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Race to the Top

At a time when many firms compete on low fees, what are the best practices for setting healthier fee expectations?

June 16, 2016
by Sharon VanderKaay

An incubator space at Quadrangle Architects’ offices allows for workshopping with clients early in the design process. Photo: Quadrangle Architects.

An incubator space at Quadrangle Architects’ offices allows for workshopping with clients early in the design process. Photo: Quadrangle Architects.

Designing a Way Forward

Architects naturally think outside the box when considering design options—but designing ways out of the low fee box has proven to be more challenging. Recently, I interviewed five Canadian architects who explained how they prepare clients to look beyond lowest fee bidding practices. They each have found ways to apply their design-thinking skills—non-linear reasoning, holistic analysis, “what if?” scenario creation—to think differently about setting fee expectations.

Although everyone I spoke with acknowledges ongoing difficulties related to scope, contracts, risk and reward, they all seek ways to make the architectural pie bigger—and to attract clients with new services rather than continuing to carve up the old pie.             

Shift Happens

It may be difficult to imagine a value-driven “race to the top” that would make today’s tight “race to the bottom” fee structures a dim memory. But change throughout history—from the computer revolution to the green movement—has typically followed the adoption curve below. How can we accelerate this shift in thinking that is only beginning to happen in the realm of architectural fees? One of the most effective ways of tackling entrenched, complex problems is to shine a light on “positive deviant” best practices that have the potential to spread more widely, and thereby change norms.

As public awareness of the impact of our built environment grows, leading architects are working with early-adopter clients to expand their professional role and influence. Ever-increasing demand for design that contributes to prosperous cities, communities, businesses and individuals will require thriving, highly knowledgeable architects. Conversely, an undernourished profession is not just bad for architects: every client and every citizen is a potential victim of low-value-for-money projects that stem from inadequate fees.

Seven Best Practices

What emerged from my five conversations was a common proactive strategy for setting healthier fee expectations. Historically, architects have been successful in selling their services to other architects by presenting their portfolio and showcasing design excellence. However, non-architects require a different approach, and all of the best practice leaders I spoke with promote their services by first addressing client needs, fears and desires.

Based on this underlying viewpoint, my interviews identified seven best practices by architects who are thinking beyond architecture as a lowest-price-wins commodity:

1. They promote themselves as project investment counselors. 

Architects ultimately act as investment advisors, guiding clients to make the best use of their total construction budget and project opportunities. In the financial sector, most successful investment advisors do not sell the cost to produce their advice; they sell the value of their services in the eyes of investors.

“Value pricing is the only way to survive,” says David Premi, MRAIC, principal of DPAI Architecture in Hamilton. A significant percentage of DPAI’s practice is kept busy working with private sector clients who set out to maximize their whole investment in the project, rather than focusing on the fee in isolation. “They choose us for the level of thinking required to develop their site to its full potential and create a legacy project,” says Premi. “It is very difficult to deliver the kind of quality that a client and the public deserve if services are procured solely on the basis of low fee.” 

2. They sell specific benefits that the client is buying. 

Commodity pricing happens when clients see marketplace sameness. In reality, there may be big differences between firms, but these contrasts are often hidden behind numbingly similar descriptions (e.g. “integrated process” or “multi-disciplinary team”) rather than phrases detailing outstanding benefits and eliciting emotional responses (e.g. “our approach leads to better answers” or “we design places people love”).

Few clients are able to compare and evaluate marketing claims of “design excellence.” Rather than rely on decision makers to see design quality as a competitive advantage, best practice firms sell the thinking capabilities that result in a better design. They emphasize the benefits of their specific design process and quality of client interaction. They explain how these talents and approaches enable greater insight into a client’s issues and opportunities.

Throughout the process of setting healthier fee expectations, it is vital to address a client’s fears before moving up to the aspirations that can positively motivate buying decisions.

3. They look upstream to help clients get the best value from their selection process.

It is common practice at the pre-proposal stage to request a meeting with decision makers to show them relevant work—and to hopefully gain greater insight into client concerns and project issues. Maureen O’Shaughnessy, FRAIC, principal at Toronto firm CS&P Architects, has used that meeting to take an active role in changing the basic terms of engagement.

While recognizing that price-shopping mindsets are deeply ingrained, she has had some success when advising public-sector clients on how to improve their RFP content and their selection process. Involving major sub-consultants in these upstream client conversations has been particularly effective. Rather than dwell on consequences for the architect (a strategy unlikely to motivate change), she emphasizes why value-based selection terms are in the purchaser’s best interest. Clients cannot be expected to see all of their opportunities to deliver better value for the taxpayer, but increasing awareness incrementally can help.

