by G. William Quatman, Esq., FAIA

Great architecture has always been the result of a great designer. For centuries those great designers also led the construction team. Names like Brunelleschi and Jefferson are synonymous with “master builder,” or capomaestro, the one who led the entire process from design through construction. But over the years we have become a fragmented profession. Engineering, though part of architectural education and licensing, is nearly always delegated to a consultant. Even after the AIA struck down its long-held ethics objection in the late 1970s to architects engaging in design-build, the liability crisis of the 1980s caused many architects to reduce construction-phase services, and self-designated “construction managers” rushed to fill the void.

As more specialized consultants continue to fragment the industry, some architects feel their niche has been reduced to “exterior decorator.” On the other end of the spectrum, design-build has grown at a phenomenal rate in the past 30 years as a delivery approach that bundles all of the project services into one package. And who is taking the lead? Mostly contractors. Architects are relegated to the role of a subcontractor on level with the trade contractors who often are forced to deal with “pay-when-paid,” uninsurable indemnity and warranty contract terms.

For those with the entrepreneurial spirit and right planning, there is an obvious path to regain the lead role architects have lost to others. That path is a return to our roots, back to the master builder: Designer-Led Design-Build.

What the owners want
When it comes to matters of project delivery, owners have spoken loud and clear. Focus groups, surveys, and polls show that owners are tired of the finger-pointing, litigation, and lack of accountability they find in the “traditional,” fragmented method of delivery. Most do not care who leads the project team as long as that person will deliver what they promise and be accountable. Owners want one-stop shopping. Contractors have been quick to take that lead role and sign on as the “prime” design-build contractor. While some architects wring their hands about design-build (and design-builders) and complain how it has further reduced the role of the architect, others recognize that an important choice exists.

Architects can own design-build by taking the lead. Great design is still what owners want, but a great designer who can also guarantee the cost, quality, and schedule will dominate the market. Those who have taken this bold step already say they will never turn back and wonder why they didn’t think of it years ago. With the lead role in design-build up for grabs, why should it fall to the contractors? By taking the lead, the architect maintains a close relationship with the owner; has total control over cost, quality, and schedule; and—yes, it is okay to say it—most architects leading design-build report making more money than ever in their careers. They also say they are having more fun than ever before. Sounds great, so why not take the lead?

Think about it. Replace adversarial relationships with teaming. Make changes during construction to improve the project without fearing a costly change order or delay claim. Solve problems on the spot to keep the job moving and reduce risk of suits or claims over design errors and omissions. Experienced design-builders say, “When you have total control, you have less risk.” The traditional method of turning over control of your plans to a group of low-bidding contractors, some of whom may be looking to exploit any error, omission, or ambiguity in those necessarily imperfect plans and specs, certainly has its risks. Doesn’t retaining control make more sense?

Start-up issues to address
Before taking the plunge into the lead role in design-build, an architect faces multiple issues. The most commonly voiced concern is mandatory bonding associated with public projects. If your firm does not do public work, this is not an issue. For those in the public market, it is true that substantial assets are needed to attract a surety willing to write bonds for your company to hold the prime contract. It is not insurmountable, however, as many architects have found ways to obtain bonds by teaming with bondable contractors, obtaining “dual obligee” bonds, or retaining enough earnings and providing personal guarantees to qualify for bonds. It is not an impasse, as any start-up contractor will tell you, it just takes time and planning.

The number two deterrent to taking the lead is risk aversion. Architects have been taught by insurers and lawyers to limit liability, take on only insurable risks, avoid site safety and supervision roles, and never, ever guarantee anything. Today’s owners want the opposite. They want someone to be responsible and take on these risks, which are present in every project. Contractors do it every day, and they are well compensated for it. “With risk, comes reward.” If your insurer or attorney tells you that an architect cannot take the lead role, find another advisor who understands design-build.

Some firms worry about how the lead role changes the image of the architect. Brunelleschi—who set precedent with his innovative Duomo in Florence—and Jefferson—architect of great buildings, a university, and a government—set their minds first and foremost to doing what is right. Taking the lead did not bother them. Leadership creates its own image.

From 1909 until 1978, the AIA forbade its members from design-build due to a perceived conflict of interest. We’ve come a long way. In September 2005, the AIA Board of Directors adopted policy statement No. 26 on Alternative Project Delivery methods that says regardless of the delivery method used, the AIA “believes that an architect is most qualified to lead” and the AIA “advocates that architects should be retained in that role.” For those ready to heed the call, here are some ideas.

