ARE 5.0 Practice Management

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Chargeable Ratio

= the time spent on direct labor / total time (Utilization Rate)

Tort

A civil wrong, as contrasted with a criminal act, which causes injury to another person

S Corporation

A corporation that chooses to allocate it's income and losses directly to shareholders in proportion to their holdings. Limited to small business corporations with less than 100 shareholders.

Performance Evaluation

A formal review performed by a manager to assess each employees performance

Chart of Accounts

A list of the various accounts a business uses to keep track of money, along with corresponding account numbers used for data processing

Personnel Policy Manuel

A positive statement of the firms commitment to employees, clients and the public at large

Quick Ratio

A refinement of the current ratio including only cash and cash equivalents plus accounts receivable plus revenue earned but not billed divided by total current liabilities

Alternate

A request included in the bidding documents asking the contractor to supply a price for some type of variation from the base bid

Allowance

A set amount of money estimated by the architect to cover a particular material or piece of equipment when the cost for it cannot be determined precisely at the time of the bid or negotiated proposal

Multi-Party Agreements

A single agreement executed by the owner, architect, contractor and other key project participants for the design, construction and commissioning of a project

Performance Bond

A statement by a surety company that obligates complete construction of the project in the event that the contractor defaults on his/her obligations

Joint Venture

A temporary association of two or more persons or firms for the purpose of completing a specific project or achieving a specific goal

Addendum

A written or graphic document, issued by the architect during the bid period prior to the execution of the contract, that modifies or interprets the bidding documents by addition, deletion, clarification or correction

Indirect Labor

All labor not charged to a specific project or revenue-producing account such as administration, general office time and marketing

Direct Labor

All labor of technical staff, principals and support staff that is directly chargeable to projects

Integrated Project Delivery (IPD)

All participants collaborate closely from the projects earliest conceptualization to move in. Owner has multiple agreements with independent design and construction firms

Gross Revenue

All the revenue generated by a business during a stated period of time

Double Entry Bookkeeping

All transactions are listed chronologically in a journal - they are then posted to a ledger where transactions are grouped into individual accounts

National Labor Relations Act

Allows private sector employees to organize into trade unions and protects union employees from unfair labor practices (Wagner Act)

Business License

Allows the business to practice and usually serves as a basis for taxation

Revenue per Total Staff

Amount of net revenue produced per staff member per year, including principals and part-time employees Annual net operating revenue / total number of employees

Accounts Payable

Amounts owed to the suppliers of goods or services that have not been paid

C Corporation

An association of individuals (stockholders, directors and officers) that exists as a legal entity apart from its members

Billing Rate

An hourly rate per staff member working on a project

Single-Purpose Entities (SPE)

An independent limited liability company newly created for the sole purpose of planning, designing and constructing a particular project

Compensation

Any kind of payment made to employees for work - a base salary + benefits

Assets

Any type of tangible or intangible resource that can be measured in monetary terms, including current, fixed and other assets

Privity

Architects are, in theory, protected from claims by parties with whom they have no direct contractual relationship

Canons

Broad principles of conduct in the AIA Code of Ethics

Limited Liability Company (LLC)

Business structure that combines the advantages of a partnership or sole proprietorship with the limited liability of a corporation. (Aka LLP Limited Liability Partnership)

Officers

Carry out the day-to-day management of the corporation

Liabilities

Claims by people outside the business and claims by the owners of the business against the total assets of the business

Bridging

Combines the advantages of the traditional design-bid-build process (someone to represent the owners interests throughout the process with a fixed cost) and the design build approach (a single source responsibility for construction)

Outsourcing

Contracting with another company to do some of the work needed for a project

Direct Personnel Expense (DPE)

Costs of providing taxes, benefits and the like and are included with the employee's base salary

Auto Insurance

Covers liability and property damage to vehicles owned by the business

Job Description

Defines the duties and responsibilities of the person holding a specific job title

Memorandum of Understanding

Defines the roles, responsibilities and contractual relationships that will be established if the firms are awarded the project and the joint venture is formed (Aka Teaming Agreement)

Teaming Agreement

Defines the roles, responsibilities and contractual relationships that will be established if the firms are awarded the project and the joint venture is formed. (Aka Memorandum of Understanding)

Support Staff

Employees other than the professional staff and senior management

Profit + Expenses = Revenue

Equation for financial planning in profit-oriented business

Wages and Fair Labor Standards Act (FLSA)

Establishes min wage, overtime, record keeping and child labor standards in both the private sector and in the government employment

Overhead

Expenses incurred to keep a business operating whether or not any revenue is being generated, such as rent, software leases and fees for power and phone

