ARE 1 - Practice Management

What tax forms does a business have to supply to employees, and when?

Form W-2, Wage and Tax Statement. This shows all wages paid in the previous year to the employee along with federal, state, city, and FICA taxes withheld. Employer must send this to each employee no later than January 31 each year for the employee's use in preparing personal taxes.

What are some aspects of an initial marketing plan?

Identify the type of work the firm wants to do, what geographical areas the firm wants to work, what the competition is, how much work the firm needs, and a budget for active marketing and PR.

How does a business pay taxes? What forms does a business have to submit?

If a business has employees, it must withhold taxes for each employee and forward this money to the IRS. Form SS-4, Application for Employer Identification Number (EIN). This is a number used in tax filings with the IRS. Form W-4, Employee's Withholding Allowance Certificate, for each employee. This form (completed by employee) indicates the number of deductions the employee is claiming.

Can a CMa control costs?

No. They do not act as the contractor, so they can't directly control cost.

Current assets

Resources that can or will be converted into cash within one year

In a design-bid-build project, who shares a contract between the architect, owner, and contractor?

The owner has separate contracts with both the architect and contractor.

Should the project delivery method be confirmed before or after the architect's agreement with the owner is made final?

Before. Different delivery methods will demand different levels of design and detailing effort from the architect, and will determine the extent of the architect's involvement in the project beyond the design phase.

If a prospective client that you don't know much about is using bidding as a method of selecting design professionals, this could be an indicator that....

They are very concerned with costs, and may be likely to file a claim to save or recover money.

What is the goal of PR?

To create a positive image of the firm in the minds of targeted audiences

For the liability insurance and property insurance that the owner is required to carry, what policy type should it be? Who pays the deductibles (if required)?

"All risk" type rather than "specified peril" type. All-risk insurance is broader in coverage, and also covers work stored off site and portions of the work in transit. The owner pays the deductibles.

If the CM is also the contractor, which AIA agreements should be used?

1. AIA Document B133 2. AIA Document A133 3. AIA Document A134

What are three potential routes an architect can take when a client requests work that the architect expects will exceed the construction and/or professional budget?

1. Accept a lower profit margin, because it will give the firm experience in a project type that the architect wants to pursue. 2. Negotiate to reduce the scope of the project, services, or both. 3. Decline the job.

What are some of the construction manager's potential responsibilities?

1. Advise on constructability of the design as it's developed 2. Provide early cost estimating and value analysis 3. Complete project scheduling 4. Assist contract negotiations 5. Manage multiple construction contracts and fast-track construction 6. Make early material purchases 7. Give guaranteed price and completion date

According to equal employment opportunity laws, it's illegal to for an employer to ask a job candidate about these (6) things.

1. Age 2. Date of birth 3. Marital status 4. National origin 5. Race 6. Maiden name

List the steps taken in a design-bid-build project.

1. Architect designs the project and prepares the construction drawings and specs. 2. These documents are used as the basis for pricing the project. 3. Through either competitive bidding or negotiation with one contractor, a contractor is awarded the construction contract. 4. The contractor builds the project while the architect provides contract administration services.

Phases of Integrated Project Delivery (IPD), and the amount of time they take relative to each other

1. Conceptualization (pre-design) 2. Criteria Design (SD) 3. Detailed Design (DD) 4. Implementation Documents (CD) 5. Agency Review 6. Buyout (bidding from participants not included in integrated team) 7. Construction (CA) 8. Closeout Early design phases may take longer than with traditional approaches. 4-6 will take less time. Total project delivery time will be shorter overall.

Examples of implied duties

1. Cooperating with contractors. 2. Not interfering with the contractor's work (delays, additional costs, etc.). 3. Giving relevant information to contractors (including any problems or errors the architect has observed). 4. Assisting the owner in coordinating work (helping owners coordinate schedules and requirements of other contractors and vendors who aren't under the control of the GC).

Disadvantages of design-bid-build system

1. Design phase must be completely finished before the construction phase proceeds. This can be a problem if the owner needs a fast schedule or if extended design and construction times result in higher costs. 2. If the contractor isn't selected by negotiation, it often leads to adversarial relationships.

Name some design methodologies that firms can have.

1. Design-based 2. Project type-based 3. Generalist

Advantages of Bridging

1. Design-build firm is in the best position to work with manufacturers, subcontractors, etc. to determine the best way to construct the project at the lowest possible cost. 2. The owner gets someone to represent their interests throughout the process 3. Advantages of competitive bidding 4. Fixed cost 5. Single-source responsibility for construction

What all does human resources involve?

Entire range of hiring, compensating, managing, and terminating employees. AND the legal responsibilities of having employees

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 service

What are some possible procedures for what to do if payment for an invoice hasn't been received in a given time frame?

1. 2 weeks: Follow up with the client. Verify it was received, ask if they have any questions. This lets the client know it is being closely followed. 2. 30 days: Send a past-due notice. 3. More than 30 days: Personal visits, phone calls, take legal action.

4 things an employee cannot be terminated for

1. Age 2. Activities outside work hours (except moonlighting) 3. Missing work for military obligations or jury duty 4. Reporting company violations of health or safety laws

List 3 different types of accounting statements

1. Balance sheet 2. Profit and loss statement (income statement) 3. Cash flow statement

For architectural firms, compensation to employees typically includes these 2 things, sometimes 3

1. Base salary or wage 2. Standard benefits 3. Bonuses

In the contract terms, what are some basic items that should be included regarding fee collection?

1. Basis for the fee 2. When invoices will be sent and in what form 3. When payment is due 4. Any penalties for late payment (for example interest charges after 45 days) 5. Provisions for nonpayment (including stopping work on the project and making no presentations until the payment has been received)

According to Canon 6, Obligations to the Environment of the AIA Code of Ethics, members should...(4 things)

1. Be environmentally responsible 2. Promote sustainable design in their professional work 3. Advocate sustainable buildings and site design 4. Use sustainable practices within their firms and encourage clients to do the same

How does the IRS determine if a worker is an employee or an independent contractor (freelancer)? 3 broad areas

1. Behavioral control 2. Financial control 3. Relationship between worker and employer

Advantages of IPD

1. Better design 2. Shorter project delivery time 3. Lower project cost 4. Quality construction 5. Fewer problems during construction

3 commonly used viable defenses against claims made against the architect:

1. Betterment 2. Statute of Limitations 3. Statute of Repose

For architectural firms, the subject of business operations includes these 5 things

1. Business Organization (legal structure) 2. Office Organization (the way the firm organizes to complete its work) 3. Ethical Standards (the accepted principles of correct professional conduct) 4. Human Resources (Practices and legal responsibilities pertaining to employing others) 5. Business Development (use of marketing and PR to increase business)

2 basic accounting methods, and their definitions

1. Cash accounting: Revenue and expenses are recognized at the time the business receives the cash or pays a bill. 2. Accrual accounting: Revenue and expenses are recognized at the time they are earned or incurred, whether or not cash is received yet (For example, if a firm sends an invoice for $50,000, that money is listed as revenue even though the client hasn't paid yet)

What are some ratios and values that firm management, accountants, and banks use to measure a business's financial health?

