We all know the complaints: too many architects routinely accept fees for projectsthey know won't pencil out. They enter unpaid competitions. They give away services, or they compete for jobs based solely on price. And they commit this economic harakiri in an environment already beset by stagnant fees, riskaverse clients who are allergic to innovative design, and a construction process increasingly dominated by costconsciouscontractors.While bottomfeeding architects are as old as the profession itself, the business challenges facing most mainstream !rms are unprecedented. "ike so many other industries, architecture is undergoing profound change, much of it driven by technology, which in turn is undermining the economic foundation of the profession. #ow architects get paid$and what they get paid for$is in %u&. The smartest and most pro!table !rms are identifying new opportunities and creating a broader de!nition of what constitutes architectural services.The new normal starts with the fundamentals of any business, in any era:cost and price. '(uccessful !rms do one of two things,) says (cott (impson, a senior principal at the *reenway *roup and coauthor, with +ames ,ramer, of #ow -irms (ucceed ../. '0f they use a commodity business model, they need to have the production process down to a science. They control the cost side, which means they raise their pro!t margin. 1r they !nd a way to attract higherpaying customers by o2ering something that clients can't get someplace else. That is avalueproposition argument.)The most successful !rms$especially thestars who can command a premium$sell To earn one A0A learning unit 3"45 read the stories listed below andcomplete the test online. 4pon passing the test, you will receive a certi!cate of completion, and your credit will be automatically reported to the A0A. Additional information regarding creditreporting and continuingeducation re6uirements can be found online at ce.construction.com. Architecture & Money: Practice #ow to 7ake 7oney 0s 8igger 8etter9 Architects *ive 8ackLearning Objectives :iscuss some of the legal and technological developments of recent decades that have prompted a ree&amination of how architects charge for their services and what kinds of services they provide. :escribe projectdelivery methods that are alternatives to designbidbuild, and e&plain how they are helping some !rms be more pro!table. :iscuss the bene!ts and drawbacks that !rms encounter when they merge with or ac6uire other !rms. :iscuss some of the administrative and legal re6uirements involved in setting up and running a corporate foundation.A0A;,/ percent as pro!t, so that's > percent of the cost of the building. ,ontractors make >/ percent for overhead and >/ percent for pro!t. That sounds to me like the contractor makes >/ times as much as the architect. 0t's a bit of an e&aggeration, but not by much.)*luckH is essentially being rewarded for reducing construction ineDciencies, which on a typical project can run as high as A. percent, according to *reenway's (impson. 'We're wasting four times as much money in construction as we're paying architects in fees,) he says. '8ut that's good news, because if we can design more eDcient processes, some of those savings can go back into the architect's pro!t pool.)And while designbuild does place more responsibility on architects, it does not entail, contrary to popular belief, more legal risk, says *luck. '-or some reason, people think that contractors have lots of liability,) he says. '4nless they do something fraudulent, they have insurance. 8ut the liability insurance on a construction project is included in the budget. 0t's a line item, like the plumbers,) he continues. 'As an architect, 0 pay over K>//,/// a year in insurance. 8ut 0 buildall of my buildings, and don't pay a nickel for insurance as a contractor.)(till, designbuild is not for everyone. 0t is a fundamentally di2erent way of practicing architecture, with a steep learning curve. Co company becomes a designbuild !rm overnight. -or some architects, 0B: holds more promise. The joint arrangement and shared responsibility often result in 6uality design and construction eDciencies, which architects can then be rewarded for. 'We're working under an 0B: contract at 8rown 4niversity, where there's additional pro!t built into our compensation model for broadbased performance,) says +ames Timberlake of LieranTimberlake, a >//person !rm based in Bhiladelphia. 'Bart of that is energy eDciency. Bart of it is overall project performance, in terms of time, money, and 6uality. These performancebased incentives are starting to become increasingly common.),apturing additional sources of revenue typically re6uires negotiating skills, research, and ingenuity. B(7+'s (tasiowski once worked with a !rm that designed a =/acre residential development and negotiated, in addition to its standard fee, a > percent royalty on the sale of each house for a ??year period, re%ecting the increased value of the property as a result of its design. 'Why not get a piece of the action every time a realestate agent gets her M percent fee9) he asks. 'That'sthe kind of creative thinking that the profession needs.)0ncreasing the number of revenue streams is also crucial. 7armol NadGiner, the "os AngelesFbased architecture, interiors, landscape, and construction !rm, o2ers a diverse portfolio of services. -ounded in >?E? by "eo 7armol and Non NadGiner, the !rm started out building its own projects out of necessity, since it lacked access to 6uality contractors. 1ver time, that e2ort has morphed into a robust >=/person department that includes designbuild services 3for most of their own projects5, construction 3for other architects and developers5, furniture, custom cabinetry, and even jewelry. Berhaps more important, the department acts as an idea incubator for both the construction side and the E.member architecture, interiors, and landscapedesign component. 'There's a somewhat inconsistent ebb and %ow to the work itself, and being diverse helps balance that out,) 7armolsays. 'That diversity, from a business standpoint, provides !nancial stability.)(eiGing an opportunity to take full advantage of (outhern ,alifornia's hot housing market, the !rm recently set up a new development unit, dedicated to highend houses. 'We want to control the whole process,) 7armol says. '(o we're purchasing the land, developing the architectural program, and marketing the houses.)This broader, %uid de!nition of architecture is e&actly what the profession needs to embrace as a survival strategy. 'We must change not just the mechanics of what we charge but the whole thought process behind it,) (tasiowski says, adding, 'Architects need to get out of the drawing business and into the consulting business. And if we do that, then we have to think like consultants and base our fees on the value we create for our clients. And those fees, in some cases, might have nothing to do with the number of hours it takes. That's a major mental shift.)7artin ,. Bedersen, former e&ecutive editor of 7etropolis, is a Cew 1rleansbased writer and editor.