SSmall Office Practice
Of vital interest to the practitioner is the Task
Force Committee Report "Small Office" which
is included in this issue of THE FLORIDA
ARCHITECT (page 13).
This report represents a year long study by the
committee chaired by Francis R. Walton, FAIA.
The task of this committee does not end with
the publication of this report. At the end of the
report a list of recommended programs, an out-
growth of the report. The Committee will place
its immediate effort in the preparation of an
"evaluation handbook" to fulfill the first recom-
The problems of a small office are very real, not
to be interpreted that problems do not exist with
the larger firms. But the resources available to the
small practitioner are much more limited. The
FAAIA through the Task Force, is devoted to pro-
vide further input by corresponding to FAAIA or
direct to Francis R. Walton, FAIA (211 N. Ridge-
wood Avenue, Daytona Beach, Florida 32014)
S An election campaign that started over two
years ago climaxed in a stunning victory for
Charles McCoy, A. I. A. as Mayor of Key
4 West, Florida. "Sonny", as he is known by his
friends and constituents, ran for the office in
I spite of dire predictions that a professional
jp man and non-politician could not win a seat
in City Hall, let alone the Mayor's chair. From
Grunt Bone Alley to Passover Lane, to Flagler
Avenue, Sonny campaigned, met and talked
with the voters of Key West. His campaigning
paid off. He was even spared the necessity of
a run-off and won by a landslide in the pri-
mary, in a field of four candidates.
His Honor, The Architect
Sonny was sworn in as Key West's first Arch-
itect-Mayor on Thursday, November 18 at
12 noon. Friends and family packed City Hall
for the ceremony, and since he has three sons
and three daughters, the usual jokes of produc-
ing quantities of prospective voters abounded.
Besides being Mayor and a native of Key West,
Sonny is a graduate of the University of Florida
where he belonged to Gargoyle Honorary Arch-
itectural Fraternity, is a member of the Florida
South Chapter of the A. I. A., and'is the South-
ern-most member in the continental United
States of the American Institute of Architects.
He has his own firm, Charles McCoy, Architect,
Sin Key West; and is a partner of McCoy-Severud
-Knight-Boerema, Architects, Key West and
THE FLORIDA ASSOCIATION
OF THE AMERICAN INSTITUTE
FAAIA OFFICERS FOR 1972
Richard E. Pryor, AIA, President
1320 Coast Line Building
Jacksonville, Florida 32202
Thomas H. Daniels, AIA, Vice President/
425 Oak Avenue
Panama City, Florida 32401
James E. Ferguson, Jr., AIA, Secretary
4221 Ponce de Leon Blvd.
Coral Gables, Florida 33146
Frank R. Mudano, AIA, Treasurer
1189 N. E. Cleveland Street
Clearwater, Florida 33515
1972 BOARD OF DIRECTORS
Ellis W. Bullock
Arnold F. Butt
John W. Dyal
John T. Dye
Rudolph J. Fletcher
Robert G. Graf
Robert B. Greenbaum
Donald R. Hampton
Oscar A. Handle
A. Reese Harvey
James B. Holliday
C. Frasuer Knight
Robert H. Levison, FAIA
Howarth L. Lewis, Jr.
James D. McGinley, Jr.
Wiley M. Parker
Roy L. Ricks
William K. Rinaman
Nils M. Schweizer
Frank D. Shumer
Kenardon M. Spina
William R. Upthegrove
Francis R. Walton, FAIA
Robert L. Woodward
American Institute of Architects
Hilliard T. Smith, Jr., FAIA
1123 Crestwood Boulevard, Lake Worth
Florida Association of the
American Institute of Architects
Fotis N. Karousatos
1000 Ponce de Leon Boulevard, Coral Gables
Smith & Moore
P. O. Box 1169
Tallahassee, Florida 32302
Ted P. Pappas
Charles E. Pattillo III
Richard J. Veenstra
THE FLORIDA ARCHITECT
Fotis N. Karousatos / Editor
John W. Totty / Assistant Editor
Howard Doehla / Advertising
Kurt Waldmann / Photography
COVER: SEASON'S GREETINGS
5 PRACTICE PROFILE:
ELLIS BULLOCK, AIA
13 SMALL OFFICE PRACTICE
29 PROJECT FINANCING FOR THE
PAUL B. FARRELL, JR.
DR. CARL J. TSCHAPPAT
32 FAAIA ORGANIZATION CHART
35 LIMITED ENROLLMENT AT THE
UNIVERSITY OF FLORIDA
RICHARD H. MORSE
THE FLORIDA ARCHITECT, Official Journal
of the Florida Association of the American
Institute of Architects, Inc., is owned and pub-
lished by the Association, a Florida Corpora-
tion not for profit. It is published bi-monthly at
the Executive Office of the Association 1000
Ponce de Leon Blvd., Coral Gables, Florida
33134. Telephone: 444-5761 (area code 305).
Opiniofts expressed by contributors are not
necessarily those of the Editor or the Florida
Association of the AIA. Editorial material may
be reprinted provided full credit is given to the
author and to THE FLORIDA ARCHITECT
and copy is sent to publisher's office. Con-
trolled circulation postage paid at Miami,
Florida. Single copies, 75 cents, subscription,
$6.50 per year. 1971 Member Roster available
at $10.00 per copy. 1971 Directory of Archi-
tectural Building Products & Services available
at $1.50 per copy.
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AIA P A COA
~I b m ~ h A
Mental Health Center Pensa-
cola (1968); $250,000; Houses
Mental Health Program, N.W.
Florida; Facilities include
day-care unit, out-patient
clinic, Mental Health Associa-
tion offices; Selected by
American Psychiatric Society
Beach House for Lindley Camp on Santa Rosa Island
(1969) $26,000; plywood and frame construction;
designed to capture prevailing breezes and for safety
from rising water.
Ellis Bullock, AIA
Humanities Building at Uni-
versity of West Florida (1967)
$960,000; in association
with Forrest Kelley, AIA,
Board of Regents; Contains
art, music drama, university
audio visual studios and educa-
tional TV studios.
PHOTOS: J. D. Hayward
t e i o pro-
duce excellent architecture. This should be
architecture that is aesthetically sensitive,
undan within the timiJ.
Over the past fifteen years, the works of Ellis W. Bullock, Jr.
and his architectural associates in Pensacola have exhibited an
emphasis on the many beauties of design and technical f
functionality. In the simplest of terms, the firm acknowledges a
responsibility to society as well as to the paying client. Most
architectural firms will agree, but not many in Florida have
adhered to this philosophy as has Bullock' veteran organization.
Located within an area some people refer to as Florida's "last
frontier", Ellis Bullock is convinced of the Miracle Strip's
blossoming future. He cites the large tracts of vacant land still
available, the abundance of waterfront acreage undeveloped and
points to over $2.8 million in present construction contracted
beyond a 200-mile radius of his office in Pensacola.
Bullock has seen the development of nearly three thousand
apartment units in Escambia County within the last five years.
His organization has participated actively in the growth of the
Pensacola Junior College campus and in the conception and
design of a new University of West Florida, now utilizing
twenty-two modern buildings for four thousand students.
"Community Development" is the name of the game for
Bullock and his associates. A 1954 Auburn graduate, Bullock
served in the Korean War as a Corps of Engineers lieutenant.