1. Chargeable ratio / utilization rate 2. Current ratio 3. Net profit before taxes 4. Overhead rate 5. Quick ratio 6. Revenue per technical staff 7. Revenue per total staff

Give some examples of a design-build entity.

1. Construction contractor with in-house design services 2. Construction contractor collaborating with an architect through a joint venture 3. Real estate developer subcontracting both design and construction services

What are the 4 basic steps to collecting accounts receivable?

1. Contract terms 2. Timely billing 3. Complete invoices 4. Regular procedures for tracking accounts

What are the variables that affect the selection of project delivery method?

1. Cost 2. Schedule 3. Project scope 4. Building quality 5. Risk

With the CMc project delivery method, how many ways are there to price the project, and what are they?

1. Cost-plus-fee with GMP 2. Cost-plus-fee without GMP

What are some ways to be more personal in collecting fees?

1. Cover letter that explains the progress and what efforts the billing represents. 2. PA or PM signs the invoices. 3. When problems develop, a phone call or personal visit should be made, rather than a letter.

Advantages of design-build approach

1. Design and construction firms are under one contract. All parties work together to give the owner the best value. 2. Owner receives a fixed price early in the process (and it's usually lower than other methods). 3. Total time of design and construction is usually less than it would be for other methods.

What are the 6 main types of project delivery methods?

1. Design-bid-build (DBB) 2. Construction manager as adviser (CMa) 3. Construction manager as constructor (CMc) 4. Design-Build (DB) 5. Design-assist contracting 6. Integrated project delivery (IPD)

Who is the construction manager, and who hires them?

1. Either construction contractor or independent third party who acts as the owner's agent 2. Hired by the owner, outside of the architect's contract

Advantages of a design-bid-build system

1. Fairly simple 2. Roles are well-defined and work proceeds in linear fashion, from selection of architect to final build-out 3. Coordination problems are minimized; contractual relationships are straightforward 4. Owner can be quoted a fixed price before proceeding with construction

What are some other factors that affect which projects a firm accepts or rejects?

1. Firm's current workload 2. How well the project matches the type of work the firm is qualified/wants to do 3. How feasible the project is

When the construction manager acts as adviser (CMa), how many methods are there for establishing total construction costs, and what are they?

1. Fixed-price 2. Cost-plus-fee with GMP 3. Cost-plus-fee without a GMP

Some strategies for risk management:

1. Know the client. Don't work for someone with a bad rep. 2. Use well-written contracts and follow them thoroughly. 3. Make sure the appropriate employees are assigned to each project. Skill level and experience should be coordinated with responsibility. 4. Maintain an active quality control program. 5. Maintain thorough documentation. 6. Be very careful about last-minute changes and substitutions. Many claims and lawsuits are caused by last-minute actions, which result in modifications that the architect doesn't have time to fully research and consider. 7. Carry liability insurance.

3 conditions that must be met for an architect to be found negligent:

1. Legal duty is established between the parties. 2. Must be shown that the architect breached that duty. 3. Must be shown that the breach of duty was the cause of the damage/injury suffered by the other party.

As stated in AIA Document A201, the owner is required to carry these 3 types of insurance, and for how long? What do these insure against?

1. Liability insurance 2. Property insurance 3. Boiler and machinery insurance This insures against physical loss or damage caused by fire, theft, vandalism, collapse, earthquake, flood, windstorm, and malicious mischief. Also provides for reasonable compensation for architect and contractor services and expenses that may be needed as a result of insured losses. For the full insurable value of the work.

Under owner-CMc agreements, the CMc's services are divided into these two phases:

1. Preconstruction phase 2. Construction phase Portions of these may proceed concurrently in order to fast-track the process.

Name some examples of PR.

1. Press releases 2. Article about a project (better to be in a magazine received by potential clients rather than architecture magazine) 3. Technical articles about a project (be sure to get client's permission) 4. Organizing seminars or workshops to the firm's target audiences 5. Volunteering for local service groups 6. Getting involved with local politics 7. Winning design awards 8. Setting up open houses for the public

AIA Document B101, the owner-architect agreement, requires architects to maintain these 4 insurance types:

1. Professional liability insurance 2. General liability insurance 3. Automobile liability insurance 4. Workers' compensation insurance

Performance evaluations help the firm in these 5 ways

1. Serve as basis for pay increases, promotions, and terminations 2. Provide a way to direct improved employee work performance 3. Help the firm understand the strengths and weaknesses of personnel 4. Help direct hiring 5. Help protect the firm from claims by employees

According to Canon 3, Obligations to the Client of the AIA Code of Ethics, members should...(7 things)

1. Serve clients competently and professionally 2. Exercise unbiased judgment 3. Not accept projects beyond their professional capacity 4. Avoid conflicts of interest 5. Be truthful in professional communication 6. Keep clients informed about their projects 7. Maintain client confidentiality

For architects, what are the 3 ways that duty is established?

1. Terms of a contract. 2. Legislative enactment (building codes, architectural licensing laws, etc.). 3. Architect's conduct (implied duties).

Corporate identity, and its main advantages

A distinct and consistently applied graphic image that connects the graphic with the designers firm in the minds of people who see it. 1. Visually communicate the firm's philosophy 2. Present a strong, visible identity to support the firm's marketing efforts 3. Organize the firm's internal office procedures and project documentation 4. Give the firm a visual coherence and consistency

Some techniques that can be used to make working with non-engineering consultants more efficient:

1. Develop list of reliable people in the area who can be called on when needed. 2. Check references and past work before hiring a consultant. 3. Plan and outline the work needed before giving it to the consultant. 4. Establish lump-sum contract price for outsourced work. This helps a project stay on budget. 5. Set up strict schedule of progress meetings, communication, and reviews. 6. Don't assume that all work is being completed as contracted. The architect must still control overall coordination and review all work that the consultant does. (This isn't extra work - the architect would still be doing that if it was done in-house).

