Practice Management Member Conversations

This message has been cross posted to the following Discussion Forums: Practice Management Member Conversations and Project Delivery .
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There two good coversations going on, and the point I make here is where these two conversations come together. 

The conversation about "value," when held between architects, always comes back to the value of the services provided by architects.  Services are what architects sell directly, but what we fail to see is that these services are a means to a greater end for the client, that being a facility.  Client's see value in the facility, not in the services.

The same architects that complain about the erosion of architect's role as leaders are failing to see this simple fact.  You can not lead the team and at the same time fail to see where the client wants the team to go.  This is the central conunundrum of the practice of architecture.  There is an inherent conflict between serving the client's needs and serving your own needs.

Standard of Care is defined by the way architects deal with this conflict of interests.  In terms of delivering value to the client, frankly, the standard of care is unfortunately very low as client's see it.  It is no wonder architects are often not respected by clients and others in the industry.

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Alan Burcope AIA
VP Project Development
HBE Corporation
Saint Louis MO
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Value vs perceived client value

Hard to disagree with Robert Glisson's basic message.  I can only offer the contractor's perspective.  We consider ourselves a mid-size commercial contractor with projects typically ranging anywhere up to $3-5 million, and our largest project of $19M several years ago.  But today's projects are typically smaller.

Whereas Mr. Glisson compares an Architect's 3-5% fee compared to a contractor's 10-20% fee, I wish his suggested contractor fees were closer to our reality, at least in Lincoln, NE.  For example, yesterday we bid on a $200K public sector project.  We bid this with a 1% OH&P mark-up.  Obtaining about half our work via competitive bidding, we are generally quite competitive.  We were 4th out of 8 bids. 

10 -20% contractor markup? - only on a $2,000 job.  Bottom line, today's reduced fees and mark-ups for both architects and contractors are simply a reflection of today's economy. Back in the good ole days (pre-October 2008), we still only had a 5% markup on a $1M project.
 
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R. Sandquist AIA
Vice President
Sandquist Construction Group Inc
Lincoln NE
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Original Message:
Sent: 01-04-2011 07:41
From: Robert Glisson
Subject: What is Value? vs Errors and Omissions


Value vs perceived client value

This discussion reminds me of something my dad, an accountant (also a service profession), has told me on multiple occasions.  "Your client will value your service in direct proportion to what you charge for it".  We have experienced this many times in our office.  

Some of our most difficult clients are the ones we charge the least.  Why? Because they pay the least.  When a client is paying a fair amount for a service, they are inclined to listen to that service.  This seems obvious. Ask yourself "do you listen to advice given to you for free at lunch by an attorney?".  Then ask "what about when you pay $150/hr for that same advice?"

We have stated in the past, we do our clients a favor by charging them a fair fee for our service.  Why? Architects know better how to achieve the clients desired result. We are trained to solve their issues. When we charge for our service, clients listen to us more acutely. When a client listens, they follow our advice. When they follow our advice, the project is more successful. This is not bagging, it should be more successful. As architects we have done 100's of projects and know what we are doing.

In the end, the project is more successful because, in large part, we charged fairly for our service. As a result, the client followed our advise and achieved their desired result. The project is better, the client is happier, the architect is paid.  Win, win, win.

So, value is created at home. The client will not "just value your service more". If you place no value on it, why should they?

In today's economy, when architects are daily reducing their fees to get work and many interns are working for free in order to "gain experience", we wonder why our clients do not perceive value in architects?

We wonder why clients "value" contractors (10-20%), realtors (6-8%), and interior designers (10% +) but do not perceive architects (3-5%)? It seems the answer is in the numbers!

Our advice, create value by charging fairly for your service. Everyone, including your client, will benefit.
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Robert Glisson AIA
Rojo Architecture
Tampa FL
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This serves as a reminder that discussions of fees generally - particularly in listserv settings - are extremely problematic.  We were the subject of antitrust litigation three times in the latter twentieth century, and two of those cases involved alleged price-fixing.  All of them resulted in findings unfavorable to the Institute.  Because violations of federal antitrust law are felonies that can result in criminal convictions and substantial civil liability, we are extremely careful not to engage in behavior that may expose the Institute or any of its members to legal jeopardy.  Because merely talking about fees could be and has in the past been regarded as evidence of an attempt or conspiracy to fix prices - either of  which is a serious violation of law - those kinds of discussions are restricted on AIA-sponsored channels as is stated in the AIA KnowledgeNet Code of Conduct.  

