Practice and Management Study

PRACTICE AND MANAGEMENT 4165025 Eleanor Sillett 4155846 Katherine Scott 4166524 Amye Stead

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3 Ltd.

Brief Room Size Calculations

04

Precedents Comparison

05

Building Cost Estimates Elemental Analysis

06

Calculating Potential Fees Business Plan

08

Fee Scales

09

Analytical Method

10

Analysis of Fees

12

Presentation to Client

13

Tender

Reflection

CONTENTS

Strengths and Drawbacks

14

Conclusion

15

Reference List

16

03

Brief Room Size Calculations Precedents Comparison

Extracting key details and information from both the brief, and online sources to enable understanding of the requirements of the design project in hand

Building Cost Estimates Elemental Analysis

Fee Calculations Business Plan Fee Scales

Understanding how much the Merryvale Nursery will cost the client using estimations of building size and cost based on the University of Nottingham’s brief, The Blackbook and online sources

Determining the direct and indirect costs of S3 ’s business structure in order to create a feasible fee proposal via two contrasting systems : Fee Scale and Analytic Method

Analytical Method

Tender Analysis of Fees Presentation to Client

Reflection Strengths and Drawbacks

Producing a fee proposal for the client after thorough analysis of the two fee methods.

This will be presented in a cover letter format to be given to the University of Nottingham A comment upon the strengths and drawbacks of the methods used. Application of such methods in real world practice will also be considered with a comment on RIBA’s 2013 proposal for Stages of Work

INTRODUCTION

04

Room Massing Diagram Scale 1:2000 : Merryvale Nursery, University of Nottingham Room Size Calculation 1 : Entrance Hall / 15m2 Added to brief to enhance overall quality of Nursery Design (1)

2 : Classroom / 43m2

Sized to hold 15 children per classroom (1)

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10

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3: Children’s WCs/ 14m2

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Providing 3 WCs and 3 washbasins (1)

4 : Nursery Hall / 83m2

Sized to provide ample space for 30 children seated children seated and play as well as space for adults to watch performances on the stage (1)

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Extracting key details and information from both the brief and online sources to enable understanding of the requirements of the design project in hand

5 : Storage Room / 8m2

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Sized to provide ample storage for Tables, chairs and indoor play equipment (1)

6 : Performance Stage / 24m2

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3

Sized based on 3 x 8m elevated space used for performance within the nursery hall (1)

1 2

7 9

8 9

7: Staff Room / 15m2

Sized to provide space for 4 nursery supervisors based on a ratio of 1 supervisor: 8 children aged 3 to 5 (2)

8 : Kitchenette and Kitchen Store / 8m2 and 2m2

Sized to provide space for simple kitchen appliances and food storage as appropriate to daily staff at the Nursery (1)

9: Office / 8m2 Total Floor Area : 300m2 Indoor + 116m2 Outdoor

Sized to provide space for 1 computer, filing and 2 supervisors (1)

10 : Outdoor Play Area / 100m2

Including grass area and child friendly tarmac ground cover (1)

BRIEF

11 : Outdoor Storage Room / 16m2 Sized to store outdoor play equipment (1)

ROOM SIZE CALCULATION

(1) Section 2, Building Handbook, Department of Education, 2009 (2) http://www.nidirect.gov.uk/day-nurseries , Date Accessed :1st Feb 2014

05

Precedent Studies : Education Buildings

Presented are a number of precedent studies (3) under a similar typology to that of Merryvale Nursery. They have been included to provide understanding of the variety of sizes and costs per square meter incurred by the construction of a nursery in a variety of UK (3) http://www.ajbuildingslibrary.co.uk

PRECEDENT COMPARISON

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Elemental Analysis Costing Breakdown (4)

1 2 3 4 5 6 7 8

Elemental Substructure Superstructure Internal Finishes Fittings and Furnishings Services External Works Preliminaries Outdoor play area: concrete

Cost £/m2 142.81 395.37 90.41 45.13 336.08 262.53 108.45 23 Total Cost

£ £ £ £ £ £ £ £ £

Cost 42,843 118,611 27,123 13,539 100,824 78,759 32,535 2,300 416,534

Location factor Total contextual cost

Table 2

Cost/m2 Total cost

Table 1

Understanding how much the Merryvale Nursery will cost the client using estimations of building size and cost based on the University of Nottingham’s brief, The Blackbook and online sources

Table 1 presents an elemental analysis for the construction of the Nursery.

