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10.28.2009
Stoop to Conquer
Architects wrestle with underbidding to get jobs
Bunch Design is working on a the renovation of a Pasadena bungalow essentially for cost just to keep busy.
Courtesy Bunch Design

With firms still laying off large portions of their staffs and some closing their doors altogether, the economic downturn continues to pressure California architects to secure commissions however they can. According to several sources, some architects are offering clients lower project cost estimates than they can deliver, reducing services, and even working for free.

“I think some people’s attitude right now is to just get the job and worry about the consequences later. They’re low-balling us to get projects,” said Jess Mullen-Carey, principal at Silver Lake firm Make Architecture. He said his firm recently was passed over for a retail center and car wash in Long Beach from a client with whom they had worked successfully in the past. There were “a host of reasons” they didn’t win the job. But a major one, he believes, was that the winning firm’s proposed fee was two-thirds the amount of any other bid. “We couldn’t work with what they offered,” he said. “There’s no saying they won’t be adding services down the line.”

San Francisco architect Cary Bernstein sees a similar “deal with it later” trend in her city, where she says the biggest problem she’s come across is architects willfully underestimating what construction costs are going to be on a job. “I think some people would just get the job and take the risk of potential friction later,” she noted.

She pointed to a competing firm that offered a construction cost of about $300 per square foot for a house in the heart of San Francisco with extreme green features. “I said, no way, that’s just not possible,” said Bernstein, of the offered fee. “Is there a project to be done for that money? Possibly. Is that going to be what the client wants? Probably not.” She continued, “You have to think about whether you’re being honest with the client.”

Part of the blame, said Bernstein, goes to cash-strapped or inexperienced clients, who are much more likely to believe unrealistic projections in tough times. “They’re not looking for real numbers, they’re looking for what they want to hear,” she said. Desperate clients, said several other architects, are also encouraging firms to offer drastically reduced fees or free work upfront like drawings and documents to try to win them over.

Many firms said they could do little but comply, especially when some clients might just forego using an architect altogether to save the money. Mullen-Carey said his firm is now delivering free floor plans for a client who is considering them for a 5,000-square-foot office project in LA, even though it “goes against every bone in my body.” But in this climate, he said, “We feel if we have to spend a few hours on some basic layouts it’s generally worth the effort.”

Bo Sundius, founder of the small LA firm Bunch Design, has also performed free schematic work and has been willing to accept virtually no profit on a few projects just to keep things moving.

“We try to keep as many projects going as possible,” said Sundius, whose firm has taken commissions with terms as low as 10 percent of construction cost in recent months. “If there’s a slow bleed we can handle that. But as soon as you start hemorrhaging money you’re in trouble. When you’re doing nothing you’re hemorrhaging.”

Even more drastic, some would say non-collegial, tactics are drawing attention. One firm, Santa Monica–based Boto Design, recently sent out a note promising “a referral fee will be paid to all brokers upon securing an architectural commission.”

Will Wright, director of government and public affairs for AIA/LA, sees the recent habits of underbidding and even stretching what’s possible as a symptom of several problems in construction, including a “culture of change orders,” in which prices are rarely static, and the “flawed” design-bid-build model that leaves both clients and architects vulnerable to unforeseen changes down the line. One solution, now under consideration by the AIA at many levels, is “Integrated Project Delivery,” where, among other things, all parties are part of a single team and are all contractually obligated to hold up their end of the bargain.

Meanwhile, many worry that the cost of driving down rates will linger long after the recession is over. “If everyone starts dropping their fees to a bad spot what are you going to do? Not do it and become extinct?” Mullen-Carey said.

Others say the strategy will hurt firms in the short run as well as the long run. “It’s a slippery slope when you’re cutting fees to get jobs,” said Roger Sherman, principal at LA-based Roger Sherman Architecture + Urban Design, who said he saw one firm underbid his fee estimate on a public project by almost 50 percent. “If it’s the kind of client who’s going to pick you just because your fee is lower, it’s probably not the client you’re going to want to work with.”

A version of this article appeared in AN 08_10.28.2009_CA.

Sam Lubell