An upturn in construction means more work for architects, but many are still struggling to translate this into higher fees. A panel of experts discussed how to tackle this challenge at a recent Architects Journal Roundtable event in London.
The Architects Journal, in partnership with Deltek, invited key members from nine AJ120 practices to Tower 42 in London to discuss the key challenges facing their businesses. One such challenge discussed was fee levels.
How to handle increasing costs
The architecture industry is seeing an increase in its existing and new cost sources whilst fees are still low. Because there is more work, architecture practices need more staff, which costs a lot. As a result margins fall, fees remain low and often payments are late. Juggling all of these factors becomes critical so that practices can ensure sustainable profit growth.
Jo McCaffrey, Director at Levitt Bernstein, also believes that many architects were locked into framework agreements signed in ‘very tough times’ and were still working to those fees.
It is imperative for Architecture practices to keep a close eye on project profit margins now more than ever with a steady increase in costs compared to stable fees over the past few years. Instilling a strong culture of project management and profitability is important alongside having a fully-integrated Time & Expense, Project Planning, Project management and accounting package to ensure you can keep a finger on the pulse of your project's financial health.
Managing competition and opportunities
Costs are not the only thing that’s increasing for Architecture practices in the UK. The number of opportunities and bids are also on the increase. Times have changed from when Architecture practices needed to bid for anything and everything just to keep their head above water. Now practices are thinking more strategically about the projects they pursue and ultimately invest time and money in winning.
David King, Director at HOK commented on this subject saying:
“We are monitoring opportunities more than we are receiving them. Overall, there was a feeling that practices needed to break the recession mentality, which was leading the industry to price jobs too low.”
Some of Deltek’s most successful clients are now using historical data to assess their strongest and most profitable projects from the past to assess whether they should now chase work from a profitability standpoint, but also an added value perspective. Having a customer relationship management (CRM) system can empower management to assess the success of previous projects by region, sector, disciplines and cash flow amongst other things to make sure the projects that they invest time chasing, are the right projects for the practice moving forward.