and documenting everything about a project.  Essentially, almost every building or fitout is a prototype and to detail every single junction, item or assembly might mean we would never actually finish.  Couple that with the fact that as detailed design and documentation progresses, we may need go back and modify or redesign different parts or elements to improve them or accommodate engineering or product details or the inevitable new client requirement, and at times it feels like design can be a never ending cycle.  Then even as construction takes place, the built reality doesn’t match the ideal, or the contractor has alternative suggestions for products or details.  The client then moves in and the way the space is actually used may differ from their original intentions, or their organisation may have changed over the time the project has taken to come to fruition.  Generally, there  comes a point where further modifications to the the project stop. Its often because of limits, of programs, fee budgets or client expectations –  But does this mean the design was actually finished – can it be and should it be?

To many engineers, it seems that architects and interior designers are notorious for changing their minds and never finishing design.  While it is true that many architects and interior designers are indecisive or looking to constantly keep improving the design at the cost of program (or engineering), it is also just as true that many of these ‘design changes’ are driven by technical or functional requirements.  If the mechanical engineer hasn’t advised the architect of sufficient space they require for plant at the concept stage, the structure may have to change to adjust.  If the client has decided they really need to keep their Comms room onsite instead of using a data centre, then the Comms Room is certainly going to be getting bigger with all the flow on effects to services and other parts of the building that may have.  Many clients and engineers don’t realise that even the smallest of decisions on audio visual or appliances can have flow on effects to the sizes of whole rooms and hence the whole building.  An example is that a corridor with no door in it could be 1m wide, add a door and you might have to increase the width to 1.6m for wheelchairs.  Obviously as architects and designers we try to build some tolerances into our designs from the beginning but extra space gets quickly eaten up.

In every project there has to be points where certain decisions are frozen, and will only change for a significant reason.  Usually we label these points as client sign offs or reviews.  Points at which the client agrees to the design.  The challenge though is always about what level of detail the client signing off.  Unsurprisingly many clients like to leave their changes and decisions as open as possible as late as possible. Its not only the architect or designer that wants to keep their options open.  Even with defined milestones, some clients can be quite difficult about what they believe they have agreed to, particularly if they want design changes and don’t want to pay for them.  Its easier to blame the architect than to concede the client organisation has changed its mind about how they want a space to function.  On one project, we proposed a combined reception and breakout space, initially the client stakeholder group really liked the idea and the images presented.  Some time after signing off on the schematic design and well into our detailed design process, we were informed that the client did not want to proceed with this space.  They wanted a traditional separate reception area, and questioned why we would ever have thought a combined space was suitable.  We found out later that they had decided to temporarily move a different user group into the fitout, and my guess is that the head of the new user group didn’t like the concept.  Thats their choice, but why should we be the ones paying to go back to the drawing board so to speak?

Even without any need for significant client changes during design and documentation, there comes a point where contractors have to price a design and be appointed, and critically construction has to commence.  In an ideal world, the design should not actually be complete before the contractor is selected.  Contractors, and particularly the sub-contractors who are actually doing the work, have their own ideas and suggestions about construction.  These ideas can be a real asset to cost and buildability, as they are the ones that have to actually make it happen.  However, it is rare on larger scale projects (in my experience anything bigger than a single dwelling) or anything put out to competitive tender that this happens in a meaningful way – even on supposed design and construct projects.  Changes and questions inevitably seem to be last minute and often ‘value management’ happens without the input of the designer. Often only the head contractor has been appointed when the design is being finalised, and later the sub-contractors have their own suggestions.

During construction design still continues.  If we detailed every tiny piece of every project then construction documents would be ridiculously complex and would really never end.  Shop drawings and site instructions resolve the finer detail of design.  This phase tends to become the only opportunity for sub-contractor input to design changes.  Whilst we all dream on zero RFIs and variations, is this really a feasible reality?  I’d say not within our current documentation and procurement systems.

When the day of practical completion arrives and the client moves in, many clients think the design process is well and truly done.  However the best clients realise that as you inhabit your spaces you will understand it and realise things you didn’t see during the design process.  Almost everyone can relate to this through their own homes.  Did the furniture you thought of before you moved in suit the spaces in the way you pictured?  It’s the reason why many architects like to camp on a site, or live in their own unrenovated or under furnished homes before they make all the final design decisions.  Its a great idea for clients to save some of their design contingency to continue to work with their architect or designer in the months after they move in to undertake those additional little projects that can make that space just right.  Even with the best design and planning, organisational, technology and other forms of change mean that design should never be static – a building should never be considered finished ‘forever’.  Maybe the built elements are complete, but the lightweight furniture type elements will always need to change over time.

So I believe the answer is no – design is never ‘finished’.  But that shouldn’t mean that we avoid decisions or sign offs, whether by the designer or the client.  If we don’t say stop here and allow the team to move on, then the building will never be built.  In his book, Linchin, Seth Godin talks about the concept of ‘shipping’ which he defines as getting a project completed and out the door.  It is better to have something that is not perfect out there in the world than to have nothing at all.  To me, this is the ‘finished’ that we need to realise as architects and designers, otherwise we could still be working at 2am every day.  To quote Seth Godin “If you want to produce things on time and on budget, all you have to do is work until you run out of time or run out of money. Then ship.” Maybe its not quite that easy, but apparently the more we try the easier it gets.

Ceilidh Higgins

Image Credits: “Finish it” (CC BY 2.0) by  Pedro Travassos