Where to From Here: Clients Drive Collaboration and Consolidation

Michael Hegarty , 8 June 2016

Michael Hegarty of GHD Woodhead reflects on the rise of the integrated architecture and engineering practice, arguing that we need to understand design as process that is essential to client needs.

3 - Michael Hegarty

The ACA – SA State of the Architectural Profession survey provides useful insight on the size, shape and characteristics of architectural practice in South Australia.

The survey results indicate that in SA the procurement of architectural services remains largely traditional, with 82% of respondents providing full service for an average of 60% of their work. However, it’s the 40% non-traditional procurement that should grab the attention of our industry, particularly in a small state with conservative work practices.

SA clients for large- and mid-sized projects continue to procure most design teams in packages of architectural, structural/civil and building services. This is a rapidly shifting procurement environment as key client agencies such as DPTI in SA now favouring various models of contractor led delivery which will lead to greater contractor selection of teams. This will fuel the stratification of our profession between large international multi-disciplinary and small local specialists, as has already happened in the UK, USA and Middle East.

Another headline survey result is that nett fee income levels remain low, particularly for sole practitioners and small practices. This is not sustainable. While small firms may have lower overheads, their team structure will inevitably be more top heavy than larger firms. The challenge of maintaining a practice and providing competitive take-home-pay for staff has reached tipping point for many mid-sized practices. It is this middle tier that is being squeezed out of the market.

Based on their global research IBISWorld is forecasting an annualised 2.2 per cent growth to 2020 for the architectural design industry, and importantly they highlight that clients are more and more being attracted towards integrated architecture and engineering (A+E) design-led practices.

“A growing trend of broadening service offerings is occurring across the professional services sector, and the architecture industry is no exception,” observed IBISWorld report author, Sebastian Chia.

“The main competitors are those that offer a wider range of building services and expertise … at the lower end, low-cost architectural drafters are also seeking a greater market share by providing lower priced or lower value services.”

Another interesting indication from the ACA – SA State of the Architectural Profession survey is that the majority of people employed are full-time and only very low numbers in a part-time capacity or with flexible hours. These work practices may in part explain the low participation of women working in traditional architectural practices. At the other end of the spectrum, in some larger multi-disciplinary businesses flexible work arrangements are now the norm. At GHD Woodhead we offer flexible work arrangements, have implemented active strategies for cultural diversity and have a policy of graduate recruitment across all disciplines globally targeted at 50/50 based on gender.

Many architectural practices are amalgamating to grow while others are reducing in capability as they cling to outdated models of practice that don’t respond to the needs of clients. It is now self-evident that architectural businesses have diverged to become either larger integrated practices at one level or smaller specialist local firms. This shift has been driven largely by commercial and government clients that deliver large-scale projects who are looking for simpler robust contractual relationships with consultants, and in their experience that is best delivered by a multi-disciplinary practice.

An integrated and collaborative form of practice is not new. Many of the firms that now present multi-disciplinary services started as architecture practices, with others reaching a similar position from an engineering starting point. Over many decades, this has become the default operational model for clients and architects working on large projects in the US, UK and Middle East.

A parallel driver for change has been that clients are now putting much more emphasis on design management rather than project management. Project management as a discrete discipline has focused too much on process and short-term risk while clients’ primary concerns remain the quality of built product and long-term results. Clients have realised that they require the skills of an architect as design manager, the conductor of the orchestra who understands the strengths of all of the individual disciplines and coordinates a harmonious outcome.

The recent growth of integrated A+E practices in Australia is part of a somewhat inevitable catch-up for local architectural practice to match international norms. Many foreign-based firms successfully operate this model overseas and have expanded their operations in Australia in recent years.

At GHD Woodhead we see ourselves at the forefront of this transition, and we pride ourselves on the wide range of skills and disciplines we offer. Our national network of design-led studios and the range of skills and disciplines we offer, enable us to play a role in shaping the cities and landscapes of Australia, that is not available to smaller conventionally structured architectural practices. This doesn’t mean that we always do everything ourselves and, indeed, we frequently partner and collaborate in the best interests of specific projects. But the collaborations are made more cohesive through the technological and systems resources that we can leverage to integrate the team due to the scale and diversity of our wider operations. We see our role as making things simply better for our clients.

In looking to the future we might anticipate that clients will continue to review their procurement models as design practices continue to consolidate, and therefore our client’s choice of integrated multi-disciplinary firms in the market grows. Procurement of our services as part of cohesive design teams from the outset rather than as an amalgamation of packaged disciplines will then become more common.

Among the more qualitative research responses to the survey are many themes that align closely with the hard data. However, there was also the somewhat fatalistic view that “the importance of design must be promoted for architects to have continuing relevance”. I find this difficult to reconcile from a number of standpoints; not least is that all architectural practices and our professional bodies have been promoting the importance of design for centuries.

As architects we have tended to use the word design as a noun (the design, our design), but our clients value design as a verb (design process). We have only ourselves to blame for any lack of understanding of design value, as we have historically promoted creating a design as something that we do rather than promoting design as an essential activity that our clients need – whether that be designing to resolve constraints and challenges, designing to help maximise their opportunity, or designing to make things better. We need to reframe our promotion of design as something that isn’t all about us and is more about our clients.

The ACA – SA research clearly identifies fee shrinkage as the greatest challenge facing the profession, closely followed by the greater risk architects are expected to bear. Our clients will value design based on the what-design-does-to-help-them argument and in turn they will be happy to pay for the value that we place on ourselves.

Michael Hegarty is Managing Principal of GHD Woodhead.