Six paths to gaining experience
There is, of course, the age-old conundrum:
If you need experience to break into a new market, how do you get that experience in the first place? I offer six approaches here as encouragement for those ready to get up and get going.

1. Start small with a current client. A good beginning point would be a small project with which your firm has a lot of familiarity, working with a current client. Having the client’s trust in you as a designer typically translates to greater willingness to trust you on the construction side as well. To reduce risk further, consider starting with small tenant improvements and finish work. What a great way to get experience managing trade subs and build your skills at that level.

The worst formula is to take on as your first design-build project a building type you’ve never done before with a client you’ve never worked with before. It’s a formula for disaster. Nonetheless, the big project brings with it a big fee, and some people are determined to plow ahead boldly into the unknown. I say work through it slowly, one step at a time.

2. Try design/construction management. Design/construction management is the second approach, where the architect is strictly an agent of the owner and manager of the trade subcontractors, but not really at risk for their work. It’s not true “design-build” because the trade subcontracts go directly to the owner, not a single contractor. The architect contracts with the owner to manage those subs and provide the design services. It is a way to learn the construction management aspects without taking all the risk. As a C/M advisor, you may want the subs to have “open-book accounting,” so you see all of their costs. This will help you learn how subs price out work, knowledge to use in the future.

3. Team with a GC. Take on the role as a sub to a trusted general contractor with whom you work well and learn from them for a project or two. Watch them very closely. Put one of your staff in their office, as the team works together, to observe what they do and how they do it. You can really get a good start on your education into leading and managing construction this way. The GC takes the risk as prime, you are a sub. But you’re there for the learning experience.

4. Form a true “joint venture” with a contractor. The joint venture could be a partnership or it could be a new company—such as a limited-liability corporation—in which you and the contractor are both at risk, but your risk is shared with your teammate. Subject to state licensing laws, the contractor and the architect each owns 50 percent of the new company, and you’re right there in the driver’s seat with the contractor—sharing the risks and the rewards.

5. Go out and hire the right staff. Hire estimators, superintendents, and project managers you don’t already have and form a design-build company with a strong core group. Most firms choose to set up a separate company for the construction—especially when starting out—to minimize the risk to the architecture practice. This works best for private work, since public work may take several years to get the requisite bonding capacity.

Different insurance is needed. For example, you’ll need a different workers’ compensation policy than you have now, different general liability coverage than now, and instead of the auto insurance that you normally carry for cars that go to and from the site, now you’re insuring construction equipment. Workers’ compensation is where the premiums will skyrocket from what you’re paying now, because architects’ offices tend to be fairly safe places to work. Construction sites are one of the most dangerous. But every architect I’ve worked with who’s done this has said “You’re going to make so much more money, don’t worry about the higher premiums.”

6. Merge corporately with a contractor. Either you buy a construction company or they buy you. There are many examples nationwide of mergers both ways that have worked successfully. Contractors are looking for ways to bring design services “in-house.” So how about you—is your firm for sale? For firms in an ownership transition crisis, merging with a construction company may be the answer you have not considered. It gives the contractor an instant staff, plus record of project types the company can handle.

Some final thoughts
Leverage the financial side of starting a construction company. For instance, you don’t have to own any equipment. You can rent everything and charge it to the owner. You may be able to hire temporary labor as needed. But for those willing to “staff up” and carry the overhead of construction management personnel until the first job, find staff you can use in your architecture practice for estimating and project administration until that first design-build job comes along. Prepare a strong business plan to present to the bank and secure a line of credit. Look into SBA loans for new businesses. I have heard of people who have financed their start up by maxing out their credit card limit. It’s an option, not a recommendation.

I know of one engineering firm that took a significant investment risk that worked out to their benefit. They hired two talented people from a construction company before they even had a project locked up. The firm carried those two people’s salaries for a year and a half waiting for the right opportunity to come up, keeping them busy in the meantime with other firm work. And they were ready when a job came up with a client with whom they’d worked and a familiar project type. The firm made $600,000 profit on that first project, which they put back into the company to look more appealing to a bonding company. It took some patience and good judgment, and now they’re doing design-build on all types of projects.

Be prudent and pick familiar projects and clients to start out. Get good legal and insurance advice from people who understand design-build. Talk to your peers who have already taken the lead. Get off the couch and get going. Architects can lead design-build once again.

Copyright 2006 The American Institute of Architects. All rights reserved. Home Page