Negotiating Architect Contracts

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In this episode of the Business of Architecture Show, we talk tips for negotiating an architectural contract. Our guest is business consultant Mariana Idiarte. She has worked with firms such as Rem Koolhaas’ firm OMA to help negotiate architectural contracts with both clients and other consultants.

In this episode you’ll hear:

  • When the actual negotiation begins (its sooner than you think)
  • How to make sure you have the right negotiating strategy
  • Three common negotiating mistakes architects that make
  • Connect with Mariana Idiarte on Linkedin

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Transcript

Enoch: I am your host, Enoch Sears. Architects, welcome back to the Business of Architecture show. As you know, Business of Architecture is here to help you find success and figure out how to focus on what you love in architecture.

Today, we have the privilege and honor of having Mariana Idiarte with us today. She’s a business consultant for creative professionals. She’s graciously taking her time out right now. She’s in the Netherlands and I believe it’s quite a bit later there. So, thank you, Mariana, and welcome to the show.

Mariana: Thank you, Enoch. Thanks for having me in the show.

Enoch: Could you tell me a little bit about what it means to be a business consultant for you for creative professionals?

Mariana: Sure. Well, I should start giving you a little bit of introduction to my background, maybe. I was born in Argentina. After finishing high school, I studied Architecture for a few years until I decided I actually wanted to study Advertising. So, I went and finished my studies in Advertising and Communication then. At that time, I was actually working with architects already for government institutions.

Then, I moved to the Netherlands, I met a Dutch man. So, my love brought me here. When I came here I started working from my Communication background for KPMG – a large accountancy firm [Inaudible 00:01:56] From one thing to the other, I started managing a team, also internal communications for an I.T. department, and before I knew it, I was also negotiating contracts with I.T. suppliers globally until I started missing the creative sector where I’ve always felt happy.

I dropped KPMG and I took the baggage and all I’ve learned from my previous experiences and went to work for OMA, the office of the architect Rem Koolhaas in Rotterdam as a contract manager. I spent a couple of years there negotiating contracts for OMA, worldwide as well, from architecture projects to publications, from master plans to catwalk design for Prada – so, a lot of diverse things until I was up to a new challenge.

Actually, the idea of starting working on my own as a consultant initiated when some ex-colleagues and architect friends of mine started asking me for some help doing business. They asked me for help to negotiate contracts they have, they were complicated. They started their own firms and needed someone to help them during the first steps doing business; the idea of starting working as a consultant, and advising people, and helping them with their businesses became a reality.

I’ve been doing that for the past four years. I’ve been having a lot of fun. I helped a lot of architects and sometimes designers, artists, some cultural organizations as well in everything that is related to doing business and dealing with the market.

Enoch: I know you’re based in the Netherlands, are most of your clients from Europe? Where do you find yourself serving- finding your clients?

Mariana: Well, you could say that my focus is the firms that operate internationally. I obviously have an international background and a lot of international experience. So, that is something I love and I like to help people that want to be entrepreneurs internationally or work internationally as well. I speak, also, multiple languages, I help with a lot of different firms – mainly European based but also firms that are based in Europe and do business in Asia, for instance, in China, or Africa, or even South America.

Well, my network is very large and international, so I find myself sometimes talking to people in Mexico or China once a week. Yeah, wherever people go, I’ll be there.

Enoch: Fascinating. Well, I wanted to focus today’s conversation on negotiation. That’s something we haven’t touched upon on the show here. You have hours and hours of negotiation experience on your belt. I would just love to get behind the scenes of a typical negotiation.

What was it like working for OMA? What went in to a typical contract negotiation? Take me through that process and how that works.

Mariana: Well, “Typical” is an interesting word to talk about negotiations. I think ever single negotiation is different because the players are always different. It’s about people, on clients that had their own expectations, they bring their culture, and they have their own objectives. So, every single negotiation is different from the other.

What is “typical” or you could name typical about negotiations is there are certain areas that you typically will want to discuss and agree on. Main issues like: copyright, intellectual property rights regarding to your work as an architect, limitation of liability which is another important subject to discuss. Things like, of course, the scope of the work and all that comes within discussing the work; your fees, of course, and payments, etc.

