Representatives of Nevada’s leading architectural firms gathered at the Four Seasons Hotel on July 8 to discuss issues affecting their profession in Nevada. The gathering was part of Nevada Business Journal’s Industry Outlook series. Connie Brennan, publisher of Nevada Business Journal, served as moderator for the roundtable, which included a lively discussion about recruiting and retaining talent, dealing with government bureaucracies and adapting to the changing marketplace. Participants were first asked to introduce themselves and describe their firms’ biggest challenge. Following is a condensed version of the discussion.
Christopher Larsen: Dekker/Perich/Holmes/Sabatini has been in Las Vegas since 1988. We have a staff of 34, and we do about 50 percent commercial work, 50 percent public sector work. We have offices in Albuquerque, New Mexico and Amarillo, Texas. Our biggest challenge right now is finding qualified people.
Jerry Eich: HMC Architects has offices in Reno and Las Vegas: 20 people in Reno, five here. We’re part of a California-based company of 350 people. We specialize in healthcare and educational projects. Our biggest challenges are not only finding good people, but trying to find different ways of using our abilities other than just doing architecture. We’re trying to expand our business beyond architecture and find ways to set ourselves apart from other firms.
Wade Simpson: Welles Pugsley Architects has been around since 1964. We have roughly 30 people and we do a little bit of everything. Our biggest challenge is not only finding qualified people, but people who want to work hard and fit with our culture.
Raymond Lucchesi: Lucchesi Galati has 25 employees, and 10 of us are professionals. One of the things we’re trying to do is become mostly professional, which will be somewhat different than most firms. We have been an organization since the early ’80s, although roots of the organization go back all the way back to the’50s when my father first came here. We don’t specialize in any type of buildings, but we do want to develop relationships. The challenge for us, from an internal perspective, is about finding qualified people who align with our culture. And from an external marketplace point of view, the greatest challenge for us is that we’re still branded as an architect, which desperately challenges what we are today. Being an architect in this marketplace has actually hindered our firm at this point.
Domingo Cambeiro: I’m the principal architect at Domingo Cambeiro Corporation. I came to Las Vegas in 1962 and established my firm 34 years ago in 1970. We average approximately 40 people. We do a lot of governmental work, and about 30 percent is private work. Our challenge is the amount of time it takes projects to get out of public works. It takes about nine months before you get public works to release a project, and that is going to hurt the economy and the developers. Another thing I see as a big challenge is the water shortage, because if we don’t have water, we don’t have buildings. So, as a community and as a group we need to do whatever’s necessary to address those issues. Third is the influx of national firms in the market. While you can’t control the private money, public works projects are funded by our tax dollars, and it’s hard to see those dollars go out of state.
Ron Davison: C & B Nevada is an affiliated company with Carter Burgess, a national architecture and engineering firm. We do public works projects as well as commercial development. My greatest challenge is getting quality people, too.
Harry Campbell: I am the president/principal of HCA Architects, which recently merged with a firm from San Diego. Our firm has been here since 1966 and we have over 30 employees. We have always been general practitioners, responding to whatever project was out there. One current challenge and opportunity is getting into more specialization – instead of being all things to all clients, we want to do special things for a few clients and learn to turn down jobs. Our biggest challenge is finding qualified people, the mid-level project architect types who know how to put buildings together. Upwards of a third of our firm are licensed architects and professionals, and we have a lot of graduate students from schools who are CAD literate, but there’s a big gap between design and production.
Howard Thompson: HFTA Architects has offices in Las Vegas and in Irvine, Calif. We’ve been in business for about 35 years, and we have a very focused architectural business, dealing strictly in the private sector, serving the build-to-suit and development community. It is our goal to provide the very best service to the investment community wherever we do business. As far as challenges, getting the civil engineering package through government entities in Southern Nevada has become extremely difficult and time-consuming.
