Boom times but Australian Architects still facing Mutually Assured Destruction

Shaun Carter’s recent piece on architects fees and money is something I think everyone should read. You can find the full article here at ArchitetcureAU.  Shaun is a past president of the NSW Institute of Architects Chapter.  I thought it would be worth commenting on some of the questions and issues that he raises. Everyone architect in the country should read this article.

The old joke 

He starts with an old blokey architects joke.

Did you hear the one about the architect who won the lottery? They kept on working until they were broke. This was my introduction to architecture. I thought it was a joke. Now I’m not so sure.

This was a fine joke thirty years ago. It has a little bit of the boom-bust mentality about it. Plus a tone of altruism. In other words, architects get money and then spend it on architecture. They get money and spend it on design hours. They do this because of a love and passion for architecture and society.  But as a joke it implies architects always go back to zero, or square one, when they go broke.

The usual catastrophe 

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However, while the joke might contain some sublte truths, the problem is as that architects don’t just go broke to the point of zero dollars. They go negative, and the financial and emotional toll on themselves their families and their profession is enormous. No adequate superannuation, no assets no worth in their small businesses when they retire, its worse I guess for employee architects who are inadequately prepared for their later years. Working from contract to contract, below award wages, no paid overtime, moving from poorly managed firm to poorly managed firm isn’t really a recipe once you are past 50 or 60 for a comfortable grey life.

Exploiting the talent

Last week a graduate came to me and said he had been offered a casual job at 17 bucks on a kind of “training” basis. Anyone reading this can look up the award. Sometimes I wonder if one of the best things that could happen to the profession is that the Fair Work commission starts to prosecute architectural employers for not paying award rates. Under the award, a graduate architect on a casual rate should get $31.09 an hour and if full time or part-time. $24.87.

The Scourge of Fee Cutting 

However, as Shaun says the real problem is price competition and fee cutting:

I talk to architects all the time and in almost every conversation hear stories of outrageously low fees and cutthroat fee gazundering. Economics 101 taught me that when a good or a service is in high demand and the supply is limited, the cost goes up. So why is it, then, in this boom time for architects, that we have managed to slash our fees in a desperate race to the bottom? He then goes on to say: If we are to achieve major reforms and be respected as a profession, we need to be not only financially viable, but financially successful. Otherwise, how are we to achieve gender equality? How do we stop our practices becoming sweatshops of juniors working long and late hours?

Shaun Carter proposes four areas where he feels that architects need to change. These are architects, clients, regulation and cheap overseas labour (WTF?).

Idolising the creepy architects

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Shaun argues that architects need to be better at business and that being poor at it is “just plain dumb.” I agree with this but to change this architects really need to shift their culture around. As architects, we have to stop idolising and revering “bad boy” designers. These guys are mostly creeps and yet they are the ones that get all the symbolic capital in our profession. Plus they know nothing about business or management. Or for that matter anything really. But hey does it matter when you get all the street cred.

Sludge 

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However, he argues that architects need to collectively bargain minimum rates of fees and architects need a “strict ethical and moral code to prevent rogue architects from damaging our profession.” Fair enough, but try telling that to the AIA which as an organisation appears to have governance and decision making processes that are slow bureaucratic and easily hi-jacked by ego-driven personalities. Witness the recent hoohaa around the AACA vs. the AIA. Hence reaching any consensus that might translate into policy or advocacy approaches for architects is like wading through sludge.

Going for the Mandate 

Carter calls for minimum fee guidelines for the entire profession. He argues that governments should then follow these guides as well. However, I am not entirely sure how this might work in practice, and I am concerned in legal terms it might be seen as being anti-competitive. But hey if you are starting a practice, it would be great to get an idea of what you should be charging. I think one thing that all of our professional groups and associations could get behind is the idea (suggested to me by Vanessa Bird previous president of the Victorian Chapter). This is the idea that it should be mandated that every building project in Australia, over a certain amount, should have an architect. I am not sure how this kind of regulation would work in detail. But as Shaun Carter argues:

Regulation has been a dirty word these past 30 years of neoliberal and trickle-down economics. What we know of this period is that the failed economic model has advantaged the few at the expense of the many. Economic literature has thoroughly documented the failure of loose and limited regulation and the way this has run down professions and reputations.

Mutually Assured Destruction

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Shaun’s third notion for saving the profession from the “existential cliff” and “Mutually Assured Destruction” as he calls it is to limit university places in architecture degrees linking this to the outsourcing of architectural work offshore. As he says:

“If the profession is going to send our future architects’ jobs offshore, then let’s stop the cruel practice of offering them meaningful employment with one hand and ripping it from them with the other.”