Copyright protection for architectural work falls into these 2 categories:

1. Drawings, specs, and graphics 2. Building itself

Before beginning any work with an independent contractor, a firm should....(2 things)

1. Establish the amount of payment as a set fee or on an hourly basis 2. Be sure that the independent contractor is not otherwise financially tied to the firm

Once hourly rates are established for employees in the firm, how does a firm estimate the total fee for a given project?

1. Estimate the amount of time it will take to complete a project 2. Decide which employees (with their respective billing rates) will be doing what work 3. Multiply hours by billing rates to get the total estimated fee 4. In addition to hourly fees, also add costs for estimated non-reimbursable direct expenses, consultants' fees (if not billed separately), and a contingency (if any).

Additional suggestions for collecting fees:

1. Follow the client's billing procedures. 2. Be personal. 3. Use software that develops aged accounts receivable. Report should show 30-, 60-, 90-, and 120-day outstanding accounts. Oldest accounts should be dealt with first. 4. Use software that develops cash flow reports. 5. Consider offering 1-2% discount for payment made within 2 weeks. This could cost less than borrowing in the short term or paying for legal assistance. 6. Require a retainer before work starts. Could be 10-20% of the fee. Most project require some up-front money, and there's no reason why an architect shouldn't receive some of it.

What are the 6 canons of the AIA Code of Ethics?

1. General Obligations 2. Obligations to the Public 3. Obligations to the Client 4. Obligations to the Profession 5. Obligations to Colleagues 6. Obligations to the Environment

The two main broad categories of accounting and their definitions

1. General ledger accounting (basic accounting): All money flowing into and out of the business needed for day-to-day operations, banking, taxes, and auditing. These are firm-wide statements about the overall financial status of the business. 2. Project cost accounting: Tracks revenue, expenses, and profit for individual projects.

Two ways that a firm can write specifications:

1. Hire specification-writing firm 2. Use master specification system and use the system's software to produce documents in-house. Some large firms have an in-house spec writer and a master set of specs.

Four aspects of practice management:

1. How to decide whether or not to accept a project 2. How to decide on the type of project delivery method to use 3. How to implement each of the possible project delivery methods 4. How to determine what types of practice methodologies will best meet the needs of the client and the selected project delivery method

According to Canon 1, General Obligations of the AIA Code of Ethics, members should...(6 things)

1. Maintain and improve their knowledge and skill 2. Seek to raise architectural standards in aesthetics, education, research, training, and practice 3. Respect and seek to improve society and the environment 4. Exercise learned professional judgment 5. Uphold human rights 6. Not discriminate on the basis of race, religion, national origin, age, disability, or sexual orientation

Architects can minimize third-party claims by these actions:

1. Make sure an indemnification clause is in the contract and general conditions. 2. Don't include language in the contract that expressly states responsibility to provide management, supervision, coordination, or planning of construction. 3. Don't give directions concerning methods of construction. 4. Point out obvious construction safety problems to contractors. Follow up in writing. If the problems don't stop, suggest to the owners that construction be stopped until they're corrected.

What are some ways to keep overhead at a minimum?

1. Minimize non-billable labor. Make sure staff is billing time to projects appropriately. 2. Be sure that non-labor direct expenses are reported accurately. 3. Find best prices for phone service, internet, etc. 4. Keep rent at a minimum. 5. Team up with other firms to share the cost of continuing education. Take turns sending one employee to seminars/trade shows who then share what they learn. 6. Make sure the firm's insurance policies don't have too much coverage or overlapping coverage. A firm can raise the deductible to lower premiums.

What all should an invoice include?

1. Name and address of client 2. Project name and number 3. Reference to a contract 4. Detailed breakdown of the work performed and billing associated with each item 5. Reimbursable expenses with backup documentation and any past due amount 6. Either A) Breakdown of the time each team member spent on the job, their billing rates, and total cost, or B) Each phase of work task that was outlined in the contract may be itemized. 7. Name and number of someone to contact if the client has questions.

Name some marketing strategies.

1. Networking 2. Corporate identity 3. Brochures 4. Website 5. Social media 6. Newsletters 7. Powerpoint presentations 8. Advertising 9. Past clients

Disadvantages of design-build-approach

1. Owner has less control over design and construction than with other methods. 2. The design-build entity may substitute lower-quality or cheaper materials to stay within the budget.

Bridging, order of operations

1. Owner hires AE 2. AE develops project requirements. 3. AE gains needed approvals for the project. 4. AE develops preliminary scope drawings and specs so interested design-build firms can understand the project extent. 5. Design-build firms bid and one wins. 6. Design-build firm takes over AE's responsibilities and produce final, detailed CD's. 7. AE reviews final documents to make sure owner's design goals have been achieved (but isn't legally responsible for them). 8. Design-build firm gets permits, review submittals, and constructs the project.

What conditions must be met for a successful design-build-project?

1. Owner must be educated in the design-build method. 2. Owner's project criteria must be clearly and completely stated. 3. Key contractors are selected early and involved in the design process (these can be selected through competitive bidding though). 4. Owner can hire a consultant to anaylze project needs and develop building program and performance requirements. 5. Contract should allow for adjustments in cost and time. 6. Contract should provide for method of dispute resolution (since so many parties are involved) 7. Programs like BIM should be used, and close location of all parties for efficient communication. 8. Trust and willingness to work together.

Standard employee benefits include:

1. Paid vacation and sick leave 2. Health insurance 3. Educational benefits 4. Retirement plans 5. Dental and vision insurance 6. Travel expenses 7. Life insurance

3 requirements to obtain initial architectural license

1. Pass the Architect Registration Exam (ARE) given by NCARB (some states may require further testing) 2. Hold a degree from a university that is accredited by NAAB 3. Complete the Intern Development Program (IDP)

2 disadvantages of using a construction manager, and how can these be reduced?

1. Possible higher costs. Because the CM is hired before the design work is finished, there's no competitive bidding. 2. More complicated management structure due to having one more person on the team. These disadvantages can be reduced considerably if the contractor acts as CM.

What are some examples of non-labor direct expenses that should be billed to a project, not to the firm?

1. Progress prints 2. Copy machine prints 3. Model supplies 4. Postage and delivery 5. All local travel expenses 6. Presentation supplies

What should an architect do if a prospective client wants to use a nonstandard contract?

1. Question it, because it will probably be written to their benefit, not the architect's. 2. Suggest using a standard AIA owner-architect agreement. Explain why it's beneficial during the CA phase. 3. If they still insist, the architect should have it thoroughly reviewed by an attorney familiar with construction law.

If a prospective client is unknown to the architect, how can the architect investigate them?

1. Research on the internet 2. Review trade journal indexes in the client's line of business 3. Do a credit check 4. Contact other professionals who have worked with the prospective client 5. Talk with the client's business associates, vendors, and customers (Specifically, look for information about the client's ability to fund the project, history with building projects, and history working with design professionals.)

