Industry Focus: Architects and Engineers

Architects and engineers in the Silver State are cautiously optimistic about their industries. Working through a variety of issues as a result of the recession, executives nonetheless indicated that their businesses were experiencing growth and the industry is gaining stability. A handful of decision-makers in the architect and engineer industries recently met at the Las Vegas offices of City National Bank to discuss the challenges and opportunities facing their industries.

Connie Brennan, publisher and CEO of Nevada Business Magazine, served as moderator for the event. These monthly meetings are designed to bring leaders together to discuss issues relevant to their industries. Following is a condensed version of the roundtable discussion.

What effect has the recession had on this industry?

DAVID MELROY: I would relate it to ice fishing. For several years, we did not go out on the lake because the lake didn’t freeze over. Now we’re able to go out and drill our hole, drop a line and feel comfortable that the ice is still going to be there, but we don’t want to set up base camp or drive our car out there yet like it was in 2006 and 2007. The ice is not that thick. There’s just not the back log or the depth.

STEPHEN RANCK: I’d agree that we’re cautiously optimistic. Things seem to be turning around. There appears to be real projects starting back up, where as before we were doing concepts for three or four years and nothing came up. However, with the election and it’s impact on decision-makers, I think there is still some time [needed] to see where the market is.

Gary CONGDON: That could be why we’re seeing a slight slow down right now in clients being willing to go forward because there is a big unknown [with the election] on a national scale. What’s going to happen to taxes, to capital gains, how much more or less regulation is the EPA (Environmental Protection Agency) going to have, what are oil prices going to do? To think that we can live here in Las Vegas and be isolated from the rest of the national and world economy, that’s foolish. We’ll see what happens in November and we’ll have a better answer.

KURT GOEBEL: The biggest challenge that we’ve seen is that it’s been a very uneven recovery. We’re trying to work with regulators who have the power of the pen with the environmental regulations and trying to get them to understand that some clients are very sensitive or unstable. They have a lot of power to potentially impact the business.

CONGDON: It seemed like the first product type that really took off was the big box industrial market. That’s one of the market segments that we’ve been very successful in, so we got our share of that work when everything took off. We had three big projects that we undertook. Those are nearing completion right now. There was all kinds of talk about the industrial market being back and it’s full speed ahead, but it has slowed down. There was that initial glut of product that entered the market. There’s still activity, we still have clients talking about new product, we have multiple proposals out there, but it’s really slow now.

What do clients expect in regards to pricing post-recesson?

BRENT WRIGHT: The pressure to keep fees low is still there [as a result of the recession]. Fees haven’t come back like they were before. Maybe related to that is that schedules are, in some projects and market sectors, really unrealistic. What used to be called a rush is now the standard schedule. The expectation from the recession was projects had 10 firms fighting over one little job and people still expect that. I think that’s changing, but you still see that. [People want] fast and cheap.

CONGDON: Quite often, price is the only factor that the client is considering. Unfortunately for us, when that’s the consideration, we’re rarely going to win the job. We’re not going to be the low bidder. I don’t want to be. I can’t do a professional job to the quality that we expect if I’m competing with a guy working out of his home.

JASON ZOELLER: It’s really hard to tell an owner that’s there’s a reason to spend 60 percent more money to do this when he thinks he’s going to get the exact same thing for less, even though he’s not. That’s the challenge that we face on trying to educate everybody; you get what you pay for. If you want all these buildings that are specialized and ultra-efficient and everything else, everybody can’t do that. You have to find the right person to do those jobs and be willing to pay for that service.

STEVE SCHILLER: I think you get less than you pay for when you take these half price fees. It’s evident when we go in to clean up projects, which we’ve done on occasion. The people who take these jobs at lower fees than is necessary to do them, the client gets less than what they pay for. The drawings are bad, the design is bad and they’re not completed. It turns into a bigger problem down the road.

MELROY: In our industry, the best thank you that you can receive is the next job. You select an architect based on their skill sets. Those firms that are solid in the market and deliver a good product will always be undercut by those who say they can do it for much less. I’ve seen recently where another firm in town was 60 percent less than our fee. With that, it becomes a focus on price rather than services, the deliverables and the end result.

Do you get credit where credit is due on your projects?

CRAIG GALATI: I’ve taken a bunch of clients and pushed them off to the side saying we’re never going to work with them because, they don’t appreciate it, they try to cut our fees down or that’s not the kind of work we want to do. That’s a challenge in itself. There’s only so much of that type of work here. Every once in a while, in order to keep things going we have to take one of those jobs. Then I feel exactly what you’re talking about: under-appreciated and underpaid.

ZOELLER: We make a joke around the office that engineering is the field goal kicker or the umpire of the project because people only talk about you if you mess something up. Otherwise, it doesn’t matter. I think that’s fine as an engineer. The bigger thing is if they’ll pick up the phone and call you when they want somebody they know they’re going to get a quality job from and who will stand behind their work.

WRIGHT: I’ve thought about this a lot from our humble engineering perspective. When I was younger in my career, it used to bother me. Then I realized that, first of all, we work for [builders and developers] and they’re the ones who have the relationship with the owner. We don’t have that with the owner. Why would the owner care about us? In reality, if we’ve done our job right, all of our best work is hidden underneath all the architectural finishes. They’d never even know that we were there. The only time they’d know we were there is if there’s a problem.

How much of a struggle is it to anticipate the market?

GOEBEL: We do more with less. When you do get a job, you have to figure out how you’re going to staff it. Then you get done and now you have all these people with nothing to do. We’re still in that mode where we’re doing a lot more with a lot less, and that’s really stressful.

