Architecture and engineering firms throughout Australia and New Zealand are missing out on invoicing up to 30 percent of their billable hours, according to a new survey which also reveals that firms throughout the two countries are generally confident about growth prospects and are mainly pursuing growth through organic means rather than acquisition.
Conducted by research service firm Ipsos Synovate on behalf of Virginia based enterprise resource planning outfit Deltek and Perth technology firm Smart Software, the Trends & Challenges in Architecture and Engineering International Report 2014 reveals that practices in architecture and engineering are missing out on vast amounts of revenue as significant proportions of billable time are not charged out to clients and recouped.
Based on a survey of 235 decision makers within practices across fourteen countries (mostly in developed economies), the report revealed that on average, 30 percent of the billable hours of Australia and New Zealand firms not being invoiced or financially recovered, with almost three quarters of participants indicating they recovered only 61-80 percent of billable hours.
And whilst the relatively low number of Australian/New Zealand participants surveyed (23) means statistical errors are possible, the broader picture suggests that loss of billable hours is a common challenge across all regions, with 26 percent of such hours not having been recouped on average across the total number of firms surveyed.
Furthermore, the report suggests that whilst fixed price contracts are becoming increasingly popular, (used on 61 percent of contracts worldwide – 70 percent in Australia/NZ) it cautions projects delivered in this manner as opposed to ‘time and materials’ are only competitive and profitable where they have been scoped accurately from the beginning and stay within agreed timeframes and budgets.
“Are fixed price projects good news for the architect and engineering suppliers?” the report asks. “There is no clear answer.”
“The upside of fixed price projects means there is always the opportunity to maximise profitability if a firm is disciplined in exercising sound project control and carry out exact estimation and planning.
“On the other hand, should agreed budgets and timescales escalate, firms risk losing a considerable amount of money.”
The survey also indicated general optimism about the outlook going forward.
Across all regions, 72 percent of architecture and engineering firms anticipate revenue growth in 2014 (82 percent in Australia), with the majority (75 percent worldwide; 88 percent in Australia/NZ) expecting growth to come through organic means rather than acquisition.
In other survey results:
- Price competition and finding/retaining good staff were ranked as the biggest challenge and threat to practices
- Winning new projects and customer satisfaction were most commonly ranked the most important business issues out of six issues, with 41 percent and 38 percent (48 percent and 26 percent for ANZ) ranking these as most important.
- Long term relationships with clients, attracting talent and retaining the right people and firm reputation were considered the most important overall success factors, with 78 percent, 65 percent and 61 percent respectively ranking these in the top three out of seven success factors for their company.