But, there’s a little more to that. I do believe that negotiation starts the very first moment you start talking to the prospect. That is when the negotiation actually starts. People don’t realize it, but before you know it you’re already promising things and making statements of things you can deliver, or making promises, or giving away things even hoping to get assignments commissioned. That’s the moment where, actually, negotiation starts. Even before you get a contract in your hands, you start talking about terms and conditions.

Enoch: Is that a mistake for architects or creative professionals to start to offer things before formal negotiations have taken place?

Mariana: I wouldn’t say it’s a mistake as long as you know what you’re doing. Like in every aspect that I advice on whether it’s negotiation, whether it is marketing, whether it is business strategy, communications, I always say strategy is the key. A strategic approach to whatever you do helps you get as close as you can to your goals.

Working strategically means nothing more than having a plan. What are you goals? What are the ways you can take? What’s the road you’re going to take? Go for it.

With negotiations, it’s exactly the same thing. The moment you approach a potential client, you have to know what you actually want from that. If you get a project – how project will help you in your overall strategy. Where is it going to get you?

A good friend of mine is a lawyer specializing in intellectual property rights. He says always begin with the end in mind. Think about how you want to look back at things. Think about how you want things working out. That helps you already in handling possible situations, keeping in mind different scenarios and that you’re better prepared for things that inevitably are going to happen that you don’t know, but at least you have thought about possibilities and you’re better prepared to react.

Enoch: Are there certain points that come up in every negotiation that seem to be a little bit difficult to deal with? Are there sticking points for both parties that take more negotiation?

Mariana: Like I said, I’ve negotiated hundreds of contracts. There are not particular points that you could say they are coming back. There are certain points that are more important from one client to the other.

The important thing in a negotiation process is to be alert to what it means when some particular condition or point is becoming difficult to negotiate. Sometimes it’s like the red light just starts blinking when a client is very difficult about something. It is like: What is his thought behind it? What is he worried about? That’s the interesting about negotiation.

Many people think, “Ugh. I don’t want to deal with that. I just want it to get over with, and just sign [Inaudible 00:10:54] But, the negotiation process is actually very, very valuable to understand to other party, to get to know each other. It’s going to be the basis for the future relationship through the design process, construction process, or hopefully, a long and happy life together.

The way you negotiate, the positions you take during the negotiation are going to determine how negotiations are going to continue working in the future. Remember that negotiations doesn’t finish when you sign the contract. You’re actually just starting.

You’re going to be negotiating during the whole process whether it is to make decisions on the design, on how to approach unexpected difficulties that come on the road, when you have to negotiate to the contractors as they’re going to build whatever you’ve designed. No matter what it is, you’re going to be negotiating all the time. We do it all the time.

It is very important to be conscious about the negotiation process and, again, being alert to what happened. If a client, for instance, is very worried about termination clauses. Getting that settled is that you have to wonder, “What is the problem?” “Is there any possibility that he actually might terminate his contract?” Don’t be afraid to ask “Why is it so important for you?” “What are you worried about?” Help the client manage any risk that the situation may have.

There’s not a single issue. It depends, really, on what the situation is, or the place you’re negotiating, the culture of the sector you’re working on. It depends on a million things. The important thing is to be alert. If things are being difficult, there is a reason for it. The more you spend trying to understand what it is and helping to resolve it, the better you’re off solving it.

Enoch: Got it. That’s a good listening school. Mariana, the audience of this show is solo architects, sole-practitioners, and smaller firms. What are the top tips that you would give architects to think about when they’re thinking about negotiating?

Mariana: Okay. The first one is, like I said, thinking strategically. Especially small firms or people working by their own, you get very excited when you have a prospect or project. It’s very soon people get, you know, they get on the table, on their computer, and starts designing, and drawing.

I always say, “Hold your horses. Take the time to get to know your client – to understand what his goals are.” This is something that people tend to confuse very often.