He then goes on to say:

Perhaps the most controversial reason for the erosion of fees is firms employing cheap overseas labour to undercut the market. I believe that this is the emperor’s new clothes of business school management. It drives down fee expectations that will be difficult to claw back, while limiting employment opportunities for our young architects because their jobs are being sent overseas, all at a time when we are enrolling and graduating architects at record rates.

Protectionism?

I am not sure about this line of argument because it starts to sound a little “protectionist” and raising the spectre of “cheap overseas labour” suggests stereotyped images of what that labour looks like. Think, call centres full of Revit CAD monkeys in large second-order centres full in South, South East or North Asia. Nonetheless, I certainly dont think that Shaun Carter is intending to cross the lines into Trump Tariff and Immigration territory. But really what is being suggested here does raise questions about some of the current dynamics in practice. This includes the globalisation of competition between architects and the commodification of architectural services with the rise of new technologies. Despite all the BIM hoopla are we really ahead of the technology game?

Too many at Architecture School? 

As for the numbers of architecture students in the Universities and how many graduates are produced in Australia I might leave that to a later blog. But needless to say in 2015, the universities made $225 million bucks out of architecture (Check that out here). I also doubt that very much of that goes back into research of direct benefit to the profession. On the plus side, the Architecture Schools do support the professions with lots of sessional teaching contracts. However, is that enough given how much money the Universities are making out of architecture? For Australian Universities, Architecture Schools are a valuable cash cow. However, Architecture Schools are by no means the largest of their international education cash cows. The universities also love architects, and they love architecture schools because it all adds to their branding, reputation status and symbolic capital.

However, I don’t see many of the 18 schools of Architecture joining these debates about the value of the profession and its worth. Most architecture schools and faculties are struggling to manage the strictures imposed on them by central university executives who think that having an architecture school, in the portfolio, is a bit valuable and kind of quaint. If that is the case, maybe those same executives can give architecture some more research money.

We are family

To overcome the malaise that architects find themselves in the architecture schools, the professional associations, and the AACA need to lobby for the worth of architecture collectively. A fragmented and ungovernable architectural community will not solve the problems architects face. As Shaun Carter argues fee cutting is a recipe for Mutually Assured Destruction.

I am almost on annual leave between semesters. In the next few weeks expect to see a few more relaxed beach blogs and tweets from Italy and the Biennale. If you want to know more about our RASP research project you can find it here

Cutting to the Bone: How fee cutting is destroying architectural practice

The architecture awards in my city is normally a time for celebration. As it should be. Many architects in my town live for it. This is not unlike my friends in advertising, who are also obsessed with awards but the difference is if you are in advertising you get to go to Cannes for the ceremony. In advertising you get an actual Lion. Architects in Australia get to go to their local state chapter awards or maybe if they are lucky to the nationals in Canberra. If you win you get a framed certificate.

I now no longer go to the AIA awards I think I was banned after my last visit there.  Of course the ban was self imposed after I knocked the the tiny but sticky dessert wine glasses off a waiters tray to see them spin in the air in slow motion and land on the toupee of a distinguished middle aged contract admin architect. Another year in the early 90s I remember booing at some of the award winners and one year, as chair of a jury, I was told if my jury didn’t give a particular building the award I might as well pack my bags and leave town. Another year I passed out at the after party and woke up in the president’s kitchen with my hands clutching someone else’s framed award. That’s probably about as close as I will ever get to an award. All of the architect awards functions I have been to in my city have now blurred in my memory into one large ceremony of alcohol, glittering prizes (always badly framed) and bad cut-price function centre food.

Social media was on fire after the recent  Victorian chapter awards because the President of the institute reportedly admonished every one for fee cutting and not arguing for the value of design. If that is what she said then she is right. Ranked just below the scourge of gender inequality in the industry the other great scourge of our profession is fee cutting. it doesn’t matter if you are in Australia or elsewhere iI think it is a global phenomena.

Fee cutting is the scourge of architects no matter where they practice as it devalues design as a service in every respect. This year in my practice class we asked students to develop fee proposals using the Association of Consulting Architects Australia Time Cost Calculation Guide. The software helps people understand the relationship between office overheads and variable rates in relation to the hours needed to be spent on each phase of a particular project.

With another colleague I am currently researching the degree to which architects choose to specialise in practice. Linked to this is how much architects charge for their knowledge and expertise. Our early results indicate that for design services most architects will charge a either a fixed fee (30% of respondents) or a fixed fee with added charge out rates if circumstances change (38% of respondents).  As most architects will know good design takes large amounts of time. Particularly in the early stages of a project.

This above statistics beg the following question: if design is the central skill that architects offer then why is it predominantly charged for with fixed fees? A fixed fee might get you the job and give your client some kind of “certainty” as to what you will charge. But if the fee is low you will always inevitably end up spending more hours than you allowed for if you care about the design. If that is the case you might as well pay your client to get them to let you do the job for them. This may be why 41% of our respondents felt that partial services were unsustainable. They were more optimistic about the profitability of specialist services. But if you are stuck in the low fee vortex you will never develop those new services.