According to Canon 5, Obligations to Colleagues of the AIA Code of Ethics, members should...(4 things)

1. Respect the rights of their colleagues and acknowledge their professional contributions 2. Provide associates and employees with suitable working conditions and fair compensation 3. Nurture fellow professional through their education, internships, and careers 4. Give credit to others for their professional work

Name some ways one can network.

1. Staying active in professional architectural organizations 2. Becoming a member of a potential client's trade organization or going to their conventions 3. Getting involved in civic groups 4. Talking with consultants who work with the firm's market

In a design-build approach, how many ways are there to price the project, and what are they?

1. Stipulated sum 2. Cost-plus-fee 3. Cost-plus-fee with GMP

Consultants to be included at a minimum on a project, and addititional consultant examples

1. Structural 2. Mechanical 3. Electrical 4. Plumbing 1. Geotechnical engineers 2. Civil engineers 3. Fire protection engineers 4. Historic preservation specialists 5. Security consultants 6. Interior designers 7. Audiovisual consultants

If you can't find much info on a prospective client, what are some other signs you should look out for?

1. They want to use a nonstandard contract. 2. They are using bidding to select design professionals. 3. They have a history of litigation. 4. In initial meetings, they made unreasonable requests or showed unreasonably high expectations.

According to Canon 4, Obligations to the Profession of the AIA Code of Ethics, members should...(5 things)

1. Uphold the integrity and dignity of the profession 2. Practice with honesty and fairness 3. Not sign and seal documents for which they do not have responsible control 4. Not knowingly make false statements 5. Be honest about their qualifications and about the work they claim credit for

According to Canon 2, Obligations to the Public of the AIA Code of Ethics, members should...(8 things)

1. Uphold the law 2. Never try to influence a public official with payment 3. Never accept payments intended to influence their judgment 4. Never help a client with anything fraudulent or illegal 5. Promote and serve the public interest 6. Render pro bono services 7. Be involved in civic activities 8. Strive to improve public appreciation of architecture

What are some methods used to largely remove the adversarial relationship between architect, owner, and contractor in design-bid-build approach? They also minimize risks during design and construction.

1. Using a design-build team 2. Hiring a construction manager 3. Creating an integrated project delivery arrangement

Name some advantages of networking.

1. Way to understand the market, identify the needs of potential clients, develop trust, and maintain contact when a business opportunity arises 2. Identify a lead (potential client who may need the services of an architect now or in the future)

What are two factors that affect which projects a firm accepts or rejects - regarding the client?

1. Whether the client's budget is sufficient to cover construction and professional fees 2. The reliability and reputation of the client

With an IPD, what are three ways to establish the contractual relationship between the primary participants?

1. With transitional forms 2. With a multi-party agreement 3. With a single purpose entity

Contractors must carry insurance that will protect from these 8 types of claims:

1. Workers' compensation 2. Damages because of bodily injury, occupational sickness, or death of employees 3. Damages of bodily injury or death to people other than employees 4. Personal injury, including slander, libel, false arrest, etc. 5. Damages other than to the work because of destruction of property 6. Damages related to use of motor vehicles 7. Bodily injury or property damage arising when an injury occurs after the job is complete and the contractor has left the site 8. Contractual liability insurance

According to the IRS, a person is an independent contractor if they...(5 things)

1. are hired for a specific project 2. they control where and how they perform their work after given their initial assignment 3. they provide their own supplies and equipment 4. they receive no benefits from the firm other than payment for services 5. they are free to work for other firms at the same time

General Partnership; main advantages and disadvantages

2 or more people (general partners) share in the management, profits, and risks. Income shared among general partners and is reported on personal tax forms. Each general partner is personally liable for business debts and liabilities. Advantages: relatively easy to form. Brings together skills of multiple people. Disadvantages: All partners are responsible and liable for actions of the others. Anyone's personal assets are vulnerable to lawsuits, etc. Income is taxed at individual rates.

How long should an unpaid invoice sit before it needs attention?

60 days

What is the average collection period for invoices in architectural firms?

60-75 days

What is the break-even point (or minimum that should be allowed) of utilization rate for the whole firm?

65%

What is the break-even point (or minimum that should be allowed) of utilization rate for professional and technical staff?

75-85%

How old does an unpaid invoice have to be before it basically means the firm is lending money to the client without charging interest?

90 days

Generalist practice methodology

A firm that completes a variety of project types. Likely uses studio firm organization. Advantages: Tend to be better equipped to move quickly from one market to another, because staff is flexible. Disadvantages: Staff needs broad range of experience. New projects can require more time and effort, straining the fee budget and resource. Wide swings in staff employment.

Design-based methodology; definition, advantages + disadvantages

A firm that develops solutions to problems that are unique and easily identifiable with the firm. Typically headed by well-known architect with distinctive style. Typically, concept design is developed by the principal, then PMs and production team develop and implement the concept. Can use studio organization, but may use departmental organization once the principal has developed the overall design. Advantages: Clients who want signature buildings will seek them out. Disadvantages: Time and fees required by these practices can be high.

Specialty-based methodology/Project type-based methodology; definition, advantages + disadvantages

A firm that focuses on one particular type of project. Some in more complex buildings, like hospitals, airports, laboratories. Some in less complex buildings, like residential, retail, or religious. Likely uses departmental firm organization. Advantages: Firms become skilled at delivering one kind of project quickly and inexpensively. Staff can be less experienced and less costly.

Quick ratio

A more conservative measure of the current ratio because it only includes liquid assets. It includes only cash + cash equivalents + accounts receivable + revenue earned but not billed, divided by total current liabilities.

Personnel policy manual

A positive statement of the firms commitment to employees, clients, and public. It's a tool to maintain clear communication, not a book of rules. Can include: 1. Office organization 2. Employment policies 3. Office procedures 4. Salary/benefits 5. Professional development.

Flextime, and how firms can manage it

A schedule that allows workers to choose work hours that fit their particular needs. Some firms define a core time when everyone should be there. Another variation is to work 9-10 hour days to allow for a day off every week.

Flexible days off

A set number of days can be established by employees to use in any way they want: sick days, vacation, trade in for cash.

What is a multi-party agreement used in IPD, and which one is used? What does it say?

A single agreement executed by the owner, architect, contractor, and other key participants for the design, construction, and commissioning of a project. AIA Document C191 outlines a collaborative working relationship that encourages the parties to meet the cost and performance goals they jointly established. The project is managed by a project management team. Also, a project executive team provides another level of project oversight and conflict resolution. Each team consists of one representative from each major party to the agreement.

