Value-Based Architecture

By Tim Dufault, FAIA, Concert CRO

For any given project type, location, schedule, or budget, there are at least ten local, regional, or national architecture firms that can do the work. Regardless of the firms’ size, expertise, or location, every architect will stress that their relationship with their clients is closely collaborative, built on listening carefully to their client’s needs and issues, and focused on delivering the project on time and within budget. In the process of selecting an architect, the only differentiator remaining is the fee. This is why the industry has become commoditized.

But this doesn’t have to be the only way. We propose a very different model: The architects’ fee is determined by the value they generate for the client with their project.

Every project would have a negotiated base fee, likely to be less than current fees, but that is between the client and the architect to determine. Beyond that, the architect and client would agree to a series of value outcomes for the project. As an example, if the architect shares digital information directly with the contractor or a material supplier to reduce the schedule by two months, there would be compensation for that. If a multi-family housing project leases up faster than the proforma model, there would be compensation for that. If a hospital project improves staff efficiency by more than an agreed-upon percentage, there is compensation for that. The compensation would be based on how much value the outcomes add to the project.

In this model, the architect and the owner establish, at the beginning of the project, what performance metrics are important and what the value of those outcomes would be. Additionally, they establish how the metric will be achieved and what control mechanisms will be in place to ensure that both parties can effectively impact and influence the outcome.

Every other compensation model has focused on either reducing or controlling the first cost and schedule of the project. None of them have succeeded in creating a fundamental change in value for the industry. In every other industry, real change comes when the economic equation focuses on changing or leveraging value, as opposed to simply reducing cost. This is where design and construction must go.

To be clear, there is risk with this model, for both the owner and the architect. However, it shifts the compensation model from one that is opaque and arbitrary to one based on measurable and agreed-upon performance metrics. With risk comes reward. Under this model, building owners and developers would realize far greater value for the major capital investment they are making.

The great news is that there are digital tools that can audit all these potential outcomes. The only remaining item is the will to change.