I write this from my “down-under” perspective, but I suspect that what’s happening here is not so different from what’s happening in the rest of the archiverse. Here are 6 trends I see unfolding.

1. MASSIVE CONSOLIDATION, ESPECIALLY IN ENGINEERING.
In Australia, there are few medium-sized engineering firms left – most have been gobbled up by the multinationals. In architecture, the number of large firms (200+) doubled in 2 years (2009-2011). In the same period, the number of mid-size firms (20-199) dropped from 352 to 308, a decline of 12.5%. The US is experiencing a similar decline in mid-size practices.

Anecdotal evidence indicates that it is the mid-range generalist practices that are disappearing; but that practices with strong credentials in strong niche markets are relatively stable. Likely outcome: If you own a mid-size generalist practice, you are increasingly likely to be approached for a buy-out or merger.

ACTION: If you are willing to sell or merge your practice, be well prepared to position your firm to get the best deal. Get a copy of PSMJ’s The Ultimate Ownership Transition Manual.

2. INCREASING FRAGMENTATION OF DESIGN SERVICES.
This trend may seem to be the opposite of the next one, but it is significant. As the search for better delivery models continues to test new ideas, many developer-clients are taking a bigger slice of the project management role, and are carving up the design work into smaller chunks, which are bid in pieces much like buying bricks and mortar.

For many design firms, contract administration is becoming a thing of the past, and increasingly, documentation is being sent offshore – by the clients, not by the designers.

The consequences of this trend are less and less control over the end result, and greater risk, coming from an inability to manage design errors & omissions. In this model, the client/developer is responsible for coordination and integration, and often does not have the skills to do it well. If that’s the case, the amount of coordination time you’ll have to do will increase – and you won’t get paid for it.

ACTION: Be very careful about contract language that could make you responsible for coordination you have no control over. Ensure that coordination planning is thorough and carried out by competent people.

3. CONTINUING ADOPTION OF IPD/PROJECT ALLIANCE DELIVERY MODELS.
IPD (Integrated Project Delivery) is currently seen as the answer to many of the problems that have dogged design & construction projects for two generations. Project Alliances are an Australian version of the same idea. In these models, a project team is formed very early in the design process or before it starts, that includes the client and the contractor. Typically a “charter” is involved, where the parties agree not to sue each other in case of disputes.

Typically, BIM (Building Information Modelling) is used as a delivery vehicle. BIM has several “levels” (3D, 4D and 5D), which refer to “dimensions” of the project data.

Where these models come unstuck is where one of the partner identities starts to act outside the intended cooperative nature of the “integrated” or “allied” team, and seeks to wield excessive control. Despite these drawbacks, I see the continued growth of this model, together with efforts to improve the way it works.

ACTION: Ensure the structure is fair and reasonable and provides safeguards against “takeover” by any one party.

4. CONTINUING GROWTH OF PROJECT WEBSITES.
Worldwide, we are seeing project websites such as Aconex gain in influence. Although these centralized document management systems have project benefits, they also impose greater costs on design professionals, and increase the quantity of email communication, that are generally unrecoverable.

One of the disadvantages is that project data cannot be accessed if you’re offline, and we know of at least one instance where one of the team members (who was paying for the service) got into a dispute with designers and required that the website shut off their access to email. The fact that control of communication passes to a third party is a potential hazard to this type of service.

ACTION: Ensure that extra costs will be reimbursed, that you won’t have to pay extra to get a copy of records at the end of the project, and that you can never be denied access.

5. DISRUPTIVE PRICE-CUTTING IN CYCLICAL SLOWDOWNS.
This may not seem like anything new, but increasingly, I’m seeing large/global firms undercutting the smaller, boutique firms, using their brand and size to take work that could better be done by the more specialized practices. The goal for the larger firms is to keep their teams together, even at a loss – and the result is a more chaotic, less predictable workflow for the smaller firms. Expect “poaching in your turf ” by bigger firms during slowdowns.

ACTION: Ensure that your client relationships are very strong and well-maintained; sufficient to resist price-cutting offers.

6. EXPANSION OF IN-HOUSE “UNIVERSITIES.”
As the consolidation noted in point 1 grows, these larger firms tend to create “in-house universities” to handle all their training programs.

There are benefits to this idea – mainly that it is much easier to coordinate training globally – but there are also downsides. The chief of those is the danger that the training programs become insular and start to stagnate, because “new thinking” and cross-fertilization from the outside doesn’t have a natural way to reinvigorate content.

ACTION: Think this through carefully before embarking on the idea. Ensure that continual improvement of content, drawn from external sources, is part of the plan.

Agree or Disagree? What are your thoughts on the future of the A/E industry? All comments welcome!

About the Author: Charles Nelson, AIA, LFRAIA, is the Director of PSMJ’s Australasia practice. He is also known for writing and speaking extensively on project and practice management. Charles can be reached at cnelson@psmj.com.

This article is included in the October issue of Professional Services Management Journal: Advice for A/E Firm Leaders: Data-Driven, Provocative, Actionable. We invite you to check out the new PSMJ newsletter: Get a free issue and then take advantage of a special offer to new subscribers.