Compensation Alternatives

A straight raise or bonus is taxable income for the employee and offers no deduction for the employer. Employees can receive alternative compensation, such as educational reimbursements, paying for travel to conventions and seminars, merit awards, day care services, etc.

What's a vendor and how does is differ from an architect/agent?

A vendor supplies a specific product for a fixed price. Contractors are vendors. Unlike architects/agents, vendors act primarily in their own interest.

What are the 6 series of AIA contract documents?

A-series: Owner-contractor agreements B-series: Owner-architect agreements C-series: Other agreements D-series: Miscellaneous documents E-series: Exhibits G-series: Contract administration and project management forms

What's the main contract for a design-build approach?

AIA Document A141 The Design-Build Institute of America (DBIA) also offers a series of standard agreements. They tend to be more neutral for all parties, while the AIA documents favor the architect.

What contract should be used for IPD?

AIA Document A295

If the construction manager is an independent adviser (CMa), which AIA agreements should be used?

AIA Document B132 AIA Document A132 AIA Document A232 AIA Document C132

Modified accrual basis accounting method, definition

Accounting method that records fee revenue, expenses billed to the client, and invoices to the firm by outside consultants. But, it does not include the amounts of fees that have been earned but not yet billed to the client.

Can an architect intentionally seek to interfere with another architect's contractual relationship with a client?

Typically nah, it's illegal

How can a firm double check their proposed fee?

Use information about past projects to develop benchmark fees based on area, construction costs, project type, or other measures.

Double-entry bookkeeping system

Used in the accrual accounting method. All transactions are listed chronologically in a journal. They are also posted to a ledger where transactions are grouped into individual accounts. Accounting reports are then generated.

Discretionary distribution

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

Can an architect supplant or replace another architect on a project?

Yes

Can architects compete for projects on the basis of fee?

Yes

Can architects advertise?

Yes, as long as no misleading or false statements are made

Chart of accounts

a list of all accounts used by a business

Limited Partnership; main advantages and disadvantages

At least 1 general partner and at least 1 limited partner. General partner(s) invest in the business, manage it, and are financially responsible for it. Limited partner(s) are investors who receive a portion of the profits, but have no say in the management of the company and are liable only to the extent of their investment. (Has been largely superseded by the limited liability company). Advantages: relatively easy to form. Brings together skills of multiple people. Disadvantages: All partners are responsible and liable for actions of the others. Anyone's personal assets are vulnerable to lawsuits, etc. Income is taxed at individual rates.

Implied duties, definition

Based on how the parties conduct themselves in the course of performing their work. Situations may arise that are not covered by the contracts, and courts will often look at how the parties conducted themselves in the past.

Profit sharing

Based on individual project performance. If the team produces a job on schedule and is profitable, then each member of the team receives a percentage of that profit in addition to base salary.

How are billing rates determined?

Based on the employee's salary + cost for that employee's fringe benefits + cost of office overhead + allowance for profit

What are the 3 tiers of statements in the AIA Code of Ethics?

CESROC 1. Canons: broad principles of conduct 2. Ethical standards: specific goals toward which members should aspire 3. Rules of conduct: specific, mandatory statements that members must follow

Sabbaticals

Can be given every 3-5 years to allow a refresher break. Gives added incentive for an employee to stay with the company.

The process of considering someone for employment should include a review of at least these 4 things.

Candidate's past work experience, resume, portfolio review, and one or more interviews. It can also be valuable to speak with their references.

Advantages and disadvantages of cash accounting vs. accrual accounting

Cash accounting Advantages: Better at tracking actual cash flow. Fairly simple. Often used by single-person and small businesses. Accrual accounting Advantages: Gives a better pictures of a business's long-term financial status and provides info that's important for active financial management. Businesses above a certain size are required to use it.

Examples of city taxes that an architectural firm may be subject to

City income taxes Employment taxes Occupational privilege taxes Use taxes Property taxes (if the firm owns property)

These 3 acts make it illegal to discriminate on the basis of sex, race, color, religion, or national origin.

Civil Rights Act of 1964 Civil Rights Act of 1991 Equal Employment Opportunity Act of 1972

Liabilities

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

Traditionally, owners have chosen which project delivery method in order to achieve the lowest cost? Why is it risky?

Design-bid-build. There is considerable risk that in the end the building will cost more than the lowest bid.

MacLeamy Curve

Diagram comparing project effort vs influence and cost for two project delivery methods: IPD and design-bid-build

Studio organization of staff (also called vertical or tall organization); main advantages and disadvantages

Each studio is responsible for completing an entire project, from initial planning to production and CA. Studios can be created and dissolved as the need arises, or they can remain intact and be assigned new projects. For example, a firm may have one studio for retail projects, another for industrial work, and another for office planning. Advantages: Close and immediate communication among members of design team. Studios work well with a strong project manager system, in which the project manager has daily contact with the design team and client. Sometimes studio organization is combined with departments, such as spec writing. Can work well in smaller firms.

Employment contract vs. employment at will

Employment contract: Spells out employee's responsibilities, work duties, compensation, benefits, work conditions, termination procedures, and policies on accepting work from outside firms (moonlighting), noncompete clause, etc. Employment at will: No written contract. The employee can be terminated at any time without explanation. The employee can also quit at any time without giving a reason.

Explain the copyright protection for buildings and where it comes from.

Established under The Architectural Works Copyright Protection Act. Applies to buildings built after December 1, 1990. A building owner cannot construct buildings based on unauthorized copies of an architect's design. Derivative works also cannot be made (substantially similar to the original).

The Wages and Fair Labor Standards Act (FLSA)

Establishes minimum wage, overtime, pay, recordkeeping, and child labor standards in both the private sector and in government employment

Negligence, definition

Failure to use due care to avoid harming another person or damaging property. This is an important way that architects can be liable.

When do sole proprietors (and some partnerships) file taxes? Do they pay self-employment tax?

Federal and state income tax must be filed as estimated taxes every quarter. They must pay self-employment tax to cover Social Security and Medicare taxes.

Firm study groups

Groups where ideas are generated, evaluated, and submitted to the firm principals for study and implementation.

Indemnification clause, definition

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

Betterment, example

Often applies to claims of omission by the architect. If a client originally approved wood paneling in a room but the architect mistakenly showed painted finish, a change order would have to be made. The client may claim that the architect should bear the full cost of the change. However, the architect can claim that the owner would have had to pay for the wood paneling anyway (a betterment to the project), so then the architect would have to pay only for extra charges caused by the change order above what the original cost of labor and materials would have been; for example, to add blocking for the paneling and to call back the workers to redo the room.