The goal for someone is to have this built. That rarely is the goal. The goal for someone is to have a nice place for his family or for kids to grow. The goal of someone else is to have a fantastic house built to impress his colleagues, or environment, or whatever it is. The goal of a dentist is to get more patients feeling comfortable in his practice by having a nice place designed.

Whatever it is, the goal of someone else is just making money out of whatever you’re going to build. But, having clear what the expectations of the other part and understand takes, sometimes, a lot more time than just discussing about how you work as an architect. That is one of the first things that I would say: Take time to understand where the client wants to go.

Second, also take time to understand what are any factors influencing the clients you’re working with. Understanding the negotiation, what the roles that people around your client play. There is a particular client, for instance, and you may talk to one of the parties, but what are the other players thinking about who influence the decisions of the party you’re dealing with.

Sometimes that happens in more complex projects as well, even for very small firms where you’re doing a project for a government institution for instance. Here in the Netherlands, there are a lot of regulations, and you have even the neighbors’ commissions giving their opinion, or having the right to refuse to anything that’s going to be built in their street, or environmental organizations, or whomever you may think of.

It’s very important to have a complete picture of all the players that may or not have influence in the negotiation process. Who’s the decision-maker? Are you actually talking to the right person? Sometimes there’s someone who loves your ideas, is right on with you, but actually, at the moment of signing or the moment of giving approval is, “Oh, actually, I have to talk to someone else;” someone you’ve never met maybe or someone you have to sell to all over again – so, knowing who the decision-maker is very important.

One of the things I mentioned first is think things strategically. What do you want from this commission? What do you want from this client? Are you doing this because it’s just something that’s just going to pay the bills and you want to get through this? Is this something that you actually love doing? It’s going to be fun. It’s an opportunity for your firm. It’s a strategic movement. Whatever your own goals are for that project are also very important to be clear about it, because then you can determine what importance you can give it through the negotiation process, to those aspects as well.

So, those are the main things that I happen to see often that’s going wrong.

Enoch: Great. Give me an example from your past about something where you’re able to apply strategy to the situation, and where it helped you out, and where it was really pivotal to the negotiation to help me understand better what goes in to the strategy.

Mariana: What goes in to a strategy? Yes, I can definitely give you one example I had recently.

Enoch: Yeah, maybe if you can give me a typical project.

Mariana: I recently done in the past year and a half or so. There’s a small architects firm. There were two people who work regularly with them. They have this commission or at least a possibility to a commission for a project here in the Netherlands. They are based in the Netherlands, but they actually do a lot of work in other countries – in Germany, France, and the U.K. So, they have actually done very little in the Netherlands.

So, the problem was it was a project with a very low project and the organization seemed particularly difficult as well to work with. There were a lot of issues there. So, they consulted me on, “Okay, how do we approach this?”

One of the things I asked them to is, “Reflect on your overall strategy.” “Why would you get in to this project? It’s not going to pay well and the people seemed to be quite a pain to work with?” “There are a lot of other things underneath that don’t seem easy to resolve, why do you want to do this?”

Their reason was, strategically, saying, “Well, I think this would give us more experience in our portfolio to work in the Netherlands because we don’t have much experience here. It would be good to do it from that point of view.” So, I said, “Well, okay. If that is your goal – it’s good to do it. But, keep in mind, the way I’m seeing it, there’s not room to get all the other things working better. It is going to be complicated, and it’s not going to pay well, and you’re going to be working a lot longer for days than you expect to. If you’re okay with all of that and you think it’s worth pursuing it because… Go for it.”

They did that. It went exactly as I had predicted – very painful relationship with the organization, it paid pretty lousy, and it was very, very complicated. So, was it great to do it? At least they knew what they were up to and at least they knew what the limitations were. I think it is worth it to have a good, realistic view of what are the expectations you could actually have of the project and look critically about “What’s in it for me?” [Inaudible 00:20:54]

So, that’s an example of, okay, while you’re working on that, you’re also learning. There were moments [Inaudible 00:21:04] moments of confrontation with the client, things that weren’t working. At least they were very aware. They were not surprised by what had happened. It was like, “Okay, we knew this could happen.” Ideally spending the situation less energy, on time, and you have taken measures to manage the risk that knowing that this could happen.