Since then he's been a director of the Pensacola Chamber of
Commerce and the Jaycees; chairman of the United Arts Fund
Drive; a member of the Historical Pensacola Board of Trustees;
Vestry and Ji. Warden of St. Christopher's Chruch; member of
the City Zoning Board and the United Fund Board; In the d
Northwest Florida Chapter of AIA, he's been active as secretary,
president and director. In 1969 he was the recipient of the A
AIA Community Service Award. Currently Bullock is chairman
of the Pensacola Building Code Board of Appeals, member of
the Histoiic Pensacola Preservation Board, director of FAAIA
and convention committee chaii man plus a member of the AIA
Histoi cal Resource Commission.
Other members of the firm aie actively engaged in Chamber o.f
Commerce work, Floiida Bicentennial, Action '76 and other
ELLIS BULLOCK community and civic affairs. Each staff member is a college
graduate and excels in his field, and assignments are made to
fully utilize individual talent. Bullock, in charge of general
administration and project development, participates in all basic
design decisions. He describes other members' duties as follows:
Lewis Culver (Florida '66) is in charge of the firm's production,
scheduling and consultant coordination.
Ted Ruckstuhl (Tulane '56) overseas specifications, cost
estimating and shop drawing review.
Jim Williams handles field inspections.
Ernie Musick (Texas A&M '69) and William Davis (Texas A&M
'66) participate in all phases of architectural projects.
During 1970 Bullock added to his organization an interior
design branch. Edwin Foy (University of Georgia '68) assisted
by Susan Driscoll (Syracuse University '70) team up to
coordinate the interior design in architectural projects and
separate interior contracts.
This diversity of talent lends itself well to the team approach
which is used on all projects. Teams are usually comprised of
: three members. Outside consultants for engineering, landscaping
and planning are retained as needed on a project basis.
To obtain an optimum office situation in which excellence
prevails, expanded in-house ability is essential, Bullock believes.
Now an individual proprietorship, the addition of design,
planning and structural associates is the next planned step in the
firm's growth program.
evr, Last year the firm moved from a downtown location to new
, James offices in a suburban area. The offices reflect Bullock's design
usan philosophy of "simplicity, frank statements, and honest use of
materials." Including rental space, now occupied by a clinical
psychologist, the offices contain 2,000 square feet. The offices
were constructed to allow for incorporation into an expanded
architectural office of 5,000 square feet.
The firm uses a diazo printer for in-house reproduction, while
contract documents are reproduced by outside printers. A 3M
copier is used for correspondence, estimating and reproduction
of small specifications. In addition to adding machines, Olivetti
Logos 270 and Frieden 1140 printing electronic calculators with
memory capabilities are also used.
The office has an IDAC Spec System in addition to 350-400
catalog volumes on file. All catalog filing, cost estimating and
specifications are keyed to CS1 format.
Military installations are numerous in the Florida panhandle,
and a large percent of revenue from government and commercial
type buildings has been enjoyed by the Bullock firm. However,
this percentage has decreased somewhat over the past few years,
while educational and housing type construction has increased,
a reflection of the increased population growth in this part of
PRESENTATION AND COMPENSATION
Personal contact is still the key factor in client relationships,
Bullock believes, although letters, brochures and audio-visual
materials are used in client presentations.
Because of the variety of projects, the method of compensation
also varies. Flat fees are negotiated on most government projects
involving the Navy, Air Force and Post Office Department.
Some governmental agencies such as HUD use set scales.
On non-governmental work, the firm uses the FAAIA scale --
percent of cost of construction. On more recent projects, a
multiple of direct expense has been used to determine the
Technical Staff: L. to R. seated, Louis Culw
Theodore J. Ruckstuhl, Ellis W. Bullock, Jr.
E. Williams, Ernest R. Musick. Standing: S
Driscoll, Edwin G. Foy.
''' ml :
ELLIS BULLOCK LOOKING AHEAD
Scanning the future, Bullock says, "For the architectural
profession to keep up with the ever changing, expanding,
complex society, and to architecturally meet the needs, we must
be flexible and prepared to change. We must assume new rolls
within the broad spectrum of construction that previously have
been foreign and alien to the profession. Above all we must
assume the leadership where the basic development and design
decisions will effect our society."
He adds, "Acceptability to change, with competency, demands
continuing education. I firmly believe that a specified minimum
of continuing education should and must be a prerequisite for
annual registration renewal."
"Large complex plans, multiple discipline projects will only be
done by the firms which have these capabilities. This is the kind
of work that we seek, and to this end we shall change, expand
and educate ourselves.". U
PERCENT OF REVENUE BY BUILDING TYPE
'67 '68 '69 '70
Governmental & Commercial 68% 51% 63% 26%
University 7% 11% 20% 17%
Secondary Education 21%
Housing 11% 24%
Residential 13% 18% 6% 2%
Dollar volume of construction by the Bullock firm has risen dra-
matically since 1967, a further indication of the increase in bus-
iness and building activity.
HISTORICAL VALUE OF CONSTRUCTION VOLUME
Anderson House, circa 1859 historical restoration of
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3OP TASK FORCE COMMITTEE REPORT
SOP THE FLORIDA ASSOCIATION OF THE AMERICAN INSTITUTE OF ARCHITECTS
MOTTOES FOR THE S.O.P.
if you have a lousy personality H I D E
AND LET YOUR WORK SPEAK FOR YOU
DON'T LET THE BASTARDS WEAR YOU
When the big office pe
your clients you "Farm
SMALL OFFICE TASK FORCE COMMITTEE
CAST OF CHARACTERS,
SCHEDULE OF THE PLAYERS OR
PARTICIPANTS IN THE DIALOGUE
B B Bob Boerema, President FAAIA
Bob Bob erema, President FAAIA
B B Our Glorious Leader (for now)
F R Francis R. Walton, Chairman
H S Herschel Shepord
P P Charles E. Pattillo III "Pat"
550 Brickell Avenue
Miami, Fla. 33131
211 N. Ridgewood Ave.
Daytona Beach, Fla. 32014
456 University Blvd. N.
Jacksonville, Fla. 32211
206 W. Forsyth Street
Jacksonville, Fla. 32202
M P.O. Box 2026
Fort Myers, Fla. 33902
SG Martin Gundersen (813) 334-7141
S K 1600 N.W. LeJeune Road
4 Miami, Fla. 33126
Samuel Kruse (305) 635-0845
K 3127 Ponce de Leon Blvd.
Coral Gables, Fla. 33134
V K Walter S. Klements (305) 448-5108
B 425 So. Garden Avenue
Clearwater, Fla. 33516
BBob Levison (813) 442-9691
P. O. Box 1698
Tallahassee, Fla. 32302
RLRobert L. Woodward (904) 385-5191
A800 Douglas Entrance
Coral Gables, Fla. 33134
PAndy Ferendino (305) 444-4691
SSmall Office Practitioner
hereinafter referred to as SOP
1 Definition of a small office. (We started with
the belief this should be established. Some beg
for a qualitative definition)
1 to 7 technical personnel with 1 to 3 principals, Architects.
"Small" is an undefined term except in relations to other
size considerations. An architectural office which "em-
ploys" consulting engineers for all projects may be a
very large firm with 12 strictly architectural men. Three
working architects with three senior assistants each and
using consultants could turn out 18 million dollars worth
of work a year and if they performed job administration
with it they might require an additional support staff of
12 for this work. The addition of engineering staff aberrates
HS I tend to agree with Sam K Any office whose principal
or principals are engaged, day to day, in providing gen-
eral architectural services within the firm is basically a
small office in structure and problems by this I mean
each principal does a little design, a little PR, some spec
writing, etc. For our purposes I would not include an
But these things should also be considered and do relate
to physical size, location, etc.:
-Principals + 2 employees: don't have to sweat the
Florida Unemployment taxes unless incorporated and I'll
bet the great majority don't carry professional liability
insurance; also, too small to qualify for employee fringe
-One principal, full or part time, with or w/o em-
ployees: Oftenthese firms are very special cases, but not
always. I agree w/Pattillo- one man full time is OK, but
forget part time.