In the UK Building Costs Blackbook, pg. 886, there is a table of elemental analysis for different building types.

However, there is not a nursery typology in this table. Therefore for the purpose of this assignment the closest building type available was a data set for a Primary School.

second storey elements was excluded from the superstructure category.

The total cost of the construction was put into context by using the UK location factor of 0.94 (based on the East Midlands location). Table 2 highlights a reduction of construction cost by £15,000 as Nottingham is outside of the more expensive South Easterly location range.

Each element of a building’s construct is listed. As it was decided that this nursery would be a single storey building, the data for stairs and

Table 3 represents the Facility Benchmark Costs provided in the UK Building Cost Blackbook. Unlike Table 1 this was based upon a specific set of

BUILDING COST ESTIMATES ELEMENTAL ANALYSIS

(4) Based on the Primary School Data, UK Building Costs Blackbook (Hutchins 2007)

0.94 £401,330.51

Mid £ 1,374 £ 412,200

Low High £ 490 £ 2,742 £ 147,000 £ 822,600 Table 3

data for Nurseries. It shows a rough average for the cost of a nursery of the same floor area as the Merryvale project to be £412,200. Due to the design including an outdoor play area and a very specific list of room requirements, the value in Table 2 is perhaps a closer estimate, especially given the exclusion of a second storey in our design.

1 Substructure 2 Superstructure 3 Internal Finishes 4 Fittings and Furnishings 5 Services 6 External Works 7 Preliminaries 8 Outdoor play area: concrete

Chart 1

Chart 1 represents a breakdown of the construction costs based on Table 1 Elemental Analysis. It is clear to see that the main proportion of expenditure is on construction this is due to the superstructure and the least upon the outdoor play area and fittings and furnishings. These small elements however are subject to change based on the clients personal design choices beyond stage D.

£7,000.00

£6,000.00

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However this is a useful exercise as it shows the proposal for Merryvale is in line with similar schemes in terms of construction costs. If the client were to question how the cost of the construction were determined, these charts could be shown in explanation to reassure the client and look for areas where costs could be cut if their budget was being stretched too far.

£5,000.00

Cost/m2

£4,000.00

£3,000.00

£2,000.00

£1,000.00

£-

Cost/m2

Chart 2 represents Merryvale Nursery’s construction costs in comparison with previous precedent studies.

The Orchard Room would appear to be vastly more expensive than other examples however it is important to note the footprint of this project.

The Orchard Room has a total floor area of 70m2.

This therefore means that there is a denser cost per squared metre as elements such as superstructure and substructure need to be spread over a smaller area.

Southbrook Nursery

Whiteheath Infants and Nursery School

Auden Place Nursery

Kate Greenaway Nursery School

Briar Hill Nursery

The Orchard Room

Merryvale Nursery

£295.57

£2,261.13

£961.09

£1,068.57

£2,576.75

£6,441.87

£1,337.77

Chart2

ELEMENTAL ANALYSIS

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S3 Ltd Staff Contribution Breakdown 100% 90% 80% 70% 60% Extra 50%

Training Administration and finance

40%

Promotional work Project Involvement

30%

Calculating the appropriate amount of money to charge the client based on two contrasting fee calculation methods.

Post analysis will be used to analyse these values and determine an appropriate figure.

FEE CALCULATIONS S3 Ltd. BUSINESS PLAN

20% 10% 0% Ellie

Amye

Kat

Richard

Norman

Billy

Laurence

Shelly

Riff

Ryan

Founding partner

Founding partner

Founding partner

Part 2 student

Part 1

Intern

Intern

Cleaner

Technician

Secretary

Chart 3

S3 Ltd. is a small architecture practice (defined

by RIBA as 6-10 people). Opened in 2005 it has developed a reputation in Nottingham for good public service building design. As such it has a turnover large enough to charge 20% VAT on its architectural services (more than ÂŁ73,000 sales per annum.)