Stephen Swisher: Swisher and Hall Architects has been in business since 1985. We’re a 45-person firm with four market sectors: K-12 schools; public facilities and government projects; commercial and retail; and transportation. We are currently challenged with dealing with rapid change both within our company and our clients’ companies, due to technology. Another issue, particularly in long-term government projects with fixed budgets, is cost management. We’ve seen construction costs spike anywhere from 15 percent to 20 percent in the last three to four months. How to manage that on our clients’ behalf is a big challenge right now.
Jim Naven: Perlman Architects has 100 employees and three offices, with about 60 people in Vegas. Our biggest emphasis is on residential and retail, and we do a lot of planning. The biggest challenge we’re dealing with is risk management. Almost half our business is residential, and we get a new letter every week about the intention of somebody to file suit. So I think frivolous lawsuits and insurance costs are big issues for us.
Windom Kimsey: Tate Snyder Kimsey Architects has been around since 1960 and we have 60 employees. We have a small office in Reno and a main office in Henderson. We do primarily public works architecture and most of our clients are government entities: K-12 schools, aviation and judicial. One of the challenges is the rising cost of construction, but there’s also a desire by clients on the public-agency side for green building certifications. Producing sustainable buildings involves increased costs, both for design and construction. So it’s a challenge to help clients get what they want in this inflationary climate.
Frank Dumont: Leo A. Daly is an international company with 16 offices worldwide and 1,100 employees. We’ve been exporting design services from Las Vegas to the world, especially to Asia. We’re doing a lot of work preparing Beijing for the 2008 Olympics. In Asia, there are two cities they just dream about: one is Las Vegas and the other is Hollywood. Everyone nationwide has trouble getting good, trained people, but we bring in expertise, especially in LEED (Leadership in Energy and Environmental Design) certification. We have 80 LEED-certified professionals companywide, so we bring them in to supplement our professionals here. Our biggest challenge is finding that mid-level person – a project architect who really knows how to put together buildings. I think design/build is a plus, because in our litigious society everyone wants to point fingers, and with the design/build process, you’re forced, contractually, to work as a team. It makes people approach a project more as a team instead of as adversaries. We’re adamant believers in sustainability. One problem here in Las Vegas is that so many buildings are developer-driven. Of course, developers want the smallest initial costs, and they don’t care about higher operating costs as the building ages. We have to change that, because in the long run, sustainable buildings are much more economical. One of the ways we can change things is through taxation policy, so people have an advantage to build in sustainability from Day One. The utilities could also give an extra break to people who are constructing legitimate green buildings.
Kevin Joy: Nadel Architects has eight offices around the world, with approximately 500 architects. We have two offices in Asia, and the Las Vegas office is about 10 years old. I’m probably one of the newer players in town. I just relocated a week-and-a-half ago from our Sacramento office. In the local office right now we’ve got approximately 10 people, and we also have some in-house civil engineering and structural engineering. In Nevada, we specialize in commercial, industrial and retail architecture.
Finding the Mid-Level Employee
Connie Brennan (Nevada Business Journal): One of the common problems you mentioned is finding the right mix of people to come to your organizations. Is it the professional architect you have the most trouble recruiting, or is it mid-level people or staff?
Campbell: The theory portion is taken care of in most schools. There are a lot of graduates ready to jump into design from this level, but they’re not ready for production or management of the documents. In the old days, people came up through the ranks and had more hands-on experience of putting a building together. Now, kids come out of college wanting to jump right up to that point. They’ll allow themselves a few years of production or detailing on the CAD. I think we could find a lot of mid-level project architect types if we paid more, but most of the budgets won’t allow for that because of the money you have to spend to bring in management.
Brennan: Do you have problems with retention?
Campbell: Sure. The market is very competitive and fast-growing. People get lured away with hiring bonuses. It’s a rip-and-tear atmosphere and has been for years.
