Deep Chat With @kymio: Risk & Opportunity of Being in An Architecture Consultancy Profession

Yesterday night went on to meet up with @kymio in Melawati. We had a heart to heart session whereby he shared about his passion, thoughts and concern about career, sustainability and future.

First of all, we are both practicing graduate architect in the industry, taking on the role of managing a few projects and also designs. Lately, the market has been moving very slowly or I would say stagnant as there is not much new project coming up (in terms of new development). This is a devastating situation for a company that cannot afford to pay the employees any more due to negative cash flow whereby the clients keep on delaying the payment due to their own reason (developers also facing cash flow issue due to poor sale). There are retrenchment and also salary cut news from different companies (not to mention any of them) whereby some of my friends were also affected.

The professional practice has its own vulnerability in terms of maintaining a healthy cash flow as the turnover of the service given will be monthly and in back to back basis. Meaning to say, besides getting some amount of down payment, there will be no payment unless there is milestone completed. That makes productivity and efficiency important in our industry to ensure service quality. However, there are also risk factors that may cost the efficiency to drop, some examples are miscommunication between client and consultant, delay in responding from the local authority, term compliance for the development, and more. Without a clear way to mitigate these risk factors, it will eventually cost the company to suffer from loss due to the time cost.

Next, there is also a risk for the client for delaying payment or refuse to pay due to certain non-compliance. Some clients love to use their redundant SOP to delay the payment, saying there are a lot of process and approval needed for the payment to be released. This has to be clearly stated in the contract so that when such an event happens, the consultants can save their ass by having the right tool to demand payment. I also believe in negotiation can happen even after contract had been made. This is due to there are so many unexpected circumstances that may arise for a construction project which can stretch for 10 years plus, starting from design to final completion. The process is long and tedious which is why it is not a profession that everyone would like to be in.

Nonetheless, if it is well managed for every party, then the situation may not be as worse. To me, there is always a need for deadline not because of rushing it to be done but the cost of taking our sweet time to finish something. There are a few situations that I can show why does time matters.
Situation 1: Architect A gets a job of worth RM2,000,000 for a mixed development job to design a high-end condominium and manage the contract (as per the basic services provided by the profession). The job is estimated to be completed within 6 years. Meaning to say, there is around RM333,333 per year and around RM27,000 per month to spend on this project (without taking into account of delay). A RM27,000 cost can cover around 3 to 4 staffs to work on the project (depend on the location and salary rate too). If any delay happens, which a lot of time there will be and it increases the project period to 7 years in total, so the RM2,000,000 contract sum that seems lucrative in the beginning to depreciate. An additional 1 year will mean that the project can only pay RM285,700 per year and RM23,800 per month. A 15% cut on revenue for the company which may cost a loss to the company. This happens for most of the time and that is why a consultancy firm will need to work on several projects to have a different revenue source to cover for the monthly expenses.

Situation 2: An artist is making a new artwork for a corporate refurbish project. The contract value is worth around RM500,000. The agreed job completion time is 2 months. Let’s say that everything is well planned and sort out in the very beginning and the performance of the artist is at his/her best. The artist manages to complete the project by 1 month. This gives the artist the ability to take on another job the next month. This will equate a RM250,000 profit for his work.

Involving a lot of parties in a project will surely have a lot of headaches when comes to communication and management. That is why taking on large projects has a higher risk than taking a small job like the artwork. Nonetheless, if the team is very well versed in handling all the parties and able to deliver the job on time. Basically, there will be a huge profit since the fees will always be accounted for delay and contingency event too.

Personally, I do prefer businesses with a faster turnover to ensure we do not have any cash flow bottleneck. Consultancy may not be one of them especially in this line when a single project is counted by years. Anyway, it is a great experience too to be involved with the development of our future built environment too as all the buildings built will eventually be occupied by people (hopefully, as some buildings are abandoned due to oversupply or not strategically located).

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Well, I will be sharing more of our talk in the next few writings as the topic that we discussed were wide and covered a lot of aspects. I love this kind of in-depth conversation where we can really go deep into a topic and explore the possibilities. (Aiya, no photo, next time then!)

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