Five Ways to Reduce Costs Without Jeopardizing Quality or Profitability

by Michael Strogoff, AIA

Summary: During challenging economic times, knowing how to negotiate effectively with clients—reducing collective risks, avoiding future disputes, aligning expectations, and getting paid commensurate with the value provided—takes on added importance. In this installment in a series from Michael Strogoff, AIA, he looks at five approaches you can take to negotiate a positive understanding with your client to deliver the desired services and allocate appropriate costs and responsibilities.

One of the most common mistakes architects make when negotiating is reducing the scope of their services to the point the quality of their work or their profitability is threatened. While some architects and engineers offer well-thought-out reductions, such as substituting performance specifications for fully detailed designs of specific building components, others offer a smorgasbord of scope reductions, ranging from fewer client review meetings to reduced levels of consultant coordination. Some even suggest eliminating crucial constructability reviews or reducing their role during the construction phase, which may compromise their obligations to protect the public health, safety, and welfare.

In the end, most architects provide the very services they persuaded their clients to eliminate. They do this because 1) these services were always necessary to deliver the minimum quality level acceptable or 2) because clients requested these services after agreements were reached and the design professionals were reluctant to request additional compensation. In either case, the design professional's initial reason for eliminating these services—reaching an agreement while avoiding confrontation or alienating the client—is invalidated.

Here are five ways to reduce your costs and efforts in order to reach agreement while maintaining quality and the ability to be profitable.

Redefine the deliverables
Determine which deliverables the owner, contractor, or other stakeholders don't need to meet their objectives or properly complete their work. Are three-dimensional renderings required when rough sketches or computer-generated wire frame diagrams might suffice? Are formal meeting notes necessary for all meetings or only for key decision-making meetings? Are construction phasing diagrams necessary or can the phasing be described equally effectively in the General Conditions for Construction?

Transfer tasks to the client or contractor
Identify tasks included within your proposed scope that your client could undertake with little or none of your involvement (e.g., producing meeting notes, filing environmental reports, discussing requirements with utility companies, distributing bidding documents, leading community presentations). Some clients will be delighted to complete these tasks in exchange for lower project costs. Suggest other tasks that the contractor might complete more cost-effectively than could your A/E team, such as maintaining construction logs, preparing record drawings, training maintenance staff in operating installed equipment, etc.

Incorporate allowances
Identify tasks included within your proposed scope that, depending on actual site conditions, design direction, contractor performance, or the level of assumptions an owner is willing to accept, may not be required. Rather than eliminate these tasks altogether, an allowance could be included to fund these tasks should they become necessary. Both parties win. For example, rather than including a comprehensive evaluation of alternative HVAC systems, incorporate a single work session with the owner to present an overview of available systems and determine which is most appropriate. If the owner or engineer determines that more detailed analyses are warranted after this work session, the client can authorize payment of the allowance at that time. Likewise, don’t include exhaustive site investigations in response to possible hidden conditions or extra site observation meetings in anticipation of poor contractor performance. Simply make sure funds are allocated should these tasks become necessary

Think outside the box
Ask yourself: "How could I approach the project more efficiently?" Would a longer schedule allow fewer staff and less total hours? Would a simpler design or construction method require less documentation? What about developing the design on site with the client? Recall your most efficient efforts on other projects and apply any lessons learned. The possibilities are almost endless.