Accounting Reports

Generated from the basic info entered in journals and ledgers

Limited Partnership

Has at least one general partner (invests in the business, manages it and are financially responsible for it) and at least one limited partner (investor who receives a portion of the profits but has no say in the management of the company)

Directors

Have the fiduciary duty to act in the best interest of the stockholders and are responsible for broad policy decisions

Indemnification Clause

Holds harmless both owners and architects for any damages, claims or losses resulting from the performance of any work on the project with whom the architects have no contractual relationship

Buyout

In IPD, the process of selecting suppliers and finalizing prices from any remaining subcontractors and vendors that are not part of the IPD process

Agency Review

In IPD, the standard building code check by the authority having jurisdiction (AHJ) as well as any other reviews by permitting agencies

Unit prices

In bid documents these are set costs for certain portions of work, based on an individual quantity.

Financial Management

Includes active planning, monitoring and controlling of financial information as well as acting on that information

Human Resources Management

Involves the entire range of hiring, compensating, managing and terminating employees, along with the legal responsibilities of having employees (personnel management)

General Ledger Accounting

Keeping track of money flowing into and out of the business and is needed for day-to-day operations, banking, taxes and auditing

Profit and Loss Statement

Lists all the income and expenses of a business for a certain period of time (Income Statement)

Time Analysis Report

Lists each employee along with the number of hours he or she has spent on direct labor, indirect labor, vacation time, sick leave and holidays

Other Assets

Misc resources such as securities and copyrights

Accounts Receivable

Money that others owe to the business through invoices for services

Net Multiplier

Net revenue of the firm /Cost of direct labor

Instructions to bidders

Outlines the procedures and requirements that the bidders must follow in submitting bids, how the bids will be considered and submittals required of the successful bidder

Stockholders

Owners of the corporation in proportion to the number of shares they own

Independent Contractor

Person hired for a specific project. They control where and how they perform their work and provide their own supplies and equipment

Age Discrimination in Employment Act of 1967 (ADEA)

Prohibits age discrimination in employment for for persons age 40 or over

Civil Rights Act of 1991

Prohibits discrimination on the basis of sex, race, color, religion or national origin

General Liability Insurance

Protects against claims of property damage, liability and personal injury caused by architects or their employees

Personal Injury Protection

Protects architects against charges of slander, libel, defamation of character, misrepresentation and other torts

Professional Liability Insurance

Protects architects in case one of their actions causes bodily injury, property damage, or other damage. Covers problems resulting from things such as incorrect specs, mistakes on drawings and negligence

Workers Compensation

Protects employees in the event of injuries caused by work related activities

Property Insurance

Protects the architect's buildings contents against natural disasters such as fire, theft and flood

Health Insurance Portability and Accountability Act of 1996 (HIPPA)

Protects the privacy of health information

Modified Accrual Basis Method

Records fee revenue, expenses billed to the client and invoices to the firm by outside consultants - does NOT include the amounts of fees that have been earned but not yet billed to the client

Flexible Benefit Package

Required statuary benefits are provided, and employees can choose their additional benefits from a menu of options

Occupational Safety and Health Act of 1970 (OSHA)

Requires employers to provide a safe work environment

Employee Eligibility Verification

Requires employers to verify the employee's right to work in the United States

Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA)

Requires employers with 20 or more employees to continue group medical coverage if employment is terminated, hours are reduced, employment is changed, or in the event of death, divorce or other significant life events

Equal Pay Act

Requires equal pay for employees with the same work duties, responsibilities and experience

Family and Medical Leave Act (FMLA)

Requires that companies give an employee up to 12 weeks of unpaid leave for child, spousal, or parental care

Current Assets

Resources of a business that are converted into cash within one year

Fixed Assets

Resources that the firm uses and retains for a long period of time, such as equipment and property

Cash Accounting

Revenue and expenses are recognized at the time the business receives the cash or pays a bill

Accrual Accounting

Revenue and expenses are recognized at the time they are earned or incurred, whether or not cash changes hands

Statute of Repose

Sets a time limit within which a claim can be made. Usually starts at the time of substantial completion.

Employee Retirement Income Security Act (ERISA)

Sets min standards for pension plans in the private sector for employers who have a pension plan program

Cash Equivalents

Short term investments that can be quickly converted into cash, such as short-term certificates of deposit

Cash Flow Statement

Shows actual inflows and outflows of cash or cash equivalents

Project Progress Report

Shows the hours and labor costs for each phase of a project, both for the current reporting period and the total to date, and compares these numbers with the estimated hours and costs

Aged Accounts Receivable Report

Shows the status of all invoices for all projects, whether or not they have been paid, and the "age" of each invoice, which is the time from the invoice date to the payment date or to the current date if still unpaid

Professional Corporation

Similar to other corporations except that liability for malpractice is limited to the person responsible for the act.