Thompson: I have a comment about that mid-level issue. In Southern California, during the recession from 1990 to 1995, there were many architects out of work. I’m talking about mid-level folks in their 30s who should be really rising into that mid-range of management. They just got fed up and went into other work. A whole lot of them went into computer animation in Hollywood. Now there’s a huge gap in that middle management area, and a lot of it is a fallout from that era. I couldn’t agree more that young people today don’t want to get their hands dirty with how things go together, because they think it’s in the computer, and all they have to do is hit the keys. But they don’t really understand how the process works in the real world.
Brennan: Do you recruit people out of college now, or get them from other markets? Where do they come from?
Larsen: We’re recruiting nationwide. We find people out of college who are really good, but then we become just a training ground, and they get lured away by someone else. A lot of that generation doesn’t want to really figure out how to put a building together, but those who do become very marketable and find they can make more money somewhere else where the grass is greener.
Lucchesi: Under-40 professionals view the world differently. They seek a balance, and they view drafting as being trivial and think it should go away eventually. My father looked at drawings as etchings, and drawing was a whole activity to itself. I grew up in that world, and bridged into the computer world. This Gen-X group has a lot to offer, but I don’t think the profession’s adapted yet.
Brennan: Do you think there’s a different work ethic in this generation?
Lucchesi: I think younger people want a more balanced life. My personal perspective is that my generation and my father’s generation did whatever they had to do. My first image of my father as an architect was in my bedroom when I was three years old, drafting all night when he was on his own, trying to be an independent architect. This generation doesn’t want to go there. That’s one of the big challenges we’re struggling with.
Eich: We have to do more to keep people. It’s not the 1950s work ethic that said, “We gave you a paycheck for 40 hours, you should be happy.”
Architects’ Changing Role
Cambeiro: One of the biggest things that’s parallel to all this is that we were supposed to be the master builder. It really bothers me that as architects we are very laid-back instead of taking control. We continue to give away the things we’re supposed to do because it is easier. I’ve done design/build work, and if you have the right contractor that’s fine, but I think design/build ought to be led by the architect, not by the contractor. Otherwise, you become just another line item. It should be our responsibility to make sure that we handle, manage and deal with the clients, because we are the ones responsible for getting them their building. With a lot of clients, we need to educate them about all the things we do. They have no idea what we do, so we’re constantly battling them about fees. The result is, if we want to be competitive, we start to cut fees here and cut there, and it’s just a struggle to make money.
Eich: Dom makes a good point. For the same percentage we used to get 15 or 20 years ago, we’re providing more service to the client and having to manage the client more. At the same time, we’re spending more to retain our employees, so the whole competitive edge keeps getting sharper and sharper.
Davison: I don’t agree that you can even get the same fee. Clients are coming back and saying, “I can go down the street and get it cheaper,” because, as Dom said, we’re not educating the client on what we’re doing, and that we’re protecting him as he puts up his building.
Cambeiro: Another factor driving up our costs is errors-and-omissions insurance. In years to come, we are going to be where doctors are now. We will not be able to afford insurance, and the reason for that is everybody is on the bandwagon of suing the architect. Whether you’re right or wrong, it still costs $15,000 in legal fees to get out of the deal. You don’t think about that at the beginning of a project and add $15,000 onto your bid to cover legal fees.
Thompson: One of the reasons we like design/build is because there’s a lot less litigation, because it seems as if all three parties are headed in the same direction. I’ve been doing design/build since I got into business 35 years ago, and we’ve had almost zero problems as far as litigation on those projects, versus the type of projects we hate, which are bid projects. In a bid project, the general contractor’s always got his hand out because he knows he left money on the table. And from the time he starts the job, he is after every nickel and dime he can get. Campbell: I think we need to design ourselves, our firms, and our profession to meet what’s going on in the marketplace today. It is not the old comfortable tradition. We’re supposed to be, as Dom suggested, master builders, but all of that was gone a long time ago. It could be that we are more coordinators and designers and leaders now. If your firm is smaller than 100 people, you have to stay light on your feet. You have to move with the opportunities that are out there. There are no entitlements. You have to do what is necessary for yourself and your practice. Almost everything we’ve talked about tells me that if we try to hang on to the traditional past of an architectural firm or practice, we’re not going to survive in the coming years.