For those interested in a detailed explanation: The American Institute of Architects has been involved in antitrust difficulties three times in recent years, and did not fare well in any of those instances.  

• In the 1970s, the AIA was one of a number of professional societies and groups that were sued for maintaining fee schedules.  The AIA ultimately agreed to discontinue its use of such schedules.  Other groups fought on at considerable expense, and groups representing attorneys and engineers carried their cases all the way to the U.S. Supreme Court.  The Supreme Court found the use of fee schedules illegal under the antitrust laws.  The court's rulings are still in effect, and apply to all professional societies and groups.
• Also in the 1970s, the AIA was sued after disciplining a member for a violation of the Code of Ethics after he had "supplanted" another member who had been doing work in connection with the renovation of Union Station in Washington, D.C.  In a strongly worded decision, U.S. District Judge John Sirica held that the AIA's action had violated federal antitrust law.
• In the 1980s, an AIA chapter argued that young architects were not receiving adequate compensation, and urged an agreement among its members that would ensure a guaranteed minimum compensation for those architects.  A similar view was expressed at a Grassroots conference at about the same time.  This resulted in a Justice Department investigation that in turn led to a case before U.S. District Judge Charles Richey.  The ultimate result was a consent decree, overseen by Judge Richey that imposed various substantial obligations on the AIA for ten years concluding in 2000.

The antitrust laws remain very much in force, and there should be no doubt that they will be enforced against the AIA and members who violate them.  These comments are offered in that spirit. 

If any of you should have questions or wish to discuss further, I welcome your e-mails (Select "Reply to Sender") and phone calls (202-626-7379). 

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Jay Stephens Esq.
VP and General Counsel
The American Institute of Architects
Washington DC
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Original Message:
Sent: 01-05-2011 10:00
From: R. Sandquist
Subject: What is Value? vs Errors and Omissions

Hard to disagree with Robert Glisson's basic message.  I can only offer the contractor's perspective.  We consider ourselves a mid-size commercial contractor with projects typically ranging anywhere up to $3-5 million, and our largest project of $19M several years ago.  But today's projects are typically smaller.

Whereas Mr. Glisson compares an Architect's 3-5% fee compared to a contractor's 10-20% fee, I wish his suggested contractor fees were closer to our reality, at least in Lincoln, NE.  For example, yesterday we bid on a $200K public sector project.  We bid this with a 1% OH&P mark-up.  Obtaining about half our work via competitive bidding, we are generally quite competitive.  We were 4th out of 8 bids. 

10 -20% contractor markup? - only on a $2,000 job.  Bottom line, today's reduced fees and mark-ups for both architects and contractors are simply a reflection of today's economy. Back in the good ole days (pre-October 2008), we still only had a 5% markup on a $1M project.
 
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R. Sandquist AIA
Vice President
Sandquist Construction Group Inc
Lincoln NE
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Your comments reminds me of something a very savvy client of mine once told me:

"If you pay peanuts, you get monkeys."

I think that sums it up pretty succinctly.
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David Brotman FAIA
AIA Regional Director
Sunset Consultants
Malibu CA
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Original Message:
Sent: 01-04-2011 07:41
From: Robert Glisson
Subject: What is Value? vs Errors and Omissions


Value vs perceived client value

This discussion reminds me of something my dad, an accountant (also a service profession), has told me on multiple occasions.  "Your client will value your service in direct proportion to what you charge for it".  We have experienced this many times in our office.  

Some of our most difficult clients are the ones we charge the least.  Why? Because they pay the least.  When a client is paying a fair amount for a service, they are inclined to listen to that service.  This seems obvious. Ask yourself "do you listen to advice given to you for free at lunch by an attorney?".  Then ask "what about when you pay $150/hr for that same advice?"