In the CMc project delivery method, the architect begins providing construction administration services (as described in AIA Document A201) at which point?

Once one of three things happen: 1. Owner accepts the CMc's GMP 2. Owner approves the CMc's control estimate 3. Owner issues a notice to proceed to the CMc

Agency, definition, and how it relates to architecture

One person (the agent) acts on behalf of someone else (the principal) in dealings with another (the third party). In architecture and construction, the agent is the architect, the principal is the owner or client, and the third party is the contractor.

Design-assist contracting, definition

Project management method in which specialty subcontractors are included early in the design and construction document phases to help with the development of complex or unique portions of the building. Takes some additional work to make it effective. Architect must select the best subcontractor to meet the design, budget, and schedule requirements.

General liability insurance

Protects against claims of property damage, liability, and personal injury caused by architects or their employees, consultants, or others hired by the architects.

Personal injury protection

Protects architects against charges of slander, libel, defamation of character, misrepresentation, and other torts (civil wrong, as opposed to criminal act).

Workers' Compensation

Protects employees in the event of injuries caused by work-related activities. Mandatory in all states.

Property Insurance

Protects the architects' building its contents against disasters such as fire, theft, and flood. Can be used even if a space is rented.

Health Insurance Portability and Accountability Act of 1996 (HIPAA)

Protects the privacy of individually identifiable health information

Flexible benefit packages

Required statutory benefits are provided, and employees can choose their additional benefits from a menu of options. For example, a single employee may choose extra PTO while an employee with a large family chooses increased health insurance.

Occupational Safety and Health Act of 1970 (OSHA)

Requires employers to provide a safe work environment. Although primarily aimed at construction sites, factories, etc., OSHA can inspect offices and charge fines for failure to provide things like first aid kits, posted material safety data sheets, and fire extinguishers

Employee Eligibility Verification

Requires employers to verify the employee's right to work in the US by maintaining an employee's I-9 form for at least 3 years and at least 1 year after termination

Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA)

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

Equal Pay Act

Requires equal pay for employees who have 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

Fixed assets

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

If an AIA member is found in violation of the Code of Ethics, what happens? 4 possibilities

Sanctions...oof. They can include.... 1. Non-public admonishment 2. Censure, which includes publishing a description of the violation in an AIA periodical 3. Suspension of membership 4. Termination of membership

Statute of Repose

Sets a time limit (shorter than statute of limitations) and doesn't begin until the problem is first discovered. There is also a second time limit within which claims must be made. For example, the statute of repose for a claim against an architect may be 3 years from discovery, with absolute cutoff date 6 years from substantial completion. In this case, if a client discovered a problem 5 years after substantial completion, they would only have 1 year to file a claim.

Statute of Limitations

Sets a time limit within which a claim can be made. After the time limit, the claim is permanently barred. Generally 3-10 years (depending on state). Mostly begins with the date of substantial completion.

Employee Retirement Income Security Act (ERISA)

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

Cash flow statement (in accounting)

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. Also shows direct costs, such as for consultants, overhead allocations, and reimbursable expenses. These give the project manager and firm management an accurate look at the status of a project.

Aged accounts receivable

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

Direct Personnel Expense (DPE)

Similar to net multiplier, but lower, and not used as frequently. The costs of providing taxes, benefits and the like are included with the employee's base salary. The multiplier is then calculated to account for indirect labor and profit. Because benefits are already included in the DPE, this multiplier is slightly lower than the net multiplier.

Quality control circle

Small group of employees who meet regularly among themselves and with management representatives to identify and resolve issues that affect their area of work. May take 1-2 hours per week of company time, but the benefit-to-cost ratio is usually high.

Professional liability insurance, definition and alternative names

Sometimes called malpractice insurance or errors and omissions insurance. Protects architects in case one of their actions causes bodily injury, property damage, or other damage. Covers problems resulting from things like incorrect specs, mistakes on drawings, and negligence. However, it excludes wrongful acts, claims for cost estimates being exceeded, and claims arising from express warranties.

What is one way an office can make sure staff is billing time to projects appropriately?

Sometimes time legitimately spent on a project ends up listed as "office" time because staff can't remember what they were working on. An office can require time information to be turned in daily or throughout the day.

Departmental organization of staff (also called horizontal or flat organization); main advantages and disadvantages

Staff is organized into departments, each of which specializes in a different function. Design department, marketing department, specifications department, contracts department, etc. This is the most traditional structure. Advantages: Very efficient, allows a firm to make full use of specialists, and create economies of scale. Disadvantages: Can make a business inflexible and resistant to innovation and change. Might be challenging to keep communication open between departments. Can be difficult for employees to gain breadth of experience outside their specialty.

Control estimate

Sum of the CM's estimate of the cost of the work plus the CM's fee. Establishes the expected date of substantial completion. Also includes a list of drawings, specs, etc. used by the CMc in preparation of the control estimate.

Balance sheet (in accounting)

Summarizes all assets and liabilities and shows the financial position of a business. All the assets listed must exactly equal all the liabilities listed.

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. This can help firm management find any projects that may be hurting overall profitability and need remedial action.

Fast-tracking: description, advantages and disadvantages

The construction process is allowed to begin before the design process is completed. Architectural and engineering documents are issued in stages, called bid packages. Can be used with any project delivery method, but most common when CM is involved. Advantages: Can reduce time and cost substantially. Disadvantages: Requires many prime contracts and a great deal of coordination.

Fixed price method

The contractor gives the owner a set price for completing the project. The owner knows the final cost before construction begins and is not responsible for cost overruns. However, the owner doesn't share in any savings that the contractor may gain. Also known as stipulated sum or lump sum method.

In a design-build approach, how are the architect's responsibilities defined?

The design-builder, architect, and owner select which services the architect will provide. They may include: 1. Normal design administration services, including design scheduling, consultant coordination, design presentations, etc. 2. Evaluation of the project criteria provided by owner 3. Design 4. Providing CD's, including specs

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

Billing rate

The hourly rate charged per staff member working on a project

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 For example, if an architect designing a building in Florida did not incorporate hurricane-resistant detailing, he or she would most likely be found negligent because a reasonably prudent architect designing for the same location would do so.

Business Licenses; general and then specifically for each business type

The license allows the business to practice, and it usually serves as the basis for taxation. In some states, a firm must file with the state registration board and obtain a COA (certificate of authorization). Corporations: must be registered with the state in which it practices. Each corporation is issued a corporate ID numbers. LLC and LLP: LLC certificate or other type of business license may be required.

Documentation methodologies, definition

The methods a firm uses to document a project and generate CDs and specs. Software, hardware, etc.

