Kliwinski and LaPosta both see health care work continuing in New Jersey and Connecticut—but they are not as optimistic about education.
“Two years ago, the world changed,” LaPosta said. JCJ’s San Diego office’s school work dried up completely in 2008-2009, for example. This was a “bit of a surprise,” LaPosta said, because in previous downturns work in education picked up due to stimulus funds. This time around, said JCJ’s Barbara Hubbard, the stimulus money went to teachers instead.
A similar trend happened in New Jersey, according to Kliwinski, whose firm, Trenton-based Spiezle Architectural Group, prior to the downturn started expanding into retail, banking, hospitality and health care, after 55 years doing almost exclusively educational projects.
“With the [NJ] state budget crisis and drying up of public school work, a lot of firms that only did that are no longer in business,” he said.
“Those that made it through already had public work in the pipeline,” Hubbard said.
And that was the main difference between public and private sources: privately funded projects already under contract stopped, while public projects continued. As a result, JCJ saw its share of public projects jump from 24 percent of the firm’s portfolio in 2008 to 45 percent in 2009 (numbers for 2010 were not yet available due to pending contracts). Kinley’s firm saw a number of new large projects in dam work across the nation, as well as power, utilities and communications work up and down the East coast. His firm, traditionally doing 50-50 public-private work, after the stimulus money, is now 65 percent public projects.
Vultures Among the Canaries
Perhaps the most troubling effect of the two-year-long recession has been the slashing of fees, or even underbidding entirely, in some cases, for firms just to stay in business. “Feasting on your young” is how Connecticut’s Hubbard described it, adding that that average fee there went from 7 percent of total project cost three to four years ago, to 4 percent today.
“People are doing what they need to do to keep business,” Kliwinski said. “If that means taking a project at a loss, that’s their business decision.
“We’re seeing that fees are holding in niched expertise, be it sustainability or whatever it may be.” “There are many practice areas we have expertise in which then got more competitive because architects not involved with those markets before flooded the market, and that put pressure on the fee structure, which is unfortunate,” Schwarz said. “There will always be those firms that will ‘buy’ the work and not do justice to the work. The good developers will see right through it, and the bottom-feeders will fall through the trap.”
“It’s a very competitive fee situation,” Kinley said. “If you go into an RFP, there’s 20 people now, double the number from before. We have streamlined our company, reduced our overhead, so we can compete properly on the profit side.”
Adapting to Changing Times
More competitive bids, and underbidding, has forced firms to adapt: most firms put a higher emphasis on technology to reduce man hours and ease collaboration with developers and contractors. Team structure within firms was re-examined as well.
“There’s a higher sense of urgency,” Hubbard said.
As a result of this belt-tightening and the necessity to find new ways to work with clients, even the relationship between construction managers and architects is changing.
“I think historically CMs have had this…distrust, a halfway bemused fear of architects being extravagant, not grounded in realities of construction and the costs attended to it. “Now, you have to know better than anyone else what you’re designing, what it costs, if you don’t want to see substitutions and changes.”
Design companies have also started pushing out geographically. Connecticut’s JCJ, for example, started going after K-12 projects in Massachusetts, Pennsylvania and California.