We have stated in the past, we do our clients a favor by charging them a fair fee for our service.  Why? Architects know better how to achieve the clients desired result. We are trained to solve their issues. When we charge for our service, clients listen to us more acutely. When a client listens, they follow our advice. When they follow our advice, the project is more successful. This is not bagging, it should be more successful. As architects we have done 100's of projects and know what we are doing.

In the end, the project is more successful because, in large part, we charged fairly for our service. As a result, the client followed our advise and achieved their desired result. The project is better, the client is happier, the architect is paid.  Win, win, win.

So, value is created at home. The client will not "just value your service more". If you place no value on it, why should they?

In today's economy, when architects are daily reducing their fees to get work and many interns are working for free in order to "gain experience", we wonder why our clients do not perceive value in architects?

We wonder why clients "value" contractors (10-20%), realtors (6-8%), and interior designers (10% +) but do not perceive architects (3-5%)? It seems the answer is in the numbers!

Our advice, create value by charging fairly for your service. Everyone, including your client, will benefit.
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Robert Glisson AIA
Rojo Architecture
Tampa FL
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At the end of  Mr. Burcope's post he wrote: "It is no wonder architects are often not respected by clients and others in the industry."  Not to get too "high school coach" on this but respect is mutual and first one must respect oneself. 

I've ebeen at this for years and one issue I think our profession must deal with is that we allow our interest in architectcure to adversly impact our practice of architecture.  We say that we "get" to work on projects too often.  We need to recongnize that we bring value to the table and we should seek oppotunities to work with people who recongnize that as well.  I know it is easier said than done, especially when one is trying to keep the lights on but ask yourself this, are you more willing to compromise on a fee and contract language to work on a project that you think is really cool or on one that you are pursuing becasue it will generate a fee?


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Francis Watkins AIA
Bignell Watkins & Hasser Architects, P.A.
Annapolis MD
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Very well put, Francis.  I fully agree and have been guilty of placing my business and financial needs aside for the chance to work on what I perceived as a "cool" project.

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John Lehman AIA
Lehman Associates, PC
Highland MD
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Original Message:
Sent: 01-04-2011 09:19
From: Francis Watkins
Subject: What is Value? vs Errors and Omissions

At the end of  Mr. Burcope's post he wrote: "It is no wonder architects are often not respected by clients and others in the industry."  Not to get too "high school coach" on this but respect is mutual and first one must respect oneself. 

I've ebeen at this for years and one issue I think our profession must deal with is that we allow our interest in architectcure to adversly impact our practice of architecture.  We say that we "get" to work on projects too often.  We need to recongnize that we bring value to the table and we should seek oppotunities to work with people who recongnize that as well.  I know it is easier said than done, especially when one is trying to keep the lights on but ask yourself this, are you more willing to compromise on a fee and contract language to work on a project that you think is really cool or on one that you are pursuing becasue it will generate a fee?


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Francis Watkins AIA
Bignell Watkins & Hasser Architects, P.A.
Annapolis MD
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Let's admit there is a broad spectrum of architectural services, as well as, clients who require them. Some architects sell their services as a commodity and some as a luxury. This conflict of interest you mention may not be inherent unless you make it so. In the wide world of architectural services there is among them the responsibility to elevate the product beyond the the clients intended vision either by managing expectations at the very least, or through experience/technical accumen, creativity or sophistication. Standard of care, in large part, is matching (ideally overmatching) your skills and experience with that of the prospective client. When there is someone else out there that can perform better, by any perceivable gauge, the market will find a way to their door. Complacency could be the killer of our profession.

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Brion Sargent AIA
Dallas TX
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Great Post - Alan.  I am recopying the part that every Architect needs to think of daily.

"The conversation about "value," when held between architects, always comes back to the value of the services provided by architects.  Services are what architects sell directly, but what we fail to see is that these services are a means to a greater end for the client, that being a facility.  Client's see value in the facility, not in the services.

The same architects that complain about the erosion of architect's role as leaders are failing to see this simple fact.  You can not lead the team and at the same time fail to see where the client wants the team to go.  This is the central conunundrum of the practice of architecture.  There is an inherent conflict between serving the client's needs and serving your own needs."

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David Haynes AIA
Bothell WA
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