Campbell: Back in the 1980s, the hot idea was that architects should take the lead in construction management. We didn’t, and we will not, because we don’t control the money. The truth is, owners have the money, and contractors have more to say about what happens with their money in putting up those buildings than architects. We are a service, so I don’t think we’re going to win that battle. In design/build there is a certain amount of subrogation, and in effect, you’re either working in a design/assist/build format for the client or design/build with the contractor. Does that diminish us? I don’t think so.
Campbell: We need to use our talents and leadership and knowledge of the construction industry to get back up where we belong, rather than being drawing producers.
Swisher: One of the ways we have been successful dealing with some of these issues is that in each of our market sectors we have two or three really good clients, and we focus on their issues and partner with them. We help them figure out what’s the best thing for them to do next and provide them with solutions. As we get deeper and deeper into understanding our clients, we have come up with a lot of innovative ways to deliver projects. We’re almost to the point now where each job has a different project-delivery method based on that project and that client’s needs. We’re exploring not just design/build, but design/build/develop, as well as design/build/develop/leaseback for public entities. When you partner with a client, a lot of the liability issues seem to melt away, because there’s no disconnect between what you’re doing and what they need.
Campbell: That’s the way our practice is going – helping them with pro-formas, with banking, with land, and so forth.
Larsen: You don’t take every client who walks in the door. You develop these relationships with partners and you get repeat business.
Eich: We have a whole group who does nothing but find funding for schools for the state bonding system. We created design/build/leaseback companies for schools. We have superintendents on our staff who go around and talk to school superintendents about funding requirements; that’s how you adapt to the business. You’re not just school architects anymore, you’re creative managers of money and capital and resources and trying to figure out new ways of creating projects. We also do design/build/leaseback projects with healthcare clients on medical office buildings.
Frivilous Lawsuits Cause Concern
Brennan: Let’s talk a little bit about your concerns with frivolous lawsuits. How big a problem are they?
Eich: It’s all about mold. It’s the asbestos of this new millennium.
Brennan: Is your insurance getting a lot more expensive?
Naven: I have a meeting next week with our insurance company to see if they’ll keep us, and they say they’re going to keep us, but they warned us our fees would double, premiums would go up, and the deductible might double. Insurance companies hate condos, and they won’t insure them. Or, you’re going to pay $300,000 plus a $100,000 deductible for $1 million worth of coverage. So you might as well self-insure the project.
Davison: If the developers provide a wraparound insurance policy, does that help?
Naven: No.
Campbell: It covers everything but the architect.
Naven: Wraparound insurance is just basically general liability. It’s not professional liability.
Simpson: The lawsuits begin with the homeowners association. They sue everybody, and the developer has to sue everybody. Some of the developers are now trying different things, providing incentives for homeowners. If they don’t sue, there’s a pool of money they can use to fix any defects, and whatever they don’t use they can get as a refund. They build it into the purchase price.
Naven: We’re actually setting aside 10 percent of the purchase price of the condo. It sits there for 10 years or until the limits of the lawsuit pass. Then if the condo owner doesn’t sue, they get to keep the money. If they do sue, the developer gets to keep the money in the end.
Brennan: So, how many of you, by a show of hands, have dealt with or been threatened with a lawsuit in the last year? Nine. Well, it is a big problem.
Campbell: Even just a claim, with nothing proven, can tie up $1 million to $2 million, and your insurance company has to bring in teams of attorneys, and you’re essentially paying for that.
Eich: We have a partner who works almost 70 percent of his time on trying to mitigate problems before they become lawsuits, working with attorneys and the liability carrier to resolve the item before it becomes a lawsuit. So lawsuits are one thing we spend a lot of money on trying to avoid. We’d rather write a check than go to court.
Brennan: We talked about a lot of your challenges, but overall is it a good market for you right now?
Eich: Very good. I don’t see any end in sight to our growth.
