Why are architects so expensive? (Are they?)

In the Philippines, it is common for people to say that architects are expensive or too overpriced. How can you charge so much for "just" drawings? Spoiler: It's not "just" drawings. One thing I've come to understand is that price is relative. (See Nerd facts 1 & 2 below)

Basically, people will generally buy something if the value of the thing is worth more than the money they are imparting with. The question therein isn’t “Why are architects so expensive?” rather it’s “What is the value of an architect?” “Are architects more valuable than the money I am imparting with?”.

Normally, I’m tempted to go into the argument of “design, aesthetics and style” as the prime value of an architect, but like paintings, the price of beauty is relative to the stature of the artists and their work. Paintings can range from 500 pesos to 5 Million pesos, so valuing architects in such a manner is arguable.

Instead, the closest objective value of an architect that comes to my mind is “reverse insurance”. In so far as, we pay for insurance as a buffer for risks that may occur, but we pay for architects and consultants to minimize these risks from happening in the first place. (See image: Influence vs Cost Curve)

The value of an architect is in planning. (See Nerd fact 3 below) The plans produced to represent the ideal vision of the project, with all its stakeholder’s concerns and goals incorporated. We work on the front end of the project so that we can control costs and expectations down the line. The architectural process takes time and money. But planning and visualizing the entire project ahead has exponential and critical applications. Particularly in controlling the final project costs and more importantly the outcome.

“Plans are nothing; Planning is everything.” - Dwight D Eisenhower

Notes:

Halfway through my MBA journey, I've been exposed to the business side of the industry. So, I did a study of a typical proposed financial statement (proforma) of a residential real estate project for sale. Zooming in only on the Profits, we can derive the following from the Net Profit / Total Net Profit for each partner:

Developer 45%

Architect* 2%

Engineers/Consultants* 3%

Construction 35%

Sales/Marketing 15%

*Fees based on PH standards, which don’t typically apply.

Architects get a net profit of 4.44 pesos per 100 pesos of the developer’s net profit. This alone doesn’t tell us anything, because, of course, Developers have more risks, which may be worth more. Peter Drucker put it succinctly: “All profit is derived from risk.” It does, however, tell us where we stand in the broader scheme of things.

Nerd facts:

1. Rational choice theory states that individuals use rational calculations to make rational choices and achieve outcomes that are aligned with their own personal objectives.

2. Voluntary exchange is a transaction where two people trade goods or services freely, there is no coercive or restrictive force involved in the transaction. Both parties want to make the exchange of items, and both parties will benefit from the trade.

3. These are only 2 of the many underlying theories of economics.

4. Architecture is a unique field, that architects are supposed to know and coordinate: end-user experience, mechanical, electrical, plumbing, sanitary and structural engineering, architectural interiors, lighting, acoustics, graphic design, and construction. (I’d like to add finance to the list, but it’s not typically included in our curriculum)

5.Value of an architect* = (Design*Overall end-user satisfaction) + Cost savings

Cost savings = (Project cost without Architect - Project cost with Architect)

*The formulas are assumptions, please don’t quote me on this.