-Location in a small town (or unsophisticated city)
vs. location in a major metropolitan area means a lot -
the means for future survival might be very different for
MG There is a big difference between SOP in isolated small
town and SOP in big city or near large urban facilities.
PP Required Reading:
1. 1. The Economics of Architectural Practice, AIA,
Case & Co.
2. Methods of Compensation for Architectural
Services, AIA, Case & Co.
3. Financial Management for Architectural Firms,
AIA, with Arthur Anderson & Co.
4. Architectural Management, Guidelines Publications,
5. Architectural Promotion, Guidelines Publications,
6. Architectural Production, Guidelines Publications,
Note! These 6 publications have been of great help to
this office, especially the first three.
It is hard to define "small" office. I think this is as good
as any. A one man office operating from an office full
time is OK but one man either part-time or working out
of his house must be separated from the main definition
of a small office.
SK "1 to 7 technical personnel with 1 to 3 principals, Archi-
tects" I don't really think this is the criteria. Small is
relative to large. In Miami my firm (25) is small; in Naples
it might be a giant. The capacity to do service is the
measure. If a firm is isolated and has only a limited cap-
ability (in house or out), the firm is small. A Louis Kahn
(3 to 5 guys) is not limited because he has Philadelphia
resources at his disposal.
RLW "1 to 7 technical personnel with 1 to 3 principals, Arch-
itects" Total of less than or 10 would be typical, I
"? Would one engineer principal be O.K." Are we not
entering into a SOP with more diversified services than
an architect only from which must depend solely on
consultants for civil structural drainage, acoustical,
mechanical, electrical, etc.? The main area of concern in
the small office in the Tallahassee area is how to achieve
diversity of services in the architectural office without
the use of engineers on staff or as principals, although I
personally believe that an engineer on staff is desirable
and we should not exclude AE diversity in our definition.
2 (a) A quick review indicated that the defined
small office, 7 or less, represents 90% of
the offices in some areas and averages .at
about 80% over the state.
(b) A committee goal unmet so far was the
development of data and the desire to
make all SOP's examine their operations.
The result of this report might be the goal
HS We should scare the hell out of the state membership.
Most small practitioners are so complacent they don't
know a problem exists; 75% don't seem to be able to
read. At Grassroots someone said that any office not
familiar with the Case report deserved to fail after
that particular meeting two chapter presidents sitting
next to me asked me "What was with this Case report"
the survey questionnaire must shock the SOP's into
PP -Repeat "Case & Co's seminar of a couple of years ago
-Articles or profiles of SOP operations.
-I think most SOP's don't believe their future existence
is even in doubt and most of those believe that "profit"
is a bad word.
SK This is important. The Case report and contingent sur-
veys were very revealing. Such things as personnel
practices, evaluation of their own worth and how this
is used to determine fee and plan promotion programs.
A wealth of data could be dredged for all kinds of pro-
grams for FAAIA and AIA.
From case study we learn that the architects' indirect costs
must be understood. They include:
(1) Nontechnical (secretary-bookkeeper)
(2) Office supplies
(3) Auto expenses
(4) Dues and subscriptions
(6) Interest on business related debt
(7) Pictures and paints
(8) Professional seminars and conventions
(9) Rent and utilities
(10) Taxes and licenses
(11) Telephone answering service and telephone
(13) Business promotion
(14) Maintenance of home or studio if used partially for work
(Proportional to use by area & time)
(15) Accountants and legal fees
(17) Professional insurance
(18) Principal's salary placed as a planned item of overhead
(19) Fringe benefits
Note: Equipment is capitalized and depreciated. This accumu-
lation can run from 33 to 40% of gross fees per registered
FRW Note; Many of the items are attached to the professional
and repeat for each professional present. The principal
items that are shared by a group of professionals in one
office are nontechnical wages and rent and utilities, and
even these may expand in response to a larger force.
Irregular work flow is serious in relation to the size of
the office and in relation to the size of fixed debt
(monthly payments) of the individual.
We need to establish definitive statement to determine
the take-home pay. The Case study did not specifically
aim at SOP and the inclusion of principal's salary as
overhead or indirect expense tends to cloud the figures.
Recognizing that a portion of principal's time goes to
perform in the overhead area is obvious. The larger the
staff the more time of this sort.
FRW Organizing time is aided by following carefully the AIA
Owner-Architect Agreement schedule for payment,
Feasibility Studies, Schematics, Design Development,
Construction Documents, Bids, Construction, and being
sure to sweep up all the elements of a stage before
launching into another; such as don't start detailing out
while still trying to win owner approval of schematics
OR don't start engineers on finals while still working on
design development. Keeping the work stages sanitary
makes it less disastrous to change things that need
HS "This accumulation can run from 33 to 40% . .
"Absolutely essential for survival; terrifying. Should be
refigured each year minimum assuming firm structure
does not change. An average figure per man hour is
important to know but it is just as important to thoroughly
understand how indirect costs vary with projects types.
ACCURATE TIME SHEETS ARE MANDATORY, and
"Irregular work flow is serious . it helps to have a
working wife! We must begin to develop projects of our
own we're working hard in this direction.
PP "This accumulation can run from 33 to 40%... "- I
believe that each office must know this figure for their
own office and operation.
? "Linear vs. Const. Management"
"Irregular work flow . techniques of job cost
accounting and analysis should be discussed and refined.
Irregular work flow must be offset by regular cash-
I believe that 50-50% is more realistic if an enthusiastic
promotional program is to be employed Are you
sure about your OH figure for small office of 2
principals indirect costs can run as high as 20,000 per
month, with personnel participation in organizations
(such as AIA) insurance, (both life and hospital)
and other fringe benefits.
BL Linear vs. Construction Management. Expand from
4 Consultants and Support Services Knowing
where they are and how to utilize them.
a. Mechanical Engineers A/C, Plumbing.
b. Electrical Engineers
c. Structural Engineers
d. Site Engineering
e. Illustrators (Renderings?)
f. Extra help and cooperation worker pool consultant
h. Architect to Architect Consultation
Contract form needed and fee study
i. Landscape Architects
MG Promote these all available talent and information.
i Teams of research agencies for program develop-
ment (hospital and health facilities; education and
facilities; governmental facilities; etc.)
j Construction management teams
(These (i & j) are available to architects and often
make the difference between big-time vs. small-
time architects not size of office.)
HS a,b,c,d,e, Consultant fees are really getting hairy.
Engineering fees are often exceeding
50% of the total fee now this is no
joke. It's discouraging to have to get
the job, provide almost all client-eng-
ineer communication, take much
additional risk and then get paid the
f Members of the Sarasota chapter are involved in
one of these does it work?
g I still don't understand everything available from
h More of this is needed at the SOP level- critically.
i Services available through university centers
j Specification services (Masterspec: CSI spec)
k-Cost estimating and accounting.
I Mortgage and banking information for those who
want to be their own clients.
MG These services must be located in relation to informa-
tion in 2(a) "Distribution of Offices".
5 Professional Development
Polishing real skills, Professional release, reducing the non-
creative flap. Professional fuel, motivation to improve,
rewards for service.
Personal Improvement Aids:
a. Packaged films
b. Cassette courses
c. Books and papers
Defining areas of need and study them.
Knowing how to shape up and manage the client.