Owner's equity

The money invested in a business by the owners or stockholders

Net operating revenue (or net revenue)

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

In a design-bid-build project, why are contractors, in a sense, in the role of adversary to the owner and architect?

The owner and architect want a high-quality project at the lowest cost. The contractor wants to win the contract and still make a profit on construction.

The owner contracting directly with the consultant: what happens, advantages and disadvantages

The owner assumes all responsibility for coordinating the architect's work with the consultant's work. Advantages: The architect avoids any issues with contract provisions and payment. Disadvantages: Takes extra time. Lessens the architect's control over a project. Complicated communication.

What are the owner's responsibilities in a design-build approach, that they wouldn't normally have?

The owner assumes many of the construction contract administration duties normally performed by the architect, including: 1. Reviewing and approving submittals 2. Approving changes submitted by the design-builder 3. Visiting the site 4. Rejecting non-conforming work 5. Certify substantial completion using AIA Document G744

How does copyright work if the contract is terminated?

The owner cannot continue to make use of the architect's instruments of service without paying a licensing fee to the architect. The architect can transfer copyright to the owner if desired, or grant a license to reproduce the building or a derivative work.

If the owner requires the architect to carry insurance at limits greater than the architect normally does, who pays for it?

The owner is responsible for paying the additional cost.

Cost-plus-fee with GMP

The owner pays the actual cost of construction (direct plus indirect costs) plus a fee that is agreed on before construction begins, and the CM guarantees a maximum price. If the project is completed for less than this amount, the client receives the cost savings.

Net profit before tax

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

"In the same time frame" definition when pertaining to 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."

The time the project is designed or built, not at the time of the dispute For example, a client may claim that the architect should have used a certain material to prevent damage to the building. But, if that material was not yet available or not yet tested at the time the project was designed, the architect is unlikely to be found negligent.

Practice Methodologies; what aspects of a firm affect their practice methodologies?

The various approaches that an architectural firm may use to complete various aspects of a project (including design, documentation, and coordination). 1. Expertise and size of staff 2. Overall firm philosophy 3. How the firm is organized as a business 4. Techniques used to develop designs 5. How the firm produces the drawings and specs

In a design-bid-build project, what are some ways the contractor will try to achieve the lowest bid, and try to undermine that bid later?

To achieve a low bid, a contractor will often underestimate the requirements of the project or base the bid on low-quality materials and labor, and then try to make up costs with change orders. A contractor may also try to take advantage of discrepancies/ambiguities in the construction documentation to force change orders that could be considered errors and may be charged to the architect.

Net worth of a firm

Total assets of a firm minus its total liabilities

Break-even rate, its recommended rate, and how it's used

Total cost of operations / Total money spent on direct labor This accounts for the salary of the employee plus the amount of overhead attributed to the employee. Recommended rate: 2.30 - 2.50 Employee's base salary x Break-even rate = Minimum hourly fee that must be charged to the client in order for the firm to break even on the employee's salary. This can then be increased by whatever % of profit is wanted to arrive at an hourly fee.

Current ratio, and its acceptable levels

Total current assets divided by total current liabilities. The higher the ratio the better. 1.5 or more indicates a healthy business. 1.0 is minimum acceptable level.

Overhead rate, and its acceptable rates. How can you use this to calculate fees?

Total office overhead divided by total direct labor. Acceptable rates: 1.30 - 1.50 To calculate fees, this ratio is multiplied by the estimated cost of direct labor, and the resulting product is added to the direct labor amount.

What are the transitional forms used in IPD?

Transitional forms are modeled after existing CM agreements and include: AIA Document B195 AIA Document A195 AIA Document A295

Is it recommended to bill a lump sum payment at the end of every phase completion?

No. This can sometimes delay cash inflow for months, especially on large projects.

Time analyis report

Lists each employee along with the number of hours they have spent on direct labor, indirect labor (including marketing and prof. development), vacation time, sick leave, and holidays.

C corporation: main advantage and disadvantages

Advantages: A corporation is financially and legally independent from its shareholders. Each shareholder is financially liable only for the amount of money they have invested. If the corporation is sued, the personal assets of the shareholders are not at risk. A corporation has a continuity that is independent of any changes in shareholders, directors, and principals. It's easy to raise capital through the sale of stock. The corporation and shareholders are separate legal entities, so the corporation is taxed on its profits and the shareholders on their dividends (technically it's taxed twice). Disadvantages: high initial startup cost and the continuing paperwork and formal requirements necessary to maintain it. However, these are usually outweighed by the reduced liability and tax benefits.

S corporation

Advantages: Same as C corp. Allocates income and losses directly to shareholders in proportion to their holdings. Shareholders then report their shares of the business's income and and losses on their personal federal tax returns and are assessed tax at their individual rates. This avoids tax on corporate income, and can be advantageous when the business loses money or when tax rates favor the individual over the corporation. Disadvantages: Limited to "small business corporations." To qualify, a corporation must be a domestic company with no more than 100 shareholders. There are other restrictions as well.

Noncompete clause/Restrictive Covenant

After leaving the firm, limits/prohibitions on who an employee may work for during a specified amount of time after leaving the firm, setting up a competing business in the same geographical area, working for the firm's clients, and passing on confidential information to others

In most cases, when does the CMc estimate cost and GMP? Explain the risks.

After the design development phase, on partially completed documents. This puts the CMc at risk, so many construction managers prefer the cost-plus-fee method without a GMP. It's often referred to as Construction Manager at Risk CM@R. This way, the owner and CMc can monitor cost through periodic review of the original estimate as the project proceeds, and the fee to the construction manager can be adjusted accordingly. The CMc can also advise the architect on the cost implications of their work as drawings are finalized.

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. Very similar to design-build, but owner has multiple agreements with independent design and construction firms (whereas design-build the owner always has only one). Depends heavily on technology, communication, and BIM.

Gross revenue

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

National Labor Relations Act (Wagner Act)

Allows private sector employees to organize into trade unions and protects union employees from unfair labor practices by employers

This act makes it illegal to discriminate on the basis of disabilities.

Americans with Disabilities Act (ADA)

Revenue per total staff, how to calculate it, and how it's used

Amount of net revenue produced per staff member per year, including principals and part-time employees. Annual net operating revenue / total number of employees This can be used to estimate the required net operating revenue for future budgets.

Accounts payable

Amounts owed to the suppliers of goods or services (consultants, reproduction companies, utility companies, etc.) that have not yet been paid

What is a single purpose entity (SPE) and what does it do?