Due to the firms recent expansion it has grown from the initial three founding partners Eleanor, Katherine and Amye - to require further staff for its ever increasing portfolio .

The Merryvale Project requires the full attention of the practice so all five key members of the company will be accounted for in the following calculations as Billy and Laurence only work with S3 Ltd. in holiday time.

We consider it to be important for architecture practices to take on younger people due to the nature of the architectural education as it stands. This is why two of our main staff are Part 1 and Part 2 students.

Additional staff keeping the practice running are our cleaner, technician and secretary.

Their work is vital as since recent growth has seen our founding partners attention required solely upon their primary jobs. Eleanor is the lead architect who also does some training and company promotions. Amye is the chief of marketing and ensures publicity and good client relationships for the firm.

Katherine is the business manager, dealing with the financial and business aspects of the company. This staff breakdown can be seen in chart 3 alongside other employees.

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Fee Scale Calculation Percentage from Construction fee scales cost 6.65 £ 401,330.51

Total £ 26,688.48 Table 4

Staff Eleanor Amye Katherine

Hours spent on project daily 7 1 1

Hourly charge £ 36.55 £ 97.45 £ 97.45 Totals

The Fee Scale system is a rough estimate tool, given by the RIBA in the SFA99 (5) , to calculate the fee proposed to a client. Merryvale is a new building which falls into the class 3 bracket as an education institution of nursery type. By reading off the graph using the calculated building cost estimate, the percentage from fee scale was found to be 6.65%

Total charge for A £ 767.45 £ 292.36 £ 292.36 £ 1,352.17

For stages A and B there is no existing fee scale. Therefore the fee has to be constructed depending on the firms individual decision. Some companies may opt not to charge for this phase, however S3 believe that is bad practice. S3 believe that through charging a figure work can be done to a higher level as the company can then afford to. Eleanor, as the lead architect takes on this role however it has been established with the client that all three founding members will meet daily to assess the progress of the project

Total charge for B £ 1,279.08 £ 487.27 £ 487.27 £ 2,253.62

Total Charge £ £ £ £

2,046.53 779.63 779.63 3,605.80 Table 5

Work Stage

Days spent

A B C D

3 5 16 16

Work stage phase optimum percentage from C-L N/A N/A 20 20 Total fee charge to client

Charge £ £ £ £ £

1,352.17 2,253.62 5,337.70 5,337.70 14,281.19

By adding the calculation above to the fee scales calculations for C and D we have deduced a total fee charge to the client of £14,281.19

Table 6 (5) Practice and Management, Lecture 4, Slide 39, 2013

FEE SCALES

10

Analytical Method

Unadjusted £ m2/unit: RV Multiplier RV x M

£65.00 9600 46.2 £ 4,435.20

Table 7 shows the business rate calculation needed to determine indirect costs. The RV (rateable value) was based upon that of a small architect’s practice in Nottingham, HLP design. Using www.gov.uk/calculate-your-business-rates it was found that the correct multiplier for a business of this size in 2013/14 was 46.2. Together this made a business rate of £4,435.20

Table 7

Based on :

Costs

1

2 3

4

Category Items Establishment costs Establishment costs rent Telephones Utilites PII Business Rate Work Equipment Equipment Autocad subscription Adobe suite Staff Furnishings Transport cost Website Subscription costs for journals Additional costs Stationary and printing Team building exercises Office Groceries

Per month £1,800.00 £150.00 £80.00 N/A £1,045.00 £38.11 £250.00 £49.00 £100.00 £50.00 £80.00 Total

Per year £ 21,600.00 £ 1,800.00 £ 960.00 £ 750.00 £ 4,435.20 £ 250.00 £ 12,540.00 £ 457.32 £ 200.00 £ 3,000.00 £ 165.00 £ 1,200.00 £ 600.00 £ 960.00 £ 48,917.52 Table 8

ANALYTICAL METHOD

The rent of a 6 bed student property in Lenton The phone bills for a self employed homeworker A high electricity bill in a student house Given figure in PAM briefing document (see Table..)