Statute of Limitations

Similar to statute of repose, except that, the time limit is usually much shorter and does not begin until the problem is first discovered.

Certificate of Authorization (COA)

Some states require a firm to obtain this in order to offer services to the public

Design-Assist Contracting

Specialty subcontractors or trades are included early in the design and construction document phases to help with the development of complex or unique portions of the building

Ethical Standards

Specific goals toward which members should aspire according to the AIA Code of Ethics

Rules of Conduct

Specific, mandatory statements that members must follow in the AIA Code of Ethics

Formal Employee Contract

Spells out the employee's responsibilities, work duties and compensation, as well as the firms benefits, work conditions, termination procedures and policies

Studio Organization

Staff is organized in groups called studios. Each studio is responsible for completing an entire project (Vertical Organization or Tall Organization)

Departmental Organization

Staff is organized into departments, each of which specializes in a different function. A project moves from one department to another in its route from start to finish (Horizontal Organization or Flat Organization)

Balance Sheet

Summarizes all assets and liabilities and shows the financial position of a business

Office Earnings Report

Summarizes each of the firms projects in terms of the amount of revenue it has generated, the expenses it has incurred, unbilled services, percentage of completion and profit or loss to date

Revenue per Technical Staff

The amount of net revenue produced per technical staff member, or those staff members most directly involved with charging direct time and producing jobs

Sole Proprietorship

The business is owned by an individual

Project Delivery

The entire sequence of events that is needed to provide an owner with a completed building

Direct Personnel Expense

The expense of employee salaries plus the cost of mandatory and discretionary expenses and benefits such as payroll taxes and health insurance

Negligence

The failure to use due care to avoid harming another person or damaging property

Liability

The legal responsibility for injury to another person or damage to property

Standard of Care

The level of skill and diligence that a reasonably prudent architect would exercise in the same community, in the same time frame, and given the same or similar facts and circumstances

Owners Equity

The money invested in a business by the owners or stockholders

Net Operating Revenue (Net Revenue)

The money that remains from billing after deducting fees and expenses, reimbursable expenses and non-reimbursable project-related expenses

Design Build

The owner contracts with one entity (a person or firm) to provide both design and construction services, that entity then subcontracts portions of the work to others as needed

Design Bid Build

The owner has two separate contracts with an architect and contractor. Architect designs the project, project is sent to bid, and then the contractor who wins the bid constructs the project

Net Profit Before Tax

The percentage of profit based on net revenue minus total annual revenue minus consultants fees and reimbursable expenses

Value Engineering

The process of analyzing a particular material, assembly, system, or even an entire design to see whether the same functional requirements can be met in a less expensive way, or whether a product or system of higher quality can be found for the same cost. (Value analysis)

Control Estimate

The sum of the CM's estimate of the cost of the work plus the CM's fee in a CMc project delivery method

Net Worth

The total assets less the total liabilities

Bid Security

This is required to ensure that the successful bidder will enter into a contract with the owner

Break-Even Rate

Total cost of operations / Total money spent on direct labor

Current Ratio

Total current assets / total current liabilities

Overhead Rate

Total office overhead / total direct labor

Project Cost Accounting

Tracks revenue, expenses and profit by individual projects

General Partnership

Two or more people (general partners) share in the management, profits and risk of the business

Invitation to Bid

Used when contractors must be prequalified to bid on a project

Discretionary Distribution

Voluntary distrubution of profits to owners and nonowners, such as performance bonuses, profit sharing and incentive compensation

Canon 6 Obligations to the Environment

Which canon indicates members should be environmentally responsible, promote sustainable design, advocate sustainable buildings and site design and use sustainable practices within their firms and encourage clients to do the same?

Canon 1 General Obligations

Which canon indicates members should maintain and improve their knowledge and skill, seek to raise architectural standards, respect and seek to improve society and the environment and not discriminate?

Canon 5 Obligations to Colleagues

Which canon indicates members should respect the rights of their colleagues, provide associates and employees with suitable working conditions and fair compensation, nurture fellow professionals through their education and careers and give credit to others for their professional work?

Canon 3 Obligations to the Client

Which canon indicates members should serve their clients competently and professionally, exercised unbiased judgement, avoid conflicts of interest, be truthful in professional communications and maintain client confidentiality?

Canon 4 Obligations to the Profession

Which canon indicates members should uphold the integrity and dignity of the profession, practice with honesty and fairness, not sign and seal documents for which they do not have responsible control, not knowingly make false statements and be honest about their qualifications?

Canon 2 Obligations To The Public

Which canon indicates members should uphold the law, never try to influence a public official with a payment or accept payment intended to influence judgement, promote and serve the public interest and strive to improve public appreciation of architecture?


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