That is not a very happy example. [Inaudible 00:21:35]

Enoch: Did you have a chance to follow up with them and see if they were pleased with their decision to go ahead and do that?

Mariana: They were pleased because they got a lot of very good feedback from other people who actually joined the project after it was realized. So, they were pleased on doing that, but they’ve learned that if they were to encounter the same situation or the same conditions, they probably would say no and just put their energy to pursue something else.

Enoch: Very interesting. Do you have another example where you could talk about how there is a decision made and a strategy was not in place, and as a result, bad things happened?

Mariana: Well, I have another example. It has to do with the lack of strategy totally, you could say. This is a happy ending, so it’s good. It’s an interesting example.

Again, it’s another small firm designing a holiday house for a client. I happen to know the client as well very well, so it was very interesting to hear both stories from both sides.

The situation here is that they got very excited because they have this commission. They talked to the man of the house, the commissioner, his oldest son all the time. They had, like, three meetings or something talking only to them. They got very excited about their ideas, and his oldest son telling about going on holidays with his friends, etc., etc., and having fun.

So, there was a point where they went to their current family home and actually met the rest of the family including the wife. What happened is these architects came again with a lot of drawings already about how the house would look like, and to show their ideas and impress.

This went totally wrong and it wasn’t received as they expected because the wife of the house, well, she didn’t like the idea of having this fun hotel full of young people all the time. She said, “This is so not what I’m expecting. I want a holiday house to rest, to relax, and no guest all around.” It was just a totally different idea what her expectations were.

The funny thing is that I knew both people and they’re both really nice. They got through this shark, and they talked, and they were able to restore the faith they have, kind of, lost. But, this is also a good example of what I said before about getting to know the people who have influence and who has a say on the decision making. Take your time to understand all the players so that you can talk, with your design, to every single one of them and address their expectations at once.

This could have gone very wrong. It went very wrong at one point because this woman got totally mad at us. They were crazy. He was actually very nice. They gave them opportunity to [Inaudible 00:25:05] and come up with something else.

But, it was also a lot of spoiled energy and time, obviously, because they were designing already something that went directly to the garbage bin. If they had taken time of thinking strategically, talking to all the players, understanding, and then only agree on what to do, the process would have gone a lot smoother, and they wouldn’t have put the commission at risk as they did. Well, the things could have gone more easily. They also learned a good lesson after that.

Enoch: Yeah. I would have loved to be a fly on the wall in that room when the architects were pulling out the presentation boards. I mean, I can just imagine the conversation going on.

Mariana: Exactly.

Enoch: That’s great. So, you’ve shared with us some of the overall strategy of negotiations. Can you tell us a little bit more the tactical details – a little bit more the nitty-gritty back and forth – and give us some tips on that side?

Mariana: Sure. Like I said, on strategy you start thinking about, “Okay, what do I actually want to get from here?” You can think of the overall negotiation strategy. Most typically there will be several sessions that you will have through the negotiation process, whether it’s actually meeting face-to-face, having phone calls, or even emailing back and forth documents, etc., etc., So, you can have an overall strategy, but you could also have a strategy per meeting for instance.

One of the tactical elements that you can use is, actually, managing meetings. Also something that I see extremely often, especially with architects working by themselves, is they go in to the process and discusses things, but they do manage the meeting. With “Managing the meeting” I’m talking about start with agreeing on an agenda.

What are you going to actually discuss during the meeting? Who has to be there to make decisions? Do you have the right people attending the meeting? What are the expectations? What are you, actually, going to decide by the end of the meeting? What is it that you want to achieve?

Share that with that other parties involved so they are all in agreement beforehand what the meeting is going to be. I’ve been in meetings where people have been talking for three hours and nothing has been achieved because, simply, there was no agenda, and someone took over the meeting, so it’s wasted.

