AIA Unveils New Leading Indicator in Construction Research White Paper

WASHINGTON, D.C. — By measuring the movement of design contracts in the monthly Architecture Billings Index, the American Institute of Architects is now able to trace the path of resources into the design and construction industry from the earliest conceptualization until it results in finished projects. This new indicator is being spotlighted in an AIA economic research white paper, Designing the Construction Future.

“We have been tracking new project inquiries — bids, general solicitations, interview invitations — which tend to be rather subjective, so we began looking for a more precise way of estimating future levels of billings activity at architecture firms,” said AIA Chief Economist, Kermit Baker, Ph.D., Hon. AIA. “We determined that the most accurate predictor of future design workloads is the monthly change in the volume of new design contracts.”

Design contracts are the agreements between the client and architecture firm on the scope of, and compensation for, new design projects. Similar to how construction contract awards act as a leading indicator of future construction spending, design contracts are expected to provide a comparable glimpse of future billings and design activity. Trends in the dollar volume of design contracts end up filling an important gap between trends in project inquiries and actual design billings.

The AIA began collecting data on design contracts in October 2010 and with over three years of data there is enough information to seasonally adjust the index. Preliminary analysis suggests that a change in firm billings follows a change in design contacts by approximately six months.