Tag Archives: budget

Architecture and Interior Design is a business, isn’t it?

Time is Money by Tax Credits, on Flickr

My last post on what makes a great workplace client generated some discussion on one of the linkedin groups about if both clients and designers understanding that design is a business. Whilst no one studies interior design or architecture intending to get rich, I think we all like to get paid at least enough to reasonably live on (and for me – buy shoes) without having to work a second job on the weekends to fund our design work. However for us to get paid (and keep our jobs) then the firms we work for have to make money. Meaning our clients have to pay for our time. Pretty simple really. Time = money. So where is the problem? Why do our clients not always appreciate this? Is it because so many interior designers an architects don’t seem to get it themselves?My observations and thoughts on this topic is that there are a number of issues behind this problem. The first is that so many architects and interior designers are passionate about what they do. They have chosen to work in this field because they believe architecture and design makes the world a better place and they love creating. As I said, not for the money. So because you are doing something you love and that can completely engross you, you are prepared to stay up all night when you at uni, and possibly when you are at work too. You are certainly prepared to give away some of your own time when you feel this way, and especially when there is a knotty design problem or detail that you just have to perfect before those documents are issued for construction.

The problems arise if this attitude becomes the standard for how we work. The first problem is that employers may expect us to work these kinds of hours all the time. As profession we have demonstrated that we are prepared to give away our time to our employers for free, so in some cases the fee models have come to depend on this – more on this later.

The second problem is that some architects and designers come to believe that design takes however long as it takes and seem to be incapable of working within any fee structure. Whilst in some ways it appears these architects and designers do not understand or place any monetary value on their time, I believe that it is probably more accurate to describe these designers as believing good design is above money, so valuable it can’t be considered in such a coarse wordly way. This can begin to place architecture and design in the sphere of art, rather than as part of the practical and functional world of which it must be a part if it is to be a business, and if it not to be relegated to a luxury item for the wealthy.

I believe it is these attitudes that have contributed to the way that clients view design services. Why would our clients value our services if we don’t? If our architecture and interior design teams don’t see and approach their work as a business, then perhaps it is no surprise our clients don’t either. I recently came across an interesting article discussing how interior design as a profession is judged by outsiders based upon the terminology we use.

Many large institutional or corporate clients deal with a number of architecture and design firms, and the attitudes of some architects and interior designers influences the attitudes of the clients to the industry as a whole. I have had one client representative question why I would limit the number of user consultation meetings on a small project to 3 or 4, he asked, “but what if it takes 20?” I asked the client if they would want me to charge them for 20 if only 3 were required. He seemed most perplexed – even though this was a full time property client with years of experience – that I needed to charge for our services based upon the time we spent.

Historically architects and designers are also not good at asking for more money, in the form of variations. Our clients expect to pay for contractor variations, but not for design variations. Part of this is because architectural services are so much harder to define, our scope is much more open ended than a contractors lump sum tender scope. However even when we try to define our services it can be hard to manage the process of developing a brief and a design. I would frequently limit the number of design options to be provided – but do have to admit to usually doing a few extras just to be sure I had done sufficient exploration if the design to satisfy myself of the robustness of the solutions I presented. One client put their project on hold after this concept options stage and then questioned my bill (again a client with industry knowledge and understanding of the design process). They felt that because they had not made a decision on a preferred concept they should not pay in full for the concept stage. I then went through our fee proposal scope and what services we had promised to provide during concept stage, and asked the client had we provided each one. They agreed we had done everything we said we would, including providing 4 options that meet their brief (our proposal had offered 3 options so in fact we had over serviced them!) So I asked, why should we not be paid because you have found that your brief might not be what you want? The initial concepts had identified that the client would have to reduce spatial allocations somewhere or rent additional space and provided for various possibilities of how this could be achieved, which made the decision making more complex than the client had expected. We got paid.

You generally don’t expect to see a doctor for a free assessment of your problem, but we frequently spend significant time and money on proposals and tenders, even if we are not providing free design services, these documents are usually expected to provide an individual approach and analysis of the clients needs before we are even guaranteed a single dollar in fees. Whilst many clients take into account a wide range of issues in choosing their architect or designer, and not just fees, frequently the fee structure is a heavily weighted part of this decision. This process is a significant waste of our industry productivity and another indicator of how poorly our clients value our time and resources.

It is these kinds of client attitudes that then lead to the downward pressure on our fee structures which leads to lower qualities of service and design – and this is not good for either our clients or our industry. The lower fees then lead firms to a point where staff have to work additional hours for free to deliver the projects. In the eight years I have been involved in preparing fee proposals, fees in some of the sectors I work in have halved. Salaries and rent has not halved, and whilst tools like BIM can increase our efficiency, they have not halved our workload. Firms have reduced fees during the tough financial items of the last few years, in efforts to maintain sufficient workload to keep staff employed. The problem is that now they are down so low, do we really think they will go up again? So many clients have now come to expect fees so low that the client representatives know that they are ridiculously unsustainable and will either result in poor service or firms going under (or both). But there is often pressure within the client organisation not to spend any more than last project. Unfortunately the only likely thing to change is is if projects go significantly wrong that clients see the value in paying more for design. As long as architects and interior designers are prepared to work for free…of course we ensure this doesn’t happen.

For all architecture and interior design firms to remain viable business and our industry to exist, all architecture and design staff need to contribute to the perception in our industry and beyond that what we do is a valuable service and worth paying for. And of course we need to make sure that we provide a level of service and design to justify this. Architecture and interior design is a business – do you think so? How do we balance the artistic and creative side of what we do with making money? How do we educate our clients and the public to value and understand the services we provide? How do we manage the design process and its very nature of change in order to satisfy our clients, produce great design and still make money?