Be aware as an architect, especially they’re handling people that are very seasoned sales people or more commercially-minded, they are very, very good at handling meetings, manipulating the situation to actually not achieve anything. Then there’s one point when you have the meetings, nothing actually has been agreed, and then, “Oh, we’re wasting time,” “Now we have a deadline,” “Now we have to agree.” You’re in the time pressure and you lost your negotiation power upfront.

So, the first thing starts with managing the meetings, having an agenda, agreeing on it, agreeing on what the roles are going to be of every party at the table, and take notes or agree on who’s going to do it if you cannot take them – bring someone else to take notes for you.Taking notes as well is ticking the boxes of your agenda of going from point to point and actually time your meeting as well. If you have an hour or two, make sure you allocate the time for each point you’re going to discuss so that you can actually get through the agenda and complete things.

If you’re stuck at some point or you’re not achieving agreement, the best thing you could do, sometimes is to park those things and say, “You know what? We’re going to park this issue. Let’s continue and focus on something that maybe we can resolve more quickly.”

Focus on the positives. When the negotiation gets stuck, it’s worth stopping for a minute and say, “Let’s take a break. Let’s see what we’ve already achieved.” That brings more of a positive note so that you could say more easily, “I’m sure we can get through these last two points, for sure.

Enoch: Yeah.

Mariana: That’s something that management of an agenda of the meeting, of knowing where we’re going, on agreeing on what the action points are, going further, if something left by when things have to be resolved, something has to get back to you. Afterwards, make sure that you share the minutes of your meeting and that the other parties have the opportunity to add or comment on what you’ve given. That is something essential because many, many things are decided in this conversations and sometimes no one has taken note of that. Those are actually crucial elements in the negotiation.

You see very often that people start working without signing contracts or some projects even if [Inaudible 00:30:37] contracts are not even signed. So, things that you’ve agreed on, at least you send by email, they are as valid as a contract. There’s no doubt about what the agreement if the parties have the chance to take on them. So, that is one of the things that are most important together with preparation. Prepare for a meeting.

Enoch: Tell me a little bit about preparation and why that’s important? Can you give me an example on that?

Mariana: Certainly. I’ve been in meetings, even with very senior architects and experienced people, and they were not prepared for the meeting. The meeting goes totally, you know, like all the way just papers on the table, and all disorganized, and there’s not an introduction. There are architects that haven’t slept in three days finishing work that they had to do, so they didn’t have time to prepare and they didn’t even shower for today.

These are the types of things… I’m telling you, these happen not only in the small firms, they happen in the large firms as well. It’s terrible. You’re losing- you may be losing a client even.

I’ve been in a situation as well with architects I know very well. They were in one of the situations of being very stressed with the deadline. They have a very high-profile client actually – someone who is in a high position in a bank and someone who is accustomed to a totally different environment.

Actually, they got the commission because his wife is an artist and she’s a friend of these architects. He actually told them in their faces, “The only reason I’m going with you is I’m trusting my wife, because, actually, the way you are presenting your appearance, and this very informal and not organized way of working, I would never hire you.” He actually told them these.

So, you have to be sensitive to the type of people you’re dealing with. In some environments, it’s just simply more important that you present yourself in a professional way, that you show your work great. Even the way you’re talking to people, the way you’re dressed, make sure that you organize your presentation and your meeting in a way that shows professionalism.

Unfortunately, it doesn’t matter how fantastic your design is, sometimes, it just doesn’t speak for itself. That is where some architects go wrong. They think, “My design is fantastic,” but the way you presented it, if it’s not great, it could cause you a commission.

Enoch: Very interesting. Now, I’m loving the stories and hearing a little bit about what goes on in that world of the contract negotiation. Can you give me an example of some time where there was a sticking point where the negotiation almost came to a halt? What that was like, what it was over, and then how it eventually got resolved.

Mariana: Well, I can give you an example which actually is something that didn’t get resolved. It’s a good example of what I was talking about earlier about when the red light starts blinking.

Enoch: Yeah.

Mariana: There was a negotiation – this was in my time at OMA – it was a very large project, and it was a very high-profile client. The team had actually started working because there was a time issue as well, time pressure to complete the project.