The economics of effect or where to blow a wad.
Keeping up or knowing how to "get up". (Research on Get
FRW Let us research all other professions' programs on this.
HS "Personal improvement aids" Knowledge of what
the future holds for the unwary is plenty of incentive
If an SOP is to survive in the coming years, somebody
in the firm:
a. Must become politically active. Future work will
be increasingly sponsored or controlled by a
political entity on some level. Why do most
architects feel that political participation is always
b. Must become a businessman and kick the "roman-
tic architect" habit; learn to say NO; learn to be
an SOB and earn your client's respect.
MG "reducing the noncreative flap" Well put. There
seems to be so many days when you work frantically
and accomplish nothing. Because there is no one to
assign 'chore' type work to.
SK This is so damn important. Add: knowing how to
make the things you like to do with your family also
be the unaffected promotion of one's practice.
BL "list of specialists in Architect types" Building or
RLW "Knowing how to shape up and manage the client"
"Develop a FLORIDA-list .." Not that this will
benefit the SOP yet The whole idea is to portray
an impression of diverse expertise and if an architect
is strong in one area of program, it doesn't mean that
his clients should have to look elsewhere for other
programming. Specialization is very restrictive, and
although I think we need consultant types to draw
on the firms listed should reflect a comprehensive
list of projects or project types (which I think we will
find highly inter-related.)
6 Public Relations for SOP Architects:
(1) The highly organized presentation (or brochure)
(2) Getting to know the prospective clients and their
(3) Appearing constantly as an advocate of good architecture,
joyful architecture, fun architecture or whatever.
(4) Taking part in your community where you can really be
of value (doing the things a shoe clerk or insurance type
could not do as well).
(5) Speaking out for values you can see better than others.
(6) Don't sell what you can't deliver. Know your product.
MG "Don't sell" But sell hard when you can This is a
great weakness at least with us -
Generally, I do not think architects are very aggressive '
in the accepted business sense.
SK Needed, Needed! This is good.
WK 4 & 5 Architects need to become more involved in
RLW (5) The architect must be the "teacher" a client
will only listen for that which he does not already
know We must implement item (2) by surveying
government structure and corporate needs.
a. Job type specialization
b. Subject or area specialization as an individual such as:
Expert on insurance economy through design
Expert on building codes and their effect on design and
Notes: Under type "a" many firms that become building-type
specialists could be induced to offer consulting services under
a contract which would not cause the SOP to be swallowed up
Under type "b" many SOP's could become experts on phase or
area matters and some large firms, SOP's and perhaps through
a technical center.
(Everybody can't fish all the time; someone has to cut bait and
the knife may get dull and need sharpening.)
Should job size limitation be discussed? Or the point at which
you call for help? Some good small firms have been harmed by
lifting too much alone (Business hernia).
8 Business Management Studies Use Consultants?
SThis should be several things:
(1) Evaluation team for reappraisal or review. Could come on
call from an SOP to look over his book and operation and
product (Contract Documents)
(2) Architect with special training teamed with MBA graduate
also with select training.
(3) National might find and furnish persons.
(4) Our study could furnish a cadre for this.
FRW (Additional) -
I have never accepted the Case format completely. The
SOP needs to keep his net in full view and at the same
time realize the distribution of his time to overhead,
production, PR, PA, Citizenship and AIA. When time
is the basis of charges the assignable production time
carries the burden of it all.
9 The Architects' Technical Center could furnish:
Vehicle for special skills, temporary space for enlarged operation,
equipment and hardware (Computer).
Central Technical information source center and/or specification
Special services can include:
Operational planning (food processing, department planning,
hospital procedure and space studies, traffic, etc.)
Insurance (project and building)
Maintenance studies and programs
Many specialties can be part time consultive furnished by
practitioners. See No. 7
Some could use student manpower and located near college.
Could develop standard for product design and attract manu-
facturers to assist in product improvement and testing and
cataloging and pricing.
HS "Job size limitation ... "- Can be determined only by
the firm involved. The majority of SOP's in general
practice are doomed because:
a. The traditional SOP client is turning to prefabricated
construction and "package dealers".
b. The traditional SOP client is himself disappearing
and becoming part of the larger corporate social structure;
the large corporation in turn demands more services and
turns to the larger AE firms.
c. The SOP architect is not businesslike, but more
importantly, it has been economically and physically
impossible for him to keep abreast of technology and
maintain general practice.
I think most SOP's must either specialize and stay small
or continue to generalize but grow larger. Other directions
besides those you list: SOP becomes its own client; con-
struction management; contracting as now allowed by the
ethical standards; turn-key and package deal participation;
industrial housing design.
MG (b) Can you really get paid for this?
Last paragraph Between 1 & 7 people this would vary
HS More of this is badly needed obviously National AIA
seems not to be aware there are an increasing number
of threats to resign from National in this area from active
chapter members, almost all being SOP principals -
they feel estranged from AIA programs, feel vaguely that
things aren't as they should be but don't know why.
THESE STUDIES, SEMINARS, ETC. SHOULD AND
MUST BE MADE AVAILABLE FREE TO CORPORATE
SOP MEMBERS even if other national programs have
to be curtailed.
PP Teach self evaluation cost accounting or job analysis
How much does it cost your office to execute a
particular job. Do you keep job cost records. Reduce
indirect costs techniques.
SK My firm has had two costly studies made. Both only
gave us assurance that we knew better. I believe any of
the 4 methods are good. Bull sessions (called seminars
in some circles) are excellent with architects. The Big
offices in Detroit do this regularly.
Should it be closed to non-Architect, non-member, non-SOP?
The size of a Technical Center would develop in relation to the
activity in the area and if all offices in the area were members it
would suffer a minimum of fluctuation in size. To be practical it
would need to serve as many architects as possible and perhaps
be part of a chain which could supply talents and refined
HS Should it be closed.. NO.
This is a great idea and must have been tried elsewhere
(besides Sarasota I'm sure).( Agroup of arch grads
started to try it in Jax + 10 years ago but everybody
was a chief). Sam K. mentions the AIA program I
think regional or metropolitan centers, possibly in uni-
versity towns and possibly sponsored by AIA, might be
very practicable. Perhaps organized as a corporation
w/SOP members as stockholders, etc.
MG "furnished by practitioners" To each other?
"Possibly not" Definitely not.
Special communications ?
10 Pre-packed Design Elements
The Complete Custom Design of Everything
Reinventing the wheel daily: many engineers and architects do
it. The design of electrical, plumbing and air conditioning sys-
tems and their specifications can be capsulized into packaged
units and adapted to the project. First find the pigeon-hole
your problem belongs in and then apply with judgment the
prestudied treatment adjusting it to all consideration.
FRW We have a lack of communication on this item. I
raise this question: On many small buildings, without
architect, the electrical system is simply code grade
worked out by the electrician and serves well. Also
the air conditioning was done by a sales person with
high school or unrelated college training augmented by
a short course at the factory. It also serves well. It was
this group that discovered the value of undersizing
A.C. to get longer running time and better dehumidifying.
SK "vs" ? "Complete Custom Design" Never really true.
We don't reinvent hardware, doors, windows and many
things. It's a matter of degree. A systems approach -
an inevitable development.
RLW Component Design Research may be the only way some
SOP's will ever get their jobs out, as they get bogged
down in trying to solve details. (we use "standard detail
method" in our office where applicable.)
HS "Reinventing the wheel .. They probably could
be listed on one hand.
See comments in (7).
