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The strategic choice of an Architect-Contractor firm is to combine an architecture firm with a construction company. This combination allows designing and building what is designed as one entity, so that the client does not only get a service of building design, but also a final product – the building. There are inefficiencies in having the architect and builder as separate entities. For example, design and constructability disagreements, and a bidding process at the end on the design phase. This firm type cuts out these problems and lets the architect be the main party to control the budget. This allows the possibility to invest more in design than a contractor would do. This leads to the final product being better designed per budget than if two firms work separately.
The central varying choices are to hire architects with experience in construction, to buy software with cost-estimating abilities, to advertise through design-built publications. The unique choice is to hire reliable subcontractors.
Hiring architects with experience in construction will reduce the time it takes to learn aspects of construction such as cost estimating, and will allow for these employees to integrate faster into the company. For fast and accurate cost estimating, software will be required. By knowing the exact cost of a building, a firm can give an accurate estimate to the client as to how much the building costs and can compete not only on quality design but also on price of the building. Knowing the exact cost will also lower the risks of running over budget. This firm type can also advertise their services through design-built publications to customers that want to have a custom design but are price-conscious.
A unique central choice in this firm type is to hire reliable and credible subcontractors. A construction company is usually divided into two parts: the general contractor who knows a little about all aspects of construction and leads the construction, and subcontractors who are hired on segmented job bases like building walls or pouring the foundation. In this case the architect is the general contractor, but for the projects he/she will have to hire subcontractors who will do most of the work. These people have to be skilled, credible and reliable. If something goes wrong they will only partially answer for this, but the general contractor takes a large responsibility for the people he/she hires. Therefore, it is vital to have network systems of credible subcontractors to hire for jobs. A well-built project has a consequence of gaining reputation for the firm and increasing client referrals.
Now that all the choices have been discussed we can look at the virtuous cycle consequences that are the result. As in other firm types, if the reputation is good clients come back and refer other clients to this firm. This leads to more projects and more profits because of expanding firm size. However, this firm type has a possibility to have a relatively inelastic demand if it provides high-end designs. The clients will still think that they are saving, and they will be because it is more efficient to have an architect and a contractor together, but the high quality of design will serve as a differentiator to competitors and create demand inelasticity. The firm, in turn, will be able to raise service fees and maximize the profit this way. Or, this firm can choose another path and compete based on price. In this case the profitability will rely on accurate estimates and quantity of buildings built.
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