So, there were a lot of things going on. We negotiated a contract… When we thought it was ready, they kept coming back with something else they wanted to change or something else they wanted to add. We were like, “What the heck is going on?” I mean, we thought we’ve gone through everything already, and they kept commenting, etc., etc.

What happened was that this project was in an area that’s needed some government approval to actually be realized. The client, again, it was someone high-profile, and he thought everything was under control, and they were loving it, etc., and that it would go on and get it.

To our surprise and to everybody’s surprise is that didn’t happen. They actually never got the permits that they needed, so the project couldn’t go on. So, what this client was actually doing was postponing the signing of the agreement because he just wanted to make sure to save his back that he was not going to sign until he was a 100% sure he was actually able to realize the project.

We didn’t see that. We thought we’re relying on the high profile of the client, and his contacts, and his power. We thought, okay, he said he’s going to sort it – we believed that. But, that was actually a very clear example of what I meant with the symptoms that you can notice during the negotiation process. There wasn’t anything left to negotiate and they kept coming with things to resolve, and it was for nothing. That was a clear example of that.

Enoch: Fascinating. Okay. So, with the sole-practitioners and smaller firms, I’m just going to put out there, sort of a typical process that I see. If you could then comment on that and give suggestions for improvement or how you think it should go, that would be great.

Mariana: Sure.

Enoch: So, typically, when an architect gets a lead, they’ll have a sit-down face-to-face meeting, maybe one or two meetings where they discuss the needs of the client. Then they go through a discovery process to figure out, you know, the problematic elements of the project.

Then, at that point, there may be a little bit of discussion about timeline, a little bit of discussion about budget. The architect would then go back, prepare the proposal with the services that he/she believes that the client wants, and then they’ll just send that off to the client, and they’ll wait for a response.

Now, is there anything about that process that can be improved?

Mariana: Tell me first, how does it go further? What is the typical reaction after you send a proposal and you wait?

Enoch: Sometimes there might be a few questions from the client in terms of, “What exactly does this mean?” “What does this mean?” Sometimes if they’re looking at proposals from other architects, then they won’t even communicate, they’ll just come back to you and they’ll say, “You know, we went with this other architect,” or, “We decided not to use your services.”

Mariana: Okay. Well, one thing that you can do is, upfront, in one of the very first meetings that you have, explain how you work.
With explaining how you work is making them understand two things that are typically unknown by many clients. One is how the creative process works. That is something that many architects assume is clear, but people just don’t understand.

The process is, in general, the same for architects, but you may have your own way to work. Making the client understand that process and what it takes, why you are going to meet with him and understand what his looking for, how you’re going to make the decisions on design and proposals, and when is the client’s feedback necessary or what point is critical that you make decisions on this and that, etc., etc.

They seem very obvious sometimes to people, but clients don’t know that unless you’re talking to a professional client like a developer, maybe, or that kind of people. The common person just doesn’t know that. So, taking the time to go through the process, even if it’s in detail on showing what examples in your past of how you came to that idea, when you get started.

Use those examples that people can relate to. That is already a way of bonding, in a way. If the client gets to understand you as well as how you work, they are going to value your work better, hopefully, as well.

So, spending time in all the things you mentioned are also very important: talking about the needs of the client, determine what the problem is, talking about their time, or budget, and expectations – they’re very, very important – absolutely. But, also let them understand, make sure that they understand how you work, what are they paying for.

This is what for clients, sometimes, is difficult to assess. Because if they understand exactly what the process is, they are more likely to be able to have a better comparison if they have offers from other architects, for instance. You’re a step ahead if you show more and help them understand, and help them make decisions better.

Think about the moments where you feel like going back to a shop, or you want to go buy services or buy products again from a particular place. Most likely it’s going to be because they helped you make a decision on something. They helped you to choose the right product that you were looking for, and they helped you find exactly what you were looking for.

This is what people like. You want to get services from someone who help you, and help you in understanding, and help in making good decisions. So, it’s interesting to put yourself in the place of the client and make sure that they understand what they’re gaining from you. That is one thing.That includes, also, how you work in terms of contracts for instance. This is something that you also can explain.