David Premi adds, “The Broader Public Sector Directive (BPS) acknowledges the public interest in this regard, by exempting architects from its requirements. Purchasing agents are often surprised to hear this when we bring it to their attention. It is far more straightforward to focus on price. But the untold damage and missed opportunity in the built environment is incalculable.”

4. They are more than happy to explain their fee rationale.

Questioning the fee does not mean there is anything wrong with the fee. Can you imagine buying a service in another sector without understanding the basis for the price? Questions about the fee should be seen as a matter of due diligence. Also, remember that asking for a cost reduction is common business practice, rather than a time for defensiveness. When a client questions the dollar amount, this is the time to sell the fee and demonstrate your good sense, not drop your price.

At the same time, fees need to be anchored to something clients can relate to, or they will be perceived as arbitrary. This could mean explaining how your price compares to projects of a similar complexity and size that clients would say delivered solid value, rather than lowest cost.

There are ways to explain your fee that can increase the client’s committment to you. Jamie Wright, FRAIC, director of Toronto’s IBI Group, says, “Engaging the client in the discussion definitely helps. Getting both the type and amount of services right happens through diagnostic questions that demonstrate you have foresight. Most often, clients come away from these conversations saying, ‘I didn’t think of that!’”

“The client may need additional front end services before you can do the work requested, such as site selection or feasibility,” says Wright. “This is an opportunity for you to highlight your due diligence, rather than focusing negotiations narrowly on the fee.”

5. They can explain why clients should be terrified of low fee bidding.

“Clients cannot fully appreciate the realities of inadequate fees unless we tell them,” says Bill Birdsell, FRAIC, a Guelph-based architect and immediate past president of the Ontario Association of Architects. “There are direct and indirect project costs to underbidding that can be many times higher than the fee. Every architect knows the truth and we are doing
a disservice to clients if we sugar-coat potential negative consequences.”

There are reasons to be wary of lowest price construction bids—and the same goes for architects, engineers and every other kind of professional service. It’s the nature of low bidders to make promises they can’t keep. “The term ‘lessons learned’ is a strong way to communicate that you’ve had a bad experience with scope or terms, and are willing to share that experience,” says Jamie Wright. “This signals that you’re probably going to walk away if you can’t do a proper job, which will likely have an impact on the negotiations.”

Sometimes low bidders are desperate for work, so clients need to see the red flags. A low fee needs to be justified. The reality is that awarding a large percentage of points for lowest rate adds unnecessary risk to the project.

What should clients beware of? Give them examples of how to avoid the expensive problems, costly omissions, stressful adversarial relationships and wasteful side effects of price chopping. It’s time to use the emotional language that other professions rely on to convey low bid project dangers: “go south,” “pitfalls,” “regrets,” “hidden costs” and the memorable “stink bid.”

6. They see a knowledge-driven “race to the top” fueled by changing client needs. 

“As compared with 10, or even five years ago, our clients today have much higher expectations of what the right design can do to advance their business agenda,” says Marco VanderMaas, senior associate and design director at Quadrangle in Toronto. “They’re generally more worldly and sophisticated; they’ve seen the potential for design on an international scale.”

Quadrangle has developed a diagnostic design process that showcases the firm’s big-picture thinking. Clients are invited into the studio’s “incubator space”—a meeting area in the midst of the open-plan office—for an intense exploration of strategic issues and opportunities. Their facilitated, inquiry-based process ultimately saves time while providing clients with deeper insight into their own business. “It allows us to immerse the client in a strategic discovery process so they see the extra value we provide,” says VanderMaas. “We make our thinking visible rather than hiding it, and we work through exciting ideas together rather than having to convince clients to approve an approach or option that they may not otherwise fully understand.”   

7. They talk, write, behave, and design as humans working with humans. 

Jamie Wright has experienced the advantages of candid, plain talk during the architectural selection process. “These events can be very stilted—or they can communicate how we will really think and act if we work together. I’ve seen projects won by making human connections with decision makers, getting beyond generic language and demonstrating empathy for the client’s concerns.”

“In the end, fee negotiation is an art, not a science,” says Wright. This realization underscores the importance of creative thinking and a human-centric approach to breaking out of the low bidding box.

Sharon VanderKaay has written seven practice articles for Canadian Architect on selling design services in the knowledge era. Her frontline experience as a designer includes 25 years working for Toronto-based international architecture firms.



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2 Comments » for Race to the Top
  1. Marco De Bortoli says:

    Great article! Good job Sharon!

  2. maria elena olivares says:

    Great article!!!

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