SCHILLER: Contractors are suffering the same problem as we are. They’re struggling to get stuff that requires more input from us, more time during the construction phase, so we’re actually providing more services for less fee than we were 10 years ago.

CONGDON: It’s something we wrestle with all the time. In the heyday, you put out a proposal and within 30 days you’d be under contract and be full speed ahead. It’s taking six, seven, eight months from the time you send a proposal out there for that client to evaluate the market, make the market decisions, etc. So when you put a proposal together, you’ve got to look way ahead. I talked to my folks and we’d all rather work a little bit harder and get jobs done with staff we have than bring people on and have to lay people off.

How do you fill the staffing void?

GALATI: We don’t want to get bigger because we fell too hard last time. We want to make sure that there’s a reason for us to get bigger if we do. There are times when we pick up a job and we need some help. We’ve been able to, over the last four or five years, build some really good relationships with either other firms or other small sole proprietors who will come in and work with us for six months or three months or whatever it might need to be. That’s how we’ve been filling that gap of the people. There’s not a lot of people to hire, first of all. There’s a lot of graduates, but that takes a lot of other investment to get them to where they can actually produce. The question is do you want to do that? They’re most likely not going to stay anyway, and you wouldn’t expect that.

MELROY: I’ve been very active in the different campuses, whether ASU (Arizona State University), U of A (University of Arizona), UNLV (University of Nevada, Las Vegas), UNR (University of Nevada, Reno), specifically, in bringing young people in and getting them exposed and integrated into what we do with the hopes that we can retain them after graduation.

RANCK: To get people to come into town, you’re either bringing in a millennial who’s trying out Las Vegas or typically somebody at the end of their career who may retire here. We don’t have a lot of in-between coming into the Valley. That’s really difficult for us because there’s a gap in the pipeline of professional knowledge as well as skill and mentorship that we all need in our businesses.

How do millennials fit into this industry?

RANCK: They bring a lot of energy and energy is important in our business. Like every other millennial-affected profession, millennials are more likely to quit their job. Every two years they flip to get a new experience, which is difficult for us because hiring somebody is an investment. Hiring them and bringing them into our profession, in particular at that age, is almost an apprenticeship. You have to work for three years before you’re allowed to be licensed. That three years is the time when they gain a lot of knowledge and we invest a lot of energy giving them that knowledge and skills. It’s difficult to do that and have somebody move on.

CONGDON: I have yet to find one who can pick up a pencil and draw. That seems to be a totally lost skill that somehow they’re not teaching in architecture school anymore. I ask someone to give me a sketch and they run to their computer. For us older folks, that’s a frustration. The technology has truly changed what we all do. I refer to it as “instant architecture”. It’s that instant gratification. Everything is on an accelerated process nowadays and we have adjusted. I probably send out more emails today than I ever did. We do everything in computers. We’re totally into Revit and 3D modeling. I don’t know how we’d survive without the computers at this point in time, so the people who walk in our office have to have that skill set.

GALATI: Our clients are getting younger too. The other side of the sword with millennial employees now is they have an understanding and a relationship with those younger clients that we can never get. They communicate in a different way. I would never ever text a client. That’s just not the way we were taught. And those clients think that way. It’s different than the way we were. To us in the room that are older, we have to say, “forget it” and let them be. Yes, they’re not like us, but we weren’t like the last group either and we found our way okay. I think, let it be, those millennials will find their path.

ZOELLER: It changes the way you communicate with your staff and with your clients. We found that it’s just a little bit of a different work/life balance and that they’re much more involved with wanting to understand the big picture, their goal and their path. We have to sit down and talk career paths from day one and keep them engaged. As soon as they become stagnant, they jump ship. It gets to be a really big problem, especially when you get the people who just got out of school and you spend the three to five years getting them to that really good spot where people want them.

RANCK: The good thing about getting them engaged is, it’s not necessarily a monetary arrangement. It’s not about giving them more money. It’s providing an environment where they’re excited and energized and connected to what they’re doing or there’s a meaningfulness to what they do, which is good for us. Providing that environment is pretty simple. You don’t have to pay an arm and a leg, necessarily, to do that.

Are public works projects on the rise?

CONGDON: It’s pretty bad right now, particularly the public works side of things on all the agencies. The water district is struggling to get permits processed. The sanitation district is struggling with that. You can’t really fault the city agencies. They’re suffering from budget deficits. They laid off people just like everybody else did during the recession. They haven’t had the money to put those people back on board. NV Energy is struggling. Again, same kind of staffing problems. It can take nine months to get a design through NV Energy. These are things that hold up development, increase the developer’s cost, make it more expensive to develop in Las Vegas and in other communities and that has an impact on our local economy. We as a community need to solve these issues.

GALATI: One thing that I’ve seen is they didn’t keep up the infrastructure to be able to build new buildings. Now they’re having all kinds of problems at the water district on sites that are not that old. The hoops you have to jump through to get those sites buildable are almost prohibitive. It’s because they haven’t kept up the pressure, they haven’t built any new infrastructure. That’s part of the downside of the recession as well.

RANCK: We finally, after 10 years, got new school district work with Clark County School District. It’s a blessing for the school district to be building again and they need to. They’re very far behind. When the school district was at their peak when the town was booming, they were the ones who took infrastructure to neighborhoods. When they built a new high school, that brought power and water and gas and everything that was necessary for that school to that neighborhood. Those big public clients were really driving that. They haven’t built anything for a long time and that’s part of the reason why we’re lacking.