Part of your work is putting all these process of working, all the scope of work, and including all these moments where you’re going to have to discuss or make decisions with the client, also include them in the schedule that will go in your contract. The contract then becomes not just a document with limitations or clauses that you’re going to call if something goes wrong. The contract can become a document that you actually use to make the process better.

So, the moment that you come up with a proposal, ideally – this is something that, unfortunately, doesn’t happen often – but, ideally, what you’re looking for is that what you put in on paper or proposal shouldn’t be a surprise for your client. It should be just the confirmation of things that you already discussed and he understood.

So, that is what you, as an architect, should try to keep in mind from the beginning. How do I make my client understand every single point that I’m going to put in my contract beforehand – these conversations that we’re having and agreeing on? If you’ve done that work, the contract is going to be just, “Yeah, we’ve gone through this. I’m happy with that and that is fine.

Enoch: Okay, great. So, what you’re suggesting, just to summarize, would be to make sure the proposal is not the first time some of these things are discussed, but that everything has been discussed ahead of time, the details have been cashed out, and that there is an understanding that this is okay for both parties and that basically we just need to sign the document, and let’s move forward.

Mariana: Exactly. You may not need to go and discuss every single clause and detail in a contract.

Enoch: Sure.

Mariana: But, again in the conversations from finding out how much the client understands how an architect works or not, the more or less time you’ll have to spend going through the process.

You can make it in a very informal and friendly way. You know, “How familiar are you with the intellectual property rights?” “Do you know what that means, what it does entitle?” Understand what are the process from the moment you start talking about the ideas that you have in mind until the final realization of that and what comes along.

So, there was this lodge going on in the meantime, and most clients just have no idea. Many, many people hire an architect for the very first time in their life and maybe the only time in their lives. Being sensitive to that makes a whole difference.

Enoch: Okay. Let’s take a typical scenario that a developer comes in to an architect. He’s going to build a commercial project, maybe, in a downtown area. He says, “Listen. I’m interviewing four different architects. It’s going to be these many square feet. This is the kind of building we’re thinking of doing. Give me a proposal for this.” So, the architect’s initial inclination is just to go back, and make the proposal, and send it out.

How would you go about opening up that process and turning it in to a negotiation instead of just a, “Hey, here’s my fee,” and then that’s what’s solely I’m going to be judged on.

Mariana: Well, there are a few things. It is a reality that the market everywhere around the world sees as normal that architects have to compete by their fees. The one who gives the lowest fees gets the project.

I think, in this case, with developers, like you said, they are more seasoned in understanding what the process is and how it works. The trick is to understand their motivations. Get to talk about what they are seeking with their projects.

You know, developers are seeking profits, obviously. They do that for their business and they want to make a lot of money. But, getting to know their motivations behind it can help you become a partner rather than just an architect who is just going to do the design and leave. With “Being a partner” I mean understanding what type of developer is it? Why is he doing this particular project?

I’ve known a case, for instance, of someone in Russia. He had been extremely difficult with the architects, being on top of them all the time, and questioning every single thing or decision they were proposing on the table. They were getting mad with this guy – the developer.

After dinner together and a lot of vodka probably, and a game, they understood that this guy’s career was depending on the success of this project. He worked for a very large development company and if he didn’t succeed with his development, he would lose his job, basically. So, there was a lot more at stake than just finishing the project. It was a personal, very important motivation for that developer to get things right.

Those things happen. You’re dealing with people, not only with positions or roles. Understanding that is very important.

Also, understand the background of the development. How is it financed? I know another architect who is also working with a small developer who proposed to a developer a lower fee upfront, but he would share the profit after the houses were sold. That was a very interesting proposal for the developer because he wasn’t offered a lower fee. He was just postponing the profit to a later moment. He was in a position of doing that, and by doing that he became a business partner for the developer.

Again, spending some time to understand what’s behind the scenes, what’s behind what we see on paper, or when it comes in a briefing, and understand why people go, and what they actually need, and what they are looking for.