The opportunity for truly custom design re the typical
SOP is so small as to be negligible, in my opinion, for
purposes of this committee. Except, we might advise
those SOP's who impose a type of custom design on
their unknowing or unwilling clients that times are
changing, as of 50 years ago. It's hard enough to find
out what technology has made available, much less
improve upon it. The almost infinite combinations of
available methods and materials places few restrictions
on imaginative design approaches.
S1 Understanding and working with Bureaus and
a. The state agency (1) Under Board of Regents
(2) Not under Board of Regents
b. Federal G.S.A. vs. Military
c. County governments
d. City Governments (1) Mayor-Commissioner forms
(2) City Manager forms
(3) Consolidated City-County
Needs and limitations of the department people who want an
architect and the procedures for serving at all levels.
HS (a) Department of General Services under Blakemore,
Bob Brown, etc.
PP (d) Add (3) Consolidated forms.
A review of drawings in Jacksonville by as many as 10
agencies before building permit is issued.
SK AIA already has done this for (b). Some governments
are very complex and change personnel frequently. How
to get laws and people elected to offices in which en-
lightened environmental development are the rule rather
than the exception is an important ingredient. Architects
are apt to complain about a bad building or zoning law
.or policy than work to change it.
RLW A. (2) Be concerned primarily with State G.S.A. and
Bureau of Construction Standards.
Need to get Architects to support long range planning
concepts with local government leaders with systema-
tic development of programs which the architect can
help formulate by pushing early enough and pointing
out the needs.
See comments under (5).
Red tape is increasing constantly and the SOP can find
that dealing with some of these people is hardly worth
the effort except for really sizable jobs. The SOP
should concern itself first with getting the desirable
jobs by becoming politically active as required but
bureaus are important in determining who gets repeat
or continuing work, particularly under DGS at state
12 Shields against Problems.
Contractor rating and attitudes
Knowing when you change hats even though you don't have
PP See Note 1.
MG Best SOP Solution: Move your office out in the barn
and get a talking horse -
SK How to organize one's time is the secret of active
people not unbounded energy. FRW must know
this. I do.
HS Comment on first 2 lines: Where possible we always
restrict most governmental work to invited bidders
and always require performance bonds.
Comment on FRW note: Well said.
Man SOP's are terribly organized "in-house". In
offices with permanent staffs the principals must
avoid interruptions by the staff as well as the client.
Also, the staff can interrupt itself the larger the
staff the more necessary become fixed policies regard-
ing conversation, radios, coffee breaks, etc. I think
the SOP can often sober up its staff and itself by
meeting informally in gripe sessions also by ex-
plaining, in general, the economic health of the office
and prospects for the immediate future. Another
real problem in the small office is offering the staff
the opportunity for advancement.
WK Comment on FRW note: Very good!
In addition to the detailed response to the posed topics of the original
outline here are three self contained statements:
The first made by A. J. Ferendino takes a somewhat oblique attack on
the question. It brushes aside the questions raised and challenges the
feasibility of the small office at all hinting that the large office is a
collection of work units resembling a small office. Let Andy speak:
AJF I arranged to have a two hour lunch with Sam Kruse
and Ed Grafton and discussed the summary you sent
to me. It is very difficult to answer the question of
the needs of a small architectural office. But, my
past experience indicates to me that for every prin-
cipal in the firm there should be six to eight drafts-
men to make a fair living for each principal involved.
I do not see three or four partners with six of eight
technical personnel earning a fair living. In fact, it
is difficult for an office of twelve to fifteen technical
men with two principals to earn a fair return for their
labors, in my opinion. An intermediate firm, as above,
is too large for small work and too small for large work.
We all agreed on one premise, that the average architec-
tural graduate, and this also applies to a large percen-
tages of practicing architects, has very little business
training or instinct. It seems to me that the average
college does little to develop the business side of a
man, so consequently he has to develop his own talents
in this direction. The majority of seminars in business
practice for professional architects are generally pretty
elementary, but I will agree with whoever made up the
list of reading material, published by the AIA, as a
better source of information then the majority of sem-
inars now available.
I think consideration should be given, by the AIA, to
the use of joint management, administration, secre-
tarial and drafting pools by half.
A dozen or so architects in one office building, as a
possible solution to the small practice problem. How-
ever, I do not believe that a central source for this
type of service would work if it were not in the same
The second of these pieces by RLW is a thorough going study of a
chapter and might well contain almost every view to be found in any
chapter. This one really speaks for itself:
RLW An effort was made to engage all practicing architects
in the Tallahassee area, but I was able to get a mean-
ingful response from 6 of the 9 "firms" immediately in
Tallahassee, and from none of the practitioners in
smaller communities as Marianna, Wewahitcha, Blounts-
In order to achieve responses which would conform with
the items suggested in your memo of December 14, 1970,
the following questions were put to these firms on a
personal contact basis:
1. Size of Firms
A) 1 principal, 3 technicians, 1 secretary
B) 2 principals, 3 technicians, 1 secretary
C) 1 principal, 2 technicians, 1 secretary
D) 1 principal, no technicians, wife does
E) 1 principal, 1 technician, 1 secretary
F) 4 principals, 15 technicians, 5 secretaries,
It is significant that SOP's (D) and (E) were not AIA
affiliated, but were anxious to contribute their experi-
ence and also appeared to be well managed for "one
man type" operations.
2. Office Economics: "Do you have a systema-
tized cost accounting of all indirect and direct
costs, with an office budget?" Only one firm,
(A), does not use a computerized accounting and
billing system (offered here by banking housess,
and this individual has a bookkeeper-accountant
as a "consultant". All other firms keep itemized
pre-formed records which are coded to the com-
puter operation, from subscriptions and promotion
to employee time records. Most responses indicate
that this cost data is worth all the time spent in
recording the raw data.
3. Work Flow: "Do you have a chronopath or
schedule system in organizing and scheduling jobs
in your office?" This got an affirmative response
from only (F). All others occasionally scheduled
their work loads on a week-to-week basis, making
allowances for "down" times or rushes only as re-
quired. Most felt that their volume of work was
fairly constant and did not necessitate close inter-
4. Consultants and Support Services: (I asked this
question in varied form). All firms used a mechan-
ical and electrical consultant regularly, except on
residential work or where a nominal volume of
M/E was required to support the bidding process.
Acoustical consultants, delineators, market an-
alysts, etc., were used very infrequently. The
principal aspect of this problem architect-
to-architect" consultation seemed to be an item
which did not stimulate very much response on a
fee basis but all agreed that some sort of pro-
fessional forum was needed to work out common
problems (which few were afraid to admit that they
had). One had an idea of a mobile architect-legal
consultant, perhaps a FAA state staff, fee-paid
member who could be called in for contract or nego-
tiation counseling, similar to our lobbyist Peeples.
5. Professional Development: "Would you participate
in a "PDP" (professional development program) if
it were offered?" All said yes, when given the
schedule and subjects to be covered by the first 3
FAA sponsored ones (before they started) but only
one firm (F) was represented at the first 2. When
questioned recently most said they had last minute
client "problems", wanted to know if these seminars
would be summarized to the chapter by participants
or taped for replay. (Maybe we could get out cas-
settes on a rental basis to offset expenses of mailing,
reproduction, breakage, etc.).
6. Public Relations: "What do you do to promote your
services or profession?" Only 2 firms have brochures,
only one has a PR consultant. All architect-principals
participate in community organizations and functions
and make regular appointments with local and state
officials, send in news releases on projects, etc.
