Will AI change billing forever?

No AI prompt can determine the lasting financial implications of architecture’s embrace of AI. But with many predicting that AI will overrun numerous aspects of building design, it’s possible the traditional hourly payment model of architecture is under threat. Technology may force a reckoning: Will practices organized around selling their time need to pivot to selling their value?

“This is such a great opportunity to finally rebalance the business model a bit,” said Keir-Regan Alexander, a British architect who has written about the potential for this kind of shift. He believes the industry has needed a conversation on the subject “for many years.”

The traditional model

The longstanding billable hour model used in the architecture, engineering, and construction industry tends to be a risk-management mechanism that protects firms with guaranteed work amid extended deadlines and lengthy redesigns. But the model also disincentivizes innovation, said Bhragan Paramanantham, a civil engineer and author of the Last Week in ConTech newsletter.

For general contractors especially, a 100-hour project budget tends to encourage firms to attempt to hit the exact hourly budget without a minute more of effort. If the firm goes over, the client wins. 

The old standard may be comforting during a period of reduced opportunities and anxiety about the architectural economy. We’re currently in such a period: The AIA/Deltek Architecture Billings Index® from March showed flat billings as well as the 25th straight month of decreasing value for newly signed contracts. 

But now, Paramanantham said, larger firms involved in design and build projects believe that, with the advent of AI, they can set a flat fee for work and reap bigger margins as improving technology allows them to do more in less time with fewer workers. Troy Rudd, an executive at the design and construction firm AECOM, recently noted during an earnings call that the firm’s clients are increasingly “bringing up in the dialogue how they would like to move to a method of contracting that recognizes that value–so moving away from something like cost plus to something that looks more like a fixed fee.” 

Last November, AECOM acquired the AI firm Consigli for $390 million. Paramanantham argues that the acquisition indicates AECOM’s leadership was clearly starting to think about ways that AI and automation can bring business benefits and change how it charges for work. (Consigli calls itself the “autonomous engineer”).

“There's definitely a recognition that AI has changed things,” he said. “I think everyone knew that the billable hour model was broken, but the business was so good, right? If there’s no incentive to change, why cannibalize your core business?”

The drawbacks of a flat fee system

Some warn that an embrace of flat fees might put an uncomfortable spotlight on budgets and timelines. Barry LePatner, an attorney, author, and construction and infrastructure expert, expressed concern regarding the need for architects to deliver “certainty about cost or date of completion.”

Others speculate that broad AI adoption in design will potentially disadvantage small architecture firms. If larger, more established companies can invest more quickly and broadly in the latest technology, they may be able to submit more designs, out-compete smaller companies, and realize the increasing margins that make a flat fee scheme more appealing. Such an outcome could create a more concentrated industry.

“Bidding with AI enables you to increase your throughput, so you can bid more often for more things,” said Alexander. “It’s a big investment, but when you make it and teams get good at it, they are bidding in shorter periods of time.”

The worth of the profession

Any shift to a flat fee structure would require greater industry coordination on what those fees would be, said Alexander. The solution may be some level of coordination to keep firms from undercutting each other during a race to the bottom. Industry-wide standards would also offer more protection in moments of high inflation during which, without the ability to raise prices across the board, firms may seek to undercut and therefore reduce payments and margins for everyone.

“Maybe we shouldn’t work for free,” Alexander said, in reference to contests and other work done for clients before contracts get signed. “It's quite controversial, because people think it's anti-competitive to not be able to work for free, but I just see it as degrading the profession.”

Reminding clients of the true worth of the profession may be as vital as rethinking payment structures. Alexander also advocates for a professional focus on competency, making sure that anyone who calls themselves an architect has the ability and expertise to do what they ask AI to do. It’s important to agree on a baseline standard and train juniors to that level, a practice that might be at risk with firms that, because of AI, may not hire younger architects or may recruit less qualified workers to simply be prompt engineers.

Architects should also promote their duty of care: They’re ultimately responsible for projects, and more importantly–and of more value to clients–can guarantee a better, safer, higher-quality project. Alexander said architects are already seeing clients shoot back renders or project images they themselves have edited or mocked up with AI, a suggestion, whether implicit or not, that clients can play a larger role in the design process.

Ultimately, Alexander hopes that the fee conversation, catalyzed by the adoption of AI, becomes as much about professionalism and best practices in the industry. A shift in how architects look at fees ultimately asks the question of what architects are selling and what their work is worth. 

“Personally, I feel that we need a campaign about this in professional services, to be confident about the value we provide our clients and the important services we deliver,” Alexander said. “We can’t be bashful about it. We’re not just clicking buttons—that’s not what we do.” 

Want to learn more about AI’s impact on the profession? Check out guidance, tools, and insights from AIA’s AI Task Force.

Patrick Sisson is a freelance writer covering architecture and design. He lives in Los Angeles.