4 year plan, spending £1000 on new IT equipment Figure on AutoCAD website for 5 computer licenses Figure on Adobe website for 1 computer license 5 year plan, spending £1000 on new furnishings Running on company car for a month (own data) rentwebistedesign.co.uk AJ subscription Extrapolated data from own university expenditure Bi-monthly occasions e.g.lunch/training exercises £20/week for milk, fruit for employees, client meetings

Staff type Founding partner Founding partner Founding partner Part 2 student Part 1 Intern Intern Cleaner Technician Secretary

Staff Ellie Amye Kat Richard Norman Billy Laurence Shelly Riff Ryan TOTAL

Annual pay £45,000 £45,000 £45,000 £28,000 £18,000 £650 £3,000 £288 £17,280 £15,600 £ 217,818 £

pension Days worked Pay per day £46,350.00 240 £187.50 £46,350.00 240 £187.50 £46,350.00 240 £187.50 £28,840.00 240 £120.17 £18,540.00 240 £77.25 £669.50 10 £65.00 £3,090.00 20 £150.00 6 £48.00 £296.64 £17,798.40 120 £144.00 £16,068.00 156 £100.00 224,352.54 £ 1,512.00 £ 1,266.92

By taking into account the Annual Pay of each member of staff, Table 9 calculates the total Annual Pay, total Pay including pension, total Days worked and total pay per day of the practice. It is clear from this that the firm must be generating enough income to qualify for VAT charges, as there must be an income above the minimum turnover of £73,000 in order to pay our staff and still generate profit.

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Table 9

Days Project Sick Fee earning Fee earning worked Involvement / % leave days in year hours in year 240 0.75 12 192 £ 1,536.00 240 0.25 12 72 £ 576.00 240 0.25 12 72 £ 576.00 240 0.9 12 228 £ 1,824.00 240 1 12 252 £ 2,016.00 Total 816 £ 6,528.00

Indirect costs Direct costs £ 9,783.50 £ 9,783.50 £ 9,783.50 £ 9,783.50 £ 9,783.50 £ 48,917.52

£ £ £ £ £

46,350.00 46,350.00 46,350.00 28,840.00 18,540.00

Total cost per annum £ 56,133.50 £ 56,133.50 £ 56,133.50 £ 38,623.50 £ 28,323.50

Cost per fee earning hour £ 36.55 £ 97.45 £ 97.45 £ 21.18 £ 14.05

Table 10

Total costs per annum Cost of Inflation for coming year Gross costs per annum Costs including profit target Total working persons days Selling price per person per day

£ 273,270.06 £ 6,831.75 £ 280,101.81 £ 336,122.17 1512 £ 222.30

Table 10 explains how the cost of each staff working is calculated. By taking into account both indirect and direct costs, split between the 5 main staff we host, the cost per earning hour of each is calculated.

Eleanor’s hourly cost is lower than Amye and Katherine’s, as they work less on architecture projects, so each hour they spend on architecture costs more to clients.

The figures in table 11 are general, based upon our basic requirement of cost of funding staff each day. When fee earning we need to take into account the time spent specifically on a project to be more accurate. The profit target used was 20% as recommended by the Architect’s Handbook of Professional Practice, 2008, Joseph A. Demkin

Table 11

ANALYTICAL METHOD

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Analysis of Fee Methods Work Stage

Days spent

A B

3 5

Work stage phase optimum percentage from C-L N/A £ N/A £ Total fee charge to client £

Charge 1,352.17 2,253.62 3,605.79

Table 12

Calculation of the percentage of time spent on stages A and B of this project used to calculate the cost of each

Staff type Founding partner Founding partner Founding partner Part 2 student Part 1 Producing a fee proposal for the client after thorough analysis of the two fee methods.

This will be presented in a cover letter format to be given to the University of Nottingham

TENDER ANALYSIS

Staff Eleanor Amye Kat Richard Norman

Project Involvement 75% 25% 25% 90% 100%

Cost per working Hour £ 36.55 £ 97.45 £ 97.45 £ 21.18 £ 14.05

Hour worked on this project 180 60 60 216 240

Table 13

Table 13 uses the analytical method to calculate the fee for stages C and D

Total fee charge to client for stages A D with this method

Cost for this staff member £ 6,578.15 £ 5,847.24 £ 5,847.24 £ 4,573.84 £ 3,371.85

£

29,824.10 Table 14

Table 15 provides a final comparison between the analytical and the fee scales method.