7. Practice: "Do you believe that you (as a practitioner)
can specialize or become a consulting expert in a
particular field?" Only (B) felt that they might be a
consultant in "restoration" work or a historical archi-
tecture specialist. All others were believers that the
architect should stay in general practice and do the
best they can with their present scope of practice and
accept the consequences. Most all but (F) are against
8. Use of the Architects Technical Center: This stimu-
lated some interest. Building type program samples,
specifications, material use, testing results (as a central
ASTM file) and data generally used on projects are of
great interest. Architects feel that for the most part,
manufacturer's literature and sales representatives
aren't getting the job done and don't know the answers,
and therefore are getting some architects into trouble
with their clients. (Note: my own answer to this has
been to use the C.S.I. "Spec-Data" from manufactur-
ers, in conjunction with the technical articles from the
"Specifier". This organization is filling a great need in
this area of technical education, but seems a shame to
spend extra dues money for another organization to do
what we could be doing also). It is the feeling that a
great deal of money would be required to set up a fully
operational ATC and would the use given it on a state
wide bases? All 6 responding firms felt that it would
only be "occasionally" used by them unless the cost
were minimal, chargeable and the information instant
(how's that for idealism? The idea was that it should
be there if they do need it.)
General: I cannot begin to interpret or relay all the
"extra comments since I didn't have enough tape, but
I would like to chip in a few ideas that were volunteered.
a. The AIA should get away from the "socially
oriented programs" and work toward a more
"business management" and "technical service
organization", stressing ethics and idealogy by
b. The major problem of SOP's is to get the one or
two experienced technicians that they really
need to get the work out. I got a lot of expres-
sions on architectural technical education for
draftsmen and the lack of it. (Like a lot of
business and other professional areas, however,
this void will be eventually filled by blacks work-
ing toward the "white collar" jobs and these are
gradually becoming plentiful in the drafting field
if you don't believe it, contact Florida A & M
University. (A) (D)
c. Profit planning is not the problem but in work-
ing with people, it is difficult to organize time in
solving one problem at a time in a small office.
Self discipline to work long hours is required.
It is encouraging to note that even though my responses
were so limited, that I talked informally with other archi-
tects (employees and government employed) that were
greatly encouraged themselves to know that the FAA
Task Force on Small Office Practice actually existed and
could be formulative in establishing guidelines for the
SOP. Also I might note, that most of the recent gradu-
ates (employees), and architects in government that work
on projects with small office architects (as well as large
office architects) are more receptive to professional edu-
cation in office and practice management because they
see problems that practitioners often do not.
The third self-contained statement is offered by the Chairman:
FRW Perhaps I believed some of these things before the study,
but these make their way to the top over many others. As
Peter DeBono points out in his book "The Mechanism of
the Mind" we tend to process our experiences into mem-
ory as related and adjusted to our own bent and usually
supporting it. It therefore takes a pretty devastating
experience to make really new channels for memory re-
tention and evaluation. This material approaches this
point with me.
The reason for the small office is the personal client.
On the other hand, very large institutional clients tend
to look for institutional scale architects. The personal
clients disappear or become rare in the process of en-
The reason people move into personal practice is not
an economic one, it is a question of rewards other than
money. The contact with all parts of the work from
inception to the workmen's handiwork is the archi-
tect's life, most rewarding as it is lived and since all he
has is time, why not spend it doing what he wants to dc
There is a fatalism about the SOP, this is what he wants
to do and if he can keep busy and get paid he feels the
reward is right. The word freedom is frequently used
by SOP architects.
Since freedom is so important to him the only things
he can't seem to control completely are the things he
grouses about, fees, client control, contractors, regula-
tions and engineers. There may be some SOP's who are
relatively unemployables in organizations but the great
variety of pressures and contacts which he sustains
assure that he will reach a fair adjustment and those wh
accept his oddities will be his clients and his contractor!
Certainly lacking is the bland staff man quality in the
Most SOP's don't think they have unsolved problems ar
attempts to improve his lot which challenge his detach-
ment (freedom) will be resisted. For this reason the arcl
tects technical center, the drafting pool, operating as a
satellite of a large firm, entering a joint venture team, ar
perhaps doomed to limited use although all valid and
loaded with possibilities. In order to make them work
we would have to recruit skilled staff from the big office
to head up these organizations, organization men over
Remember however, freedom is an illusive thing, the
man who stood on the ancient slave ship and put the
lash to the oarsmen was himself a slave. He could not
leave the ship either.
Most architects feel they are efficient but feel the
pinch of not enough time to read and keep up to date,
do their jobs better, take part in other activities, to
keep the place in order. To me this indicates a need
for support activities to free creative time for the SOP.
Note: By direction of the Board this report has been slightly abridged
for publication in conformity with discussions at the meeting August
FRW Let's look to other professions for examples which might
clue our actions, consider:
a. Performers have managers and they keep working on
their voice or act, they get material from writers and
arrangers, they submit to directors and producers.
b. Dentists send stuff to the lab and they send each other
off to learn new techniques and come back to coach
the others who sent them. They have certified spec-
ialties, as well as G.P. They also look to the proper
distribution of dentists in the population.
c. Lawyers go to seminars and bring back a book or two
to put on the shelf for ready reference. They some-
times get paid slowly and after long waits, on purpose.
d. Doctors consult and refer, have specialties and get the
cost of care into the hands of hospitals and their staffs
instead of hiding their fee in a total cost package. They
monitor and watch each other to keep each one on the
e. Accountants, the top men in a firm, have individual
responsibility to clients regardless of size of firm.
They all must keep up to date and the Cassette tape
is used to bring them study material.
f. Advertising works through account executives who live
with the client and feed his story back to the creative
people. Recall, they too accept a budget as a starting
point and their results are-harder to prove than ours.
The following 13 suggested projects are proposed for im-
provement of practice and it is further suggested that this
committee be continued and charged to prepare the evalu-
ation handbook recommended as part of Item 1. The
other items are fit topics for carefully selected committees
or chapter study group activities, if various chapters were
selected to make the studies for implementation.
These Programs for Improvement should be organized,
schooled or sponsored by FAAIA.
1. A program for "practice evaluation" with a handbook.
If any SOP requested it, a team of his peers from "away"
would inspect and review the operation of a SOP and
give him a written score and recommendations based
on the handbook.
2. P.R. and Management firms for SOP's all neat and
3. Contract documents for Architect participation as part
owner and as construction managers with introductory
seminars to launch them.
4. An established custom and relationship adaptable for
the cooperation and consultation and referral between
SOP's with necessary contract documents.
5. A network of communication between SOP's (Xerox
by Telephone and Tape).
6. A published listing of projects by SOP's and service
rendered so in depth experience of a kind would be
known. (All architects aren't doing the same thing).
7. Publication of aids, nuts and bolts type material not
broadbrush viewpoints, (workbooks of detail standards
for Florida, specifications that can be incorporated by
reference). (Also a roster and classification of available
commercial facilities for all types of reproduction).
8. Data storage and retrieval equipment and skill available
to all through lease and maintenance contract. Sales-
men no longer provide enough product information to
9. Some pool of technicians not too far away through
rosters or directory.
10. A good roster of engineer and other consultants and
their background and experience.
11. A continuing program of professional advancement
both in job and role playing activities.
'12. Consultants or floating paper work experts, part
time, job record keepers, requisition reviewers, esti-
mators and application filler outers, real nitpickers
working for fees and like firemen at a fire.
13. A new class of trained employees or consultants to
do secretarial work, as well as office time records
and internal cost paper work, requires some con-
struction operation background and probably will
be men or very special women.
FLORIDA ASSOCIATION OF THE
AMERICAN INSTITUTE OF ARCHITECTS
Suite 210, 1000 Ponce de Leon Blvd.,
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Project Financing For The Architect
Paul B. Farrell, Jr.