Enoch: So, I really liked that, Mariana, what you mentioned about the contract negotiation in terms of… So, it sounds like you need to listen, you need to be able to ask questions, and be able to dig really deep.

Then, a lot of times when it comes down to what you think are fees, try to figure out another way to come to an agreement without lowering your fees. That could be, you know, putting the fees to the back end, it could be adding additional value to the project and what you’re offering – so, all excellent pointers.

I’ve really enjoyed our conversation today. I felt like I’ve gotten a little bit more information and a strong strategic foundation for negotiating – focus on the strategy.

Any parting words that you would like to say to the audience, Mariana?

Mariana: Well, as a final word, I would say something that you mentioned as well and that is a reality. Many architects get to hear, “Sorry, we’re going with someone else who has lower fees.” When you hear that, be open for the confrontation. Ask the client, “Can I see the proposal of the other architect? No pressure whatsoever, but I would like to help you understand whether you’re getting the same services for that price.”

Again, many clients just don’t know. They see a ballpark figure, and if they don’t understand the process completely, there is a really big chance that when you see another proposal [Inaudible 00:50:22] proposal, you can help the client by saying watch out here because this or this is not included, or here you may come to the point that if this doesn’t happen it can get expensive, etc., etc.

So, the client either, you know, best case scenario they could say, “Actually, you’re right.” It’s like comparing pears and apples – it’s a different story. Make sure that you help them make the right decision. That’s what it has to be based on. Worst case scenario if you actually find someone’s proposal that is doing the same job for a lower fee, you may want to go back to your own process and see, “How can I improve my own internal processes to be more cost-efficient?” Maybe there is something that you have to change.

Even if they chose to go to another architect for whatever reason it is, they would always remember you as someone who tried to help them make a good decision and that’s invaluable.

Enoch: Mariana, it’s been a pleasure having you on the show. Thank you for sharing your knowledge and your experience with us, and your fascinating background.

Mariana: Thank you, Enoch. I’m glad to hear you enjoyed it too.

Enoch Sears
I am a licensed California architect who loves researching and sharing about running a great architecture business. I founded Business of Architecture to help solo architects and small firms run a better business so they can have the peace of mind to focus on creating great architecture.
Enoch Sears

@businessofarch

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Enoch Sears

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5 Responses to Negotiating Architect Contracts

  1. Carol Jin March 17, 2014 at 6:12 pm #

    Excellent interview! I agree with all her points, especially on signing contract, closing the deal so to speak. Not all clients select architect solely on fees and that is a fact. It is emotional choice as much as it is rational decision. It is so worthwhile to take the time to understand what they want, and what you want, and then you have better chance to find the common ground.
    Thanks for the effort and time for producing such insightful content!

  2. Rachel Burton March 17, 2014 at 5:21 am #

    Hi Enoch,

    This was a really great interview. I especially liked Marina’s points about taking the time to understand what the client really wants and identify your own business goals in talking a particular project.

    Her points about educating the client about our process, identify who is involved in the decision making process, preparing for meetings, having an agenda and running the meeting according to the agenda….all invaluable.

    Thanks for providing really good content and helping me ‘conquer the world!’

  3. Pablo Schaer March 14, 2014 at 8:38 am #

    Excellent, clear and very interesting interview.
    I am an architect but also a sales engineer and it was great to hear many concepts mentioned that are so important to refresh and to take into account !

  4. Ruth Cawker February 21, 2014 at 10:06 am #

    Hello Enoch,

    Two comments: I really appreciate being able to read the transcript of the interview rather than watch a video, as I prefer receiving written information on business subjects. So thank you for providing text version of the discussion with Mariana Idiarte.
    In terms of the subject, I would value additional detail about:
    - the types of contracts illustrated: are firms using the standard form architectural contracts or drafting made to measure clauses for special conditions? and
    - exploring international markets.
    Having worked for a few years in a corporate context, I agree with the points about preparing meetings and would add that it is an area that should be included in architectural schools.

  5. Felipe Uría February 19, 2014 at 4:05 am #

    Great interview! I found it very interesting. Congratulations to Mariana for being so clear.

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