The fee scale produces a fee of £29,824.10, whereas the fee scales method produces a fee of £14,281.19. This is what we had expected to see, as the analytical method takes into account a far wider range of outputs to achieve the figure. However, in spite of the merits of the analytical method, S3 must bear in mind that other architecture practices may be using the fee scales method. Hence, the decision was made to strike a balance between the two methods by comparing their percentage of fee of total cost value. The analytical method draws a figure of 6.92% and the fee scales 3.44%. After lengthy discussion, the three

Fee calculation method Analytical Scales Competitive fee

Percentage of fee of total cost £29,824.10 £431,154.61 6.92% £14,281.19 £415,611.70 3.44% £21,122.66 £422,453.17 5.00% Fee

Lump cost

Table 15

founding partners of S3 decided that the figure they would propose to the client would be equivalent to 5% of the lump cost. The reason for this decision was to recognise that we wanted to remain close to the analytical figure, in the upper quartile of the range. At the same time, it was also necessary to recognise the highly competitive nature of architecture firms today. Since we are still building on our portfolio, being only 6 years old, we hope that by remaining competitive but fair in our prices we can uphold the good practice of architects, while generating new business.

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Attached is the client cover letter and fee proposal. With this, the intention is to procure work for our firm by seeming like a fair, high quality yet competitive practice. It is necessary for architects to comply with the Standard Form of Agreement, therefore this letter is written in order to do so

CLIENT LETTER

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Assignment Aim The aim of this assignment was to produce a fee bid for the Merryvale Nursery scheme. In doing so, we needed to create a building cost estimate, use the fee scale and analytic methods for fee determination and to finally analyse from these what fee would be appropriate to propose to a client. In each step of the brief, we have aimed to find sources of information so as to create a proposal as close to those that would actually be produced. In order to do this, key texts such as the Blackbook, RIBA resources and government web-pages have been invaluable. Through using accurate, reliable, recent sources, we have been able to produce a fair estimate, which is similar to that of our precedent studies of other nurseries. In writing a cover letter to send to a client and a fee proposal, we have then translated the methodology of procuring the final fee estimate into a language appropriate for a non-architect to read, whilst also trying to be competitive and appealing for them to decide to work with.

Calculation drawbacks

A comment upon the strengths and drawbacks of the methods used.

Application of such methods in real world practice will also be considered with a comment on RIBA’s 2013 proposal for Stages of Work

REFLECTION STRENGTHS AND DRAWBACKS

There are drawbacks to the methods of calculation we have used, which we have tried to minimise where possible. For example, in calculating the Building Cost Estimate, we found that the Blackbook did not have a section for Elemental Analysis of Nurseries. Instead, we chose to use the figures for a primary school, the most similar available typology. By comparing this back to the figure calculated by using Facility Benchmark Costs from the Blackbook, which was specifically calculated using Nursery data, we saw there was not a large difference between our figure and that of the Benchmark figure, so we felt confident to continue with the Elemental Analysis figure for our further calculations. In our Direct costs calculations, the figures in putted were based largely upon our own student spending, so would inevitably change for a real practice, however the same method would apply.

Real World Context Although the brief for this assignment and our method relied upon the Plan of Work from RIBA, this is actually now an outdated method for fee calculation, that has been in development since 1963. RIBA introduced a new, more complex system in 2013. However, RIBA itself did say that stages A-D of the stages of work system were the strengths of the old system, and these aspects are now mirrored in stages 1-4 of the new system (RIBA Plan of work consultation document, 2013, date accessed 31st January). So we feel that this assignment has given us a chance to practise a few systems for fee calculation, even if we bear in mind the changes in the coming years that architects face, they seem to be relevant in a real world context.