Dr. Carl J. Tschappat
Possibly the major barrier that has kept the architect out of the
development business has been his inability to secure project
financing. He typically purchases land that is ripe for
development at top prices, so speculators and brokers help him -
work out land acquisition problems. He does his own design
work, and he is capable of negotiating a profitable arrangement
with planners, contractors, and engineers. Money is his first real
A developer needs both equity and debt money to make a
project go in today's financing market. The experienced
developer might be able to "mortgage out", i.e., to work only
with borrowed money, but nearly all projects require at least
some "front money" if not permanent equity.
The decision to go after debt or equity money first differs with -
each project. A mortgage lender might be enticed to make a E' "
permanent loan commitment contingent upon a showing of
sufficient financial means to justify the project. On the other
hand, equity investors are attracted most effectively (and for a
smaller piece of the action) by showing them that permanent
financing has been arranged.
The experienced developer has normally established his
mortgage financing relationships and can get commitment based
upon the project's merits plus a stated plan for securing equity
capital. He will likely need less equity for the same project than
would his less experienced counterpart. These factors obviously
place the newcomer at a serious disadvantage in getting his X
A second issue arises in dealing with the debt/equity balance.
The equity investors desire to escape all types of liability,
including responsibility for the mortgage debt if the project's -V
earnings are insufficient to meet payments. The mortgage
lender, on the other hand, seeks to secure personal liability from x
all equity owners involved in the realty transaction. Only the
developer can resolve this issue.
There are three basic steps involved in arranging for project
financing. These are the following:
1. Determine the amounts of equity and debt financing
2. Develop evidence to justify the desired loan.
3. Devise an ownership agreement which meets the needs of
equity investors. I
Determination of Needed Funds
The amount of permanent debt money which can be borrowed W
on a development project is solely a function of that project's I
"Value" at the time the permanent loan is to be closed. Value is
equal to net income divided by a market-based capitalization -
rate. The net income is computed by subtracting fixed and
variable operating expenses other than depreciation from rental
and miscellaneous income. The capitalization rate is established
by lenders based upon current interest rates and the risk
attributed to projects such-as the subject property. In chart 1,
the relationship among these variables is illustrated and the
manner in which debt and equity amounts are determined is
Project Financing, Continued
In this chart, total project value is computed by dividing net
income by a capitalization rate. A percentage of this value,
customarily between 66-2/3 per cent and 80 per cent, is taken
to derive the mortgage loan amount. This amount is dropped to
the bottom portion of the chart and added to the minimum
cash needed from equity investors to derive a maximum project
A cash return is computed by subtracting debt service, principal
plus interest, from net income. This cash return is then divided
by the minimum. cash equity required to derive the "cash on
cash" return on investment. This is the project's before tax
yield, and it must be equal to or greater than the minimum
return acceptable by investors in the subject marketplace for the
type of project represented by the subject development. If the
rate is too low, equity investors would be unwilling to pay in
the amount of cash needed, and negotiations would fail.
A different approach is needed in determining the funds needed
for land development/sales projects wherein lots are sold on
credit terms. Cash inflows and outflows are estimated for each
year of the development, including payments made to the
developer by lot buyers, operating expenses, development costs,
brokerage commissions, and income and property taxes paid.
Each year's net balance is discounted at a pre-determined rate to
the present time, thus yielding a present value of all cash flows.
This present value is the maximum amount that could be paid
for the investment; an initial payment less than that amount
results in a higher profit rate than the pre-determined rate
Justification of Loan Amount
Mortgage lenders are remarkably consistent in their conservative
loan requirements. Basically, they seek their margin of safety by
requiring substantial financial strength on the part of buyers
plus requiring a strong project. These requirements are
expressed in terms of a balance between (a) project earning, (b)
cash equity invested, and (c) strength of guaranteeing signatures.
In most projects mortgage lenders view the relationship between
net income and debt service as a critical one. Net income should
be between 1.2 and 1.3 times as great as debt service in some
projects, and even a larger amount in others. To accomplish this
relationship, the amount of loan might be reduced, thereby
reducing debt service and permitting a given net income to
achieve a higher multiple of debt service. To complicate the
procedure, some lenders choose to loan a high percentage of a
conservative value while others loan a low percentage of high
value. Thus. the only consistent decision-making variables are
net income and debt service.
An alternative to evaluating project merits is to evaluate the
financial capability of the equity investors. Lenders normally
choose not to enter unsound deals even when equity investors
are willing to pledge ample collateral to offer a high degree of
safety. However, the lenders' objectives can be met through
pledges of liquid collateral, and at some point the importance of
the quality of the subject development becomes negligible.
The developer must always keep in mind that he must make
every figure that he presents to lenders highly believable. The
lender must not have a reason to discount the project because of
unrealistically high income projections. Make the project look as
strong as can be justified within the market, and be ready to
produce the needed equity and/or collateral when requested.
The equity investment in a project is composed partly of cash
and partly of value created through developer skills and
appreciation in land value. The problem is to place the proper
valuation upon developer skills. If the developer/architect
over-prices his inputs, he creates a difficult marketing problem
in attracting cash investors. If he underprices them, he accepts
risks that are too great for the reqards he receives.
Cash investors typically seek a combination of four types of
return on their investment. These return types are as follows:
1. Cash Income from operations, typically paid annually,
quarterly, or monthly.
2. Tax Shelter, i.e., the ability to deduct losses from
personal income taxes.
3. Value Appreciation realized from refinancing; to cash
out tax free equity build up and appreciation in value.
These refinancing proceeds are not subject to income
taxes in the year of receipt.
4. Value Appreciation realized from selling the project.
Gain on sale is usually eligible for long term capital gain
In addition to the investment return, cash investors also require
a measure of protection from liability.
The skill in dealing with equity investors lies in the ability to
develop the proper balance of cash income, financing proceeds,
tax write-offs, and the risk of liability. Every offering should
emphasize the features sought by a well-defined group of
investors, and, as a final point, should be structured to offer
shares that are priced within the financial capability of the
The developer/architect must ensure that the equity offering
will meet the demands of mortgage lenders, and he must protect
his own position from excessive liability, inadequate return, or
both. He must design the equity offering to cover the following
1. Land Financing: From what source will land purchase funds
be drawn, and who will own the land? In tax shelter projects the
developer might purchase the land in his own name and lease it
to the investment group. The group deducts land rent rather
than owning a non-depreciable asset. The developer receives the
2. Cost Over-runs: Who is liable if cash equity plus loan
proceeds are inadequate to cover construction costs? Con-
versely, who is entitled to any funds that remain unspent when
the permanent loan is closed and the project is self-sustaining?
Three approaches are typically taken in solving this problem -
developer takes the over-run risk and receives all unspent
construction loan cash; developer assesses owners for cost
over-runs and splits unspent cash on a pro-rata basis; or
developer sets up cost over-runs as a loan that he .makes to the
project, charging future cash flows to pay it off. Any of these,
or variations thereof, can achieve a sound beginning relationship
between developer and investors.
3. Equity Split: What percentage of equity ownership is
retained by the developer for his services? In tax shelter projects
the developer most properly takes his share in tax-deductible
fees and rents, leaving a small cash flow plus a large tax
deduction for investors. A cash flow project might have lower
fees, no rents, and a high percentage of ownership for the
developer. The developer must exercise extreme care in this
regard in order to avoid a tax liability resulting from the
acquisition of a project share for which he paid no cash.
