About those current conditions: The architecture profession is witnessing historic lows in billing activity. But a tiny bit of encouraging news came recently when The American Institute of Architects’ Architecture Billings Index—a monthly work-on-the-boards survey—detected a creep up in new project inquiries. The housing market is still anemic, to say the least. Although no one is having an easier time walking out of a bank with a loan, some see an uptick in activity stemming from federal stimulus money and rising consumer confidence. People with cash are seizing the chance to get a project done quickly and inexpensively.
“January and February looked very bleak; we just barely had enough work to get by,” says Grew, who is down to four employees from seven a year ago. “But a funny thing happened in the past few months. The phone literally has started ringing. We have a fair amount of work already in place. Fortunately, it’s clients with cash who are calling; these are not people who are dependent on lending.” One new client is taking advantage of the slow period to design a home, which he’ll put off building until later. Another is building a “big guys’ room” in which to hang out and store his Porsches, Grew says.
Work has also picked up for Yaussi, thanks to new stimulus money for U.S. Department of Housing and Urban Development-sponsored housing. “Our first quarter, nothing was coming in the door, but now we’ve gotten about 35 RFPs from a dozen housing authorities around the state,” he says.
In this period of scarcity, competition is up too. Architects must work smarter, and that means making themselves as valuable as possible to clients. For Circle West, that has meant investing heavily in Building Information Modeling (BIM) software in order to integrate sustainable design more thoroughly into its projects and provide clients with energy-modeled options. As a result of using BIM, Koliopoulos says the firm can design a building better and more quickly than it could a year ago.
“We all hope this is going to get better,” Koenig adds, “and we say that most of our work comes from our good clients, so we have to keep them happy. But you have to stay in business, too, and that takes creativity.”
laying down the law It’s basic, but it bears repeating these days: The best way to ensure payment is to vet clients carefully. Check references and credit scores, and study a prospect’s website for signs of substance and longevity, advises Irvine, Calif.-based attorney Randy Koenig, who represents architects and engineers. A red flag is the architect’s cue to either walk away quickly or be extra vigilant by demanding a larger retainer and billing more frequently. Here are Koenig’s other fundamentals for collecting what’s due.
Rule No. 1: State in the contract that you’ll suspend work if the client fails to pay in the agreed-upon time frame, and that interest—say, 1.5 percent per month—will accrue on overdue invoices. Putting it in writing sets the tone that your client is on the hook for services rendered. A caveat: “In a one-off relationship, I’d definitely ask for the interest. But things are so tough, I would waive it for good clients,” Koenig says. “Then you generate good will by giving up something.”
Rule No. 2: The contract should also spell out that clients who don’t pay forfeit the right to use the plans. “That’s our leverage, and the law,” Koenig says. “In addition to the breach of contract, the owner is susceptible to copyright infringement charges. That carries a pretty severe penalty, and owners don’t want to be in that position.”
Rule No. 3: Bill at least every 30 days, maintain a “short fuse” on receivables, and enforce the interest charge, when appropriate. “Don’t give the client the opportunity to say, ‘I never thought it would cost this much,’” Koenig says.
Rule No. 4: To head off the inevitable offensive move, the contract should specify the outstanding amount—$50,000, $75,000, $100,000—that will trigger mediation or arbitration. “If you start writing threatening letters, the firm becomes susceptible to a cross-complaint,” he explains. “That’s the ultimate leverage a client has.”
In short, he says, being proactive is the best defense, and that includes “keeping up a rapport and the expectation that you’ll get paid”—let’s hope sooner rather than later.
