AIA Billings index up (some)

For those of you in our architectural and engineering communities, the AIA released the September ABI (Architectural Billing Index) results a few days ago. As usual, the information contained is a little nebulous. There appears to be more work in some parts of the country, while others are clearly lagging. The summary is below:

Washington, D.C. – October 20, 2010 – For the first time since January 2008, the Architecture Billings Index (ABI) indicated a growth in design activity in September, increasing for the fourth straight month. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the September ABI score was 50.4, up from a reading of 48.2 the previous month. This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was also up sharply, moving from 54.6 to 62.3 – the highest mark since July 2007.
“This is certainly encouraging news, but we will need to see consistent improvement over the next few months in order to feel comfortable about the state of the design and construction industry,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “While there has been increasing demand for design services, it is happening at a slow rate and there continue to be other obstacles that are preventing a more accelerated recovery. Still, the strong upturn in design activity in the commercial and industrial sector certainly suggests that this upturn can possibly be sustained.”

Key September ABI highlights:

• Regional averages: Northeast (56.7), Midwest (51.0), South (47.0), West (44.5)

• Sector index breakdown: commercial / industrial (56.3), institutional (47.9), multi-family residential (47.0), mixed practice (44.2)

• Project inquiries index: 62.3

As a contributing member firm which makes up the ABI, I’ll share a few observations about its purpose and methodology. Each month, a sampling of firms throughout the country are asked to participate in a volunteer survey to help gather information, primarily about the level of billings each firm has seen the previous month. The questions posed are usually similar to: ‘In the past month, have your billings: (a) increased by more than 10% (b) more than 5% (c) stayed the same (d) decreased by more than 5% (e) decreased more than 10%”. Similar questions are asked in regards to inquiries for new work. Finally, each month they’ll ask a set of more unique conditions questions.

In theory, it’s a reasonable question to ask. However, the ability to correlate workflow across time seems weak. For example, if a firm is had a particularly rough August income wise – a major project is in a review phase with no real billings accruing – then September could look artificially high once the project moves into the next phase. This would lead to a high spike in billings RELATIVE to the previous month only and would not necessarily correlate to an increase in the overall work the firm is seeing. As well, there is no real correlation between inquiries and actual available work. Our firm was asked to bid on a single family house that solicited 15 firms, an incredibly high number for a small project. If all 15 of those firms were to reply that their inquiries were ‘up’ as a result, the total amount of work wouldn’t be up, since everyone was competing for the same limited amount in that project.

So, take the numbers with a grain of salt. It’s great to see anything positive – we’re just not quite out of the woods yet.

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Hello world. My name is….

We’re going live here at The Design Office, Inc. Our hope, over the coming months and years, will be to have this blog become a way in which we can share ways to help you improve the business of running a design business.

Although our co-op is focusing on getting you the best possible savings on the things you need to run your office, we know that there’s more to fashioning a great business than just saving money. We’re going to be that resource.

Enjoy the great fall weather and we’ll chat soon.

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