4. Future Distributions: How should proceeds from refin-
ancing and sales be distributed? The normal situation would be
for all refinancing and sales proceeds to be distributed pro-rata
according to ownership. However, a project offering high cash
income or a sizable tax shelter might appeal to investors even
without these proceeds. Thus, the developer could justify
retaining a high percentage of them.
Obviously a developer could get too greedy and not be able to
attract investors. Conversely, many projects are extremely
beneficial to investors with minimal benefits to the developer.
The proper balance depends upon project merits, the investor
contacts established by the developer, and his negotiation
The developer must normally attempt to shield cash investors
from liability if his offering is to be appealing. This means that o
he needs more cash for his project than would be necessary if
investors were exposed to personal liability. The structuring of O
the arrangement, e.g., corporation, general partnership, limited
partnership, or tenancy in common, depends upon the extent of
liability to be passed on to investors and the importance of tax
shelter to them. Again, every project must be designed to meet
the needs of the selected investor group.
In summary, the developer is a coordinator of two different
financing groups plus a provider of the professional talents co
needed to accomplish the development. While he must be a
generalist his knowledge must be quite extensive in a highly
specialized area. This article points up only a few factors which
must be considered by the architect in getting his first project
The authors conducted FAAIA's PDP I II
Paul B. Farrell, Jr. Manager of Project Development for City Investing
Company's real estate subsidiary, is an attorney, urban planner and
graduate architect, currently doing research on land acquisition strategies
for New York States Urban Development Corporation.
Dr. Carl J. Tschappat is Chairman of the Department of Real Estate and
Urban Affairs, School of Business Administration, Georgia State _
gn, GART URBAN, IDSA/NSID
1972 FAAIA Organization Chart
Board of Directors
Director Florida Region
Hilliard T. Smith, Jr., FAIA
Richard E. Pryor President
Thomas H. Daniels
James E. Ferguson, Jr. Secretary
Frank R. Mudano Treasurer
Hilliard T. Smith, Jr. Dir. Fla. Reg.
Robert J. Boerema Past President
Construction Industry Council
A-E Joint Committee
Florida Professional Council
Past Presidents Advisory Council
Finance & Budget
James E. Ferguson, Jr.
Fotis N. Karousatos
Richard E. Pryor
Frank R. Mudano
Thomas H. Daniels
Florida Department of Transportation high-
way construction project in the Lakeland
area. Photo courtesy of Ewell Concrete Pipe
Highway and drainage construction projects, such as this one
in the Lakeland area, demand materials that will assure peak effi-
ciency and dependable long life. That's why engineers specify con-
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Concrete pipe is corrosion-resistant, durable and economical. Manu-
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pipe is readily available locally in a wide range of sizes to meet your
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PLANTS AND OFFICES IN TAMPA AND MIAMI
U "We are sorry, but because of limited budget, faculty, space and
V facilities the Department of Architecture has found it necessary
to restrict enrollment in our programs. Your application is
Some aspiring students were recipients of the above statement,
Sor words to that effect in answer to their application to study
o architecture at the University of Florida last fall 1971. Others
will be denied admission through this academic year and next
>, fall. The architecture, landscape architecture and interior design
4.a programs at the University of Florida have reached their maxi-
mum capacity within the present resources of space and faculty.
(D The handwriting began to appear faintly on the wall in the fall
> 1969 quarter when over 40 students could not enroll in the first
sophomore design course. All six sections filled at 17 students
C each. Another section was arranged, some overloading was
allowed, and by the end of the first week of classes the 40 was
reduced to about a dozen.
4- STUDENT HEADCOUNT 528
FULL TIME EQUIVALENT STUDENT 389
C fall 1968
E STUDENT HEADCOUNT 538
O FULL TIME EQUIVALENT STUDENT 415
C fall 1969
V STUDENT HEADCOUNT 747
FULL TIME EQUIVALENT STUDENT 513
C STUDENT HEADCOUNT 804
S FULL TIME EQUIVALENT STUDENT 513
4.. FIGURE 1. STUDENT POPULATION
0 n (Headcount includes all students, whether they carry a full-time or part-time load.)
+-a As can be seen by Figure 1, the enrollment increase in the Fall
quarter 1970 was 25% FTE and 37% Headcount. Prior to 1970
annual increases had followed the university pattern of approxi-
S0 mately 5%.
E Without promise of additional faculty, staff, or space to help
carry this increased load and facing possible damage to the
) integrity of the architectural program the department
S accepted Selective Admissions as a means of holding the enroll-
ment at the 1970 level (513 FTE students).
2,, Figure 1 indicates that in Fall 1971 the FTE enrollment was
0 held level and yet there was a noticeable increase in Headcount
Z of more than 7%. While this does not increase the needs of the
department in the eyes of those who allocate funds, it increases
() the workload of record keeping and particularly counseling. It
5 Z also indicates that we are building a pressure for future ad-
Smissions. More students, each taking fewer courses in architec-
.y ture, are fitting in architectural sections while waiting to get a
Ct full load of professional course work. CONTINUED
Limited Enrollment, Continued
During the winter of 70-71, the Department of Architecture
including Landscape Architecture and Interior Design, was
placed on selective admissions status by the University Admin-
istration. The Colleges of Law, Medicine, Health Related Pro-
fessions, Nursing, and some departments in Education and
Business Administration have been employing selective ad-
missions procedures for some time prior to this. The Depart-
ment of Art in our own college has had to use the procedure for
years. By selection within the Department, the requirements for
admission become more stringent than those administered by
the University Admissions Office and some otherwise qualified
candidates are denied. The process requires a significant amount
of counseling and evaluation of students. Those with marginal
honor point averages, those who wish to change majors from
another area of study, and out-of-state and foreign students are
the first to be identified for possible denial. Each is screened
carefully, including a personal interview whenever possible. Past
history and present enrollment give some basis for future
expectations. It is estimated that the department may receive
285 applications for junior standing during the 71-72 term. The
maximum acceptable under present circumstances has been
established to be 200. The source of these 285 applicants will
break down in somewhat the following manner: 125 from lower
division University of Florida, 100 from Florida junior colleges
and 60 from other areas such as change of major, out of state,
second degree seekers and foreign students. If history continues
to hold true, the 200 admitted will be comprised of 50% lower
division University of Florida, 40% Florida junior colleges and
10% other areas. Or tabulated:
It should be noted that the percentage of applicants who are
accepted from junior colleges and from University College are
equal (80%). The "other" classification includes out-of-state
students, foreign students, and students who transfer into archi-
tecture from other disciplines.
Present Resources of Space and Faculty
In the Fall quarter 1970, 1500 square feet of additional space in
Grove Hall, our "temporary" quarters, was assigned to the
Department. No funds were available to modify the space from
it's former use to drafting space. Fourth year students have
painted it, and built the tables and work spaces, with materials
supplied by the department. This represented a 5% increase in
the 31,000 square feet assigned to the department.
Figure 2 indicates the relatively level number of faculty avail-
able. Without the increase from 1968 to 1969 we could not
teach the number of students presently enrolled. It is interesting
also to note that this year we have 47 persons in 38.5 faculty
positions. This is accounted for by the nine graduate teaching
assistants who are helping to take the teaching load.
It is hoped that this information will serve to answer some of
the concerned inquiries we have received from architects and
others around the state. The problems of architectural educa-
tion are also the problems of the architects. U
u 5 B 5 B
U. U. J I. LL U.Ij u.
fall 1968 fall 1969 fall 1970 fall 1971
FIGURE 2. ARCHITECTURAL FACULTY
Lower division UF:
Florida junior colleges:
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