If a firm is in the spiral of fee competition, fee cutting and fixed fees you will never get the resources to undertake good design. It’s no good just cutting the fees, or offering a fixed fee, just to get the job. Of course most developers don’t really know what good design is and will exploit price competition in the market for architectural services to get the design cheaply. The talk around my city is you can get a fully designed high rise apartment building with planning permits for around 120k. Not bad for developer constructing a building with 200 apartments with a sale value of 60M.

Many  small firms dream of going upstream in the knowledge stakes and adopting a management consulting style model. They dream of clients paying a premium for their architectural knowledge and expertise is indeed a dream unless firms charge more for design. With the rise of digital practice and workflows, the disintermediation of architectural services, (try explaining what design development is to a client), the loss of contract admin to project managers and the outsourcing of documentation all architects have left is design. The problem is low fees undervalue design and ensure crap outcomes all round. It also means firms are stuck in a vortex of reacting from crisis to crisis; from low fee job to low fee job and never getting above water. If fees are low firms will never have the time or be able to invest in the R&D and the innovation they need to undertake to go upstream. Eventually these firms, and perhaps architectural services as we know it, will disappear.

So what is the solution to this downward spiral? How do small firms, which are most of the profession, get out of the vortex?

Firstly, a change in the professions  broad culture is needed. The old stereotypes really need to fall away. The myth surrounding the dichotomy between innate “designers” and “business” types in the profession is sickening. It annoys me that because I teach practice at MSD and have and MBA I am typecast as a kind of business “man” architect rather than being seen as having a stake in design or architectural theory. You can just see me in the chinois and the boating shoes playing golf with my gentleman stockbroker mates. I think these old stereotypes are perpetuated by the appalling gender constructs within the profession. As architects we all need to know about the mechanics of business strategy and competition.

As one eminent colleague said to me when I started teaching practice, “Just stand in front of them at the first lecture and tell them it’s all bout the fucking money.” In some ways it is all about the money. But, the troglodytes would argue that such a sentiment cheapens design. That is not the case as it is really about about valuing design services and arguing the case for their worth.

The best architects I have worked for have been good designers and highly skilled negotiators. A winning combination. We need to mentor our young architects so they gain negotiation skills. Yet negotiation and financial skills are not really a big part of the national architectural competency standards last time I looked. Its all about doing the traditional things and there is nothing about management, finance or negotiation. The competency standards are a sop to those who think architects need to be technical experts rather than a profession focused on generating design knowledge. The balance is all wrong.

Small firms, indeed all firms, also need to conduct formal R&D. R&D into simply doing a bit of design and calling it research. It should not be an adhoc activity. Nor is it about having a chat, and throwing around a few ideas, with a few friends down at the pub. Firm’s need to invest in formal R&D programs if they really want to develop their design skills and go upstream. R&D and innovation is the way for architects to compete with their competitors. There needs to be more institutional infrastructures from the AIA and other bodies to enable this. Architects need support to understand IP and commercialisation pathways. Unitised Building is a great model of how formal R&D can lead to a successful commercialisation pathway for an architect.

Firms need to charge more for design services. Fixed fees or even fixed fees with hourly rates for variations should be abandoned for the design phase or for partial design services. If all firms charged a percentage fee for design or an hourly rate for design the profession would be better off. Firms need to argue to clients that design is labour intensive and until it is undertaken it is hard to know how long it will take. Firms need to argue for its importance in the early stages of the project. If clients go elsewhere so be it. But they will eventually figure it out: You get what you pay for. I inform my students that they are better off going down to their local single origin, filtered coffee, wified, barista heaven with there sketch book than take on a project for low fees. Why do a job for such a low fee that you end up doing it at a loss. Effectively paying the client to do it. You are better off just buying the coffee.

As a profession we need to out the fee cutters and the informal price-cutting cartels. The culture of the profession needs to avoid the schizoid tendency when it comes to design fees. On the one hand architects exalt design and glorify the designers. On the other hand firms are viciously cutting their fees behind the scenes to get that elusive job next job. This schizophrenia will eventually destroy the profession as we know it. Fee cutting and price competition has already destroyed the middle sized firms and the small firms will be next unless all architects change this. This is architecture’s last stand.

This is the last blog for the month. Thank you to all those who read it and have sent me comments (good and bad). I am leaving the periphery and off to the northern hemisphere sunshine in my gentleman architect chinois, panama and boating shoes. So in July watch out for a few Kerouac road trip style blogs from the so called centres of architectural excellence and culture.