By trying to create as much of a real-world business structure to our firm as possible before setting out to calculate direct

and indirect costs of the firm, we found it easier to understand the way the fee structure becomes complex as the size of a firm increases and equally as the competition of a project increases. Although architects are renowned for being bad at demanding higher fees collectively, by undercutting one another at the fee bid stage, we have tried to explain to our client the benefit of paying for paying for stages A and B and equally for the fee we consider to be a fair price for them. We have also tried to consider the wide range of costs a firm such as S3 may encounter, in order to accurately calculate how much it would cost to run the firm for profit.

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The profit figure of 20% was taken from a recommendation in The Architect’s Handbook of Professional Practice( Joseph A. Demkin, 2008). This is a figure higher than many architects would use in real life, but by reducing our fee bid later in our analysis, we decided to cut into our profit margin in order to procure the work, with the mentality that some work would potentially lead to more work.

This approach seemed suitable for a client such as the University of Nottingham Estates, as they are a large investor in public buildings, with growing campuses in the UK and abroad. The reintroduction of the fee scales, which are now an outdated system, would mean that architects’ profits are protected by the RIBA so that this kind of undercutting could not happen. However, as the current climate stands, with a slow warming up of the economic climate coming out of the recession, we feel that our approach here has been in line with the current tactics of other practices, hence making our bid more competitive. Practices are still mindset of being highly competitive since the recession, and so the climate is vastly different to 7 years ago, pre-recession. Architecture is highly influenced by the economy, being one of the first areas for public spending to be cut, so bearing this in our project was key.

We did not account for the cost of borrowing, as we assumed our company was at a size large enough to be liquid during smallaverage sized projects. However, if this were a larger scheme, there may need to be some initial loans to acquire to fund the work.

The relationship with the client is important to be clarified at an early stage with relation to the Standard Form of Agreement. This is vital as part of being an architect, to protect one’s own liability, the copyright of works produced, ...So with our cover letter we have tried to write in a way which fulfils this requirement of architects to act in a responsible way.

Overall Analysis

In completing this assignment, our understanding of the business side of an architect’s work has vastly increased. The proportion of spending on each component of a build was something we had not yet investigated, and we were quite astounded that a small/ average sized building could cost such a lot of money to construct today. Clearly, the financial strategy of an architect’s office is vital - with the profit margin a clear point of contention between clients and architects. However, we can understand that those practices who do manage to acquire work while sustaining their profit margin are more able to spend more time upon the project at hand, rather than fighting for a lot more work at the same time. We believe this to be a sustainable practice for architecture, that fair payment gets better designs can only be a good thing.

STRENGTHS AND DRAWBACKS

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Books: Hutchins, 2007, UK Buildings Blackbook, Franklin and Andrews, Norwich SFA 99, as cited in the PAM lectures.

Short, David, PAM lecture series, 2013, Lectures 1-4

Websites: www.gov.uk/calculate-your-business-rates http://www.adobe.com/products/catalog/software._sl_id-contentfilter_sl_catalog_sl_ software_sl_mostpopular.html http://www.nidirect.gov.uk/day-nurseries , Date Accessed :1st Feb 2014 http://store.autodesk.co.uk/store/adsk/en_GB/DisplayHomePage www.rentwebistedesign.co.uk http://www.architectsjournal.co.uk http://www.architecture.com/Home.aspx

Photographs: Southbrook Nursery, http://www.ajbuildingslibrary.co.uk/projects/display/id/4600 Whiteheath Infants and Nursery School, http://www.ajbuildingslibrary.co.uk/projects/display/ id/5008 Auden Place Nursery, http://www.ajbuildingslibrary.co.uk/projects/display/id/3031 Kate Greenaway Nursery School, http://www.ajbuildingslibrary.co.uk/projects/display/id/2023 Briar Hill, http://www.ajbuildingslibrary.co.uk/projects/display/id/1537 The Orchards, http://www.ajbuildingslibrary.co.uk/projects/display/id/6364 Final Quote: John Ruskin, http://www.goodreads.com/author/quotes/1606.John_Ruskin, 3rd Feb 201

REFERENCE LIST

“It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money - that’s all.

When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot - it can’t be done.

If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.”

John Ruskin

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