Image credits:
Creative Commons Attribution 2.0 Generic License by Tax Credits

http://taxcredits.net/

Cost Planning for Interior Design Projects

6736154311_9a0a3a44ba_nA few months ago over drinks (many of The Midnight Lunch posts will probably be inspired this way…) I was chatting to a fellow lead interior designer who asked me about how I managed construction costs and dealt with quantity surveyors.  That conversation was one of the things I though of when I decided to start up The Midnight Lunch blog – how often is it that we get together with colleagues outside of our own teams and discuss and compare how we do things.  For most of us, I suspect not very often.

Particularly in the last few years since the financial crisis, project budgets have become more and more of an issue for clients and interior design teams alike.  There are some interior designers out there who believe that managing the construction costs is not an interior designers role – that it is the job of the project manager or quantity surveyor.  There are also some clients who believe it is better not to tell the interior designer what the budget is for fear that they will spend it all.  I disagree with both of these views.  It is the job of all team members to have some level of understanding of the budget and what impacts that could have on their discipline.  Is the job on a tight budget where every cent will count, or is the client more concerned with the level of quality?  Whichever the case, the client almost always has a budget constraint (I think we would all agree that an unlimited budget project would be the exception).  Clients – please tell your interior designers the budget.  We are not out to spend every cent.  If we don’t know and understand your budget we can’t use our skills to help you.

By understanding the clients budget and by the client placing trust in the design team to work to their budget, the design team are better able to present and discuss options with the client which achieve better design outcomes, meet client expectations and are realistic within the budgetary framework.  This cannot be achieved by a quantity surveyor alone as they usually do not fully understand the project design objectives and criteria, and nor is it their job to.  No one team member be they interior designer, quantity surveyor or project manager can usually understand the full scope of the clients detailed design and performance expectations.  Designers need to be involved in the discussion of overall design quality, fittings, furniture and the like and engineers frequently need to provide further more detailed breakdowns of what they are costing and specifying.  It is only through discussion of particular scope areas or disciplines can the design team leader make informed recommendations to the client, to allow the client to make an informed decision (in the end it is their money).  This is real value management, rather than value management as a term which these days has often come to mean cost cutting.

My key tips for value management and cost planning for interior designers are as follows:

  1. If a client wants a cost estimate that is more detailed that a mere dollars/sqm rate use a quantity surveyor (QS).  Interior designers should understand what the dollars/square meter rates in their area of specialisation will actually buy/the level of fitout quality that can be expected/the average costs.  Be able to compare your previous projects.
  2. Brief the QS.  I find that frequently the QS will start out costing a very basic level of fitout and needs further direction.  Room data sheets can be a useful tool to brief the QS on more detailed items such as whiteboards and pinboards that might otherwise be forgotten (look out for another blog post soon on Room Data Sheets).  Ask the QS to include allowances for things like feature finishes, ceilings or specialist joinery that you haven’t yet fully thought out but you know you are planning to include.
  3. Understand the cost of large or propriety items within the interiors package.  Get quotes for operable walls, workstations, furniture or major equipment items.  Talk to the QS about your expectations of what allowances should be made for these items.  You should understand what you intend to specify and the quality expected for the project.  I’ve just lately started looking at how this can be managed inside of the Revit model too.
  4. Understand the engineering estimates.  When you work with engineers who are good at explaining and value managing their components of the works learn as much as you can. On a future project you are then better able to question and discuss options with another engineer who might be prone to overdesign. (I know you engineers really want the client to have that super duper new blade server – but really do their management know what they are paying for?)
  5. Review the QS cost plan, preferably before it goes to the client (though that is usually only practical if you have engaged the QS).  Sometimes even with a good briefing they misunderstand your design intent or simply miscount (or maybe there are errors in your room data sheets).  If the cost plan is way over budget at this point maybe their are opportunities to pull back in a few areas before the client sees this version.  Conversely if the project is well under budget (does this ever happen?) maybe you can add more allowances in.  Make sure that the cost plan includes both design contingency and construction contingency.  Most of all I think its important to make sure the cost plan is a true reflection of the clients expectations regarding quality.
  6. Update the cost plan periodically throughout the project, continue to discuss and make value management decisions as you design in conjunction with the other design team members.  For the size projects I usually deal with (mostly in the $1 million – $5 million construction cost range), I find 3 to 4 iterations of the cost plan about right.  One at concept stage where a lot of issues are still fuzzy and perhaps some significant design options are being investigated, one at around 60% stage where the details are more developed and a pre-tender cost plan.  For a larger project this would be a more ongoing basis and the QS might even be present at weekly project meetings.
  7. Keep the client informed.  The biggest problems occur when either the client does not understand a mismatch between their budget and quality expectations or when costs go up from the original cost plan and the client hasn’t been kept informed.  It does seem obvious that if they add scope (eg double the amount of major signage/graphics) that this would add cost, but I find that it’s best for someone (which could be the PM or the interior designer depending on the team structure) to make sure of this.  I have had these scenarios occur and it led to some difficult meetings (and in one case legal action – surprisingly by us and not the client).

What are your tips for managing the construction costs?  Would you rather go direct to the construction contractor market than use a QS?  Who do you think is responsible on the interior design project team for managing the budget?  What are you best or worst stories of cost planning and budget management for interior design?  Do you disagree with any of the tips above?

Image Credits:
Creative Commons Attribution-Share Alike 2.0 Generic License  by  401(K) 2013