An SPE is an independent LLC newly created for the sole purpose of planning, designing, and constructing a particular project. An SPE provides for a complete sharing of risk and reward in a fully integrated collaborative process. AIA Document C195 requires the SPE to contract with an architect (who will become a member of the SPE) for services. Usually used for large and complex projects.

Employee Stock Ownership Plan (ESOP); main advantages and disadvantages

An arrangement in which the company sets up a trust, through which it give employees stock, or possibly cash with which to buy stock. The contributed stock is then allocated to each employee based on several allowable formulas. Over time, usually 10-15 years, the employee becomes fully vested (usually vesting is 10% per year). Advantages: Employees have ownership and significant participation in the firm. ESOPs offer tax advantages and financing opportunities for the business. Disadvantages: Generally for larger firms and only for firms that are on stable financial and management footing to begin with. They are complicated and expensive to set up, requiring legal advice and careful planning.

How often does an architect have to renew their license?

Annually or biannually, depending on state

Support Staff - definition

Any employees other than the professional staff and senior management. Includes administrative assistants, receptionists, bookkeepers, marketing, model builders, tech assistants.

Assets

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

The architect contracts directly with the consultant: what happens, advantages, disadvantages

Architect is responsible for coordination between architectural work and the consultant's work. The architect holds the primary contract with the owner, receives all payments, and is responsible for paying consultants their shares of the total fee. Advantages: Architects can comment on any portion of the consultant's design that affect the aesthetic objectives for the project. Disadvantages: If payments from owner are delayed, architect may have trouble paying consultants' fees. Many architects include "pay when paid" clause in contract.

What's an AE, and what is their responsibility?

Architect or engineer hired to be the project manager for Bridging project. Also called criteria architect. Works with the owner to develop the project requirements that will be used by the selected design-build firm. Works with public and private groups to gain the needed approvals. Develops preliminary scope drawings and specs so that design-build firms interested in bidding can understand the project extent. The AE reviews the final documents (produced by the winning design-build firm) to ensure the owner's design goals have been achieved, but is not legally responsible for them.

When should invoices be sent, and how often?

As soon after the payroll period as possible. A billing cycle of a month at most; some firms bill twice a month to keep cash coming in more regularly. Faster billing also helps the client associate the invoice with the work performed and may forestall questions.

Corporation (or C corporation) and its levels of participants

Association of individuals that exists as a legal entity apart from its members. Can be created only in accordance with statutory requirements. To form a corporation, formal articles of incorporation must be drawn up by an attorney and filed with the state office. 3 levels of participants: Stockholders are owners (in proportion to the number of shares they own). They elect the directors. Directors have the fiduciary duty to act in the best interest of the stockholders and are responsible for broad policy decisions. They elect the officers. Officers carry out day-to-day management of the corporation.

Limited liability company (LLC) and limited liability partnership (LLP); main advantages and disadvantages

Combine the advantages of a partnership/sole proprietorship with the limited liability of a corporation. Members are those who invest, and managers are those who manage. It is possible for a non-members to be a manager (unlike a partnership). Advantages: Liability is limited to a member's investment; a member has no personal liability. The business itself is not taxed (because an LLC is not a separate entity in the eyes of the federal govt). So, profits and losses are passed through the business to each member who must report it on their federal tax return. In some cases, the members of an LLC can elect to be classified as an S corporation: the organization remains an LLC from a legal standpoint but is taxed as an S corporation. Generally an LL C is easier to set up and operate than a corporation. Disadvantages: Some states tax LLCs. Members of an LLC are considered to be self-employed, so they must report and pay self-employment tax for Social Security and Medicare.

Bridging

Combines the advantages of design-bid-build with design-build. Owner hires an architect or engineer (AE) to be the project manager. AE acts as adviser and works with owner to develop the project requirements that will be used by the selected design-build firm.

Privity, definition

Concept that architects in theory are protected from claims by parties with whom they have no direct contractual relationship.

Most often, who typically leads a design-build entity, and who acts as consultants? Who has a contract with who?

Construction contractor leads the project. Independent architect and engineer act as consultants. The architect and engineer have agreements with the contractor, not with the owner. A design manager from the contracting firm works with the contracted architect.

Outsourcing; advantages and disadvantages

Contracting with another company to do some of the work needed for a project. Both large and small firms outsource work. CD's and renderings are often outsourced. Advantages: Can be a way to manage fluctuating workload without continually hiring and firing employees. Disadvantages: Requires careful management and coordination.

Automobile insurance

Covers liability and property damage to vehicles owned and used by the business. Can include protection against claims made by employees who use their own cars while on company business.

"The same or similar facts and circumstances" definition when pertaining to 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."

Includes budget, scheduling, and the complexity of the project, among other matters. For example, a client might want a shorter construction time and agree to a fast-track delivery system using a construction manager. Then, after the project is completed with some increased costs due to the shortened schedule, the client may claim that the architect should have suggested a deign-bid-build project delivery method to get a lower price. A court would probably hold that a prudent architect working under the same circumstances would also choose a fast-track delivery method, rendering the client's claim without merit.

What does it mean for a firm if they hire a freelance person/independent contractor?

Independent contractors are hired if an office doesn't need a full-time, permanent employee. The firm avoids the need to withhold taxes, pay benefits, or establish an employee-employer relationship. This person cannot be classified by the IRS as an employee.

What is one of the highest percentages of overhead?

Indirect labor

What is one example where the court may not support the enforcement of indemnification clause?

Instructions the architect gave or failed to give were the primary cause of the damage or injury.

Financial management, definition

It's beyond the basic bookkeeping and accounting activities. Includes active planning, monitoring, and controlling of financial information, as well as acting on that information.

Liability, definition

Legal responsibility for injury to another person or damage to property.

Profit and Loss Statement (Income Statement)

Lists all the income and expenses of a business for a certain period of time. The difference between all the income and all the expenses gives either the profit or the loss for that period.

Professional Corporation

Many states allow the formation of these for professionals (such as architects, lawyers, doctors, etc.). Similar to other corporations except that liability for malpractice is generally limited to the person responsible for the act. However, each state has different laws.

Difference between marketing and PR

Marketing only focuses on a particular potential job or single potential client, while PR establishes and communicates the firm's presence to various groups of people on many different levels

Wellness

Might include health club membership, weight management program, or smoking cessation program. Seen as a way to reduce the rising costs of healthcare by preventing problems before they occur.

Other assets

Miscellaneous resources such as securities or copyrights

Accounts receivable

Money that others owe to the business through invoices for services

What are some other types of insurance not required by Document B101?

More common: 1. Property insurance 2. Personal injury protection Others: 3. Health and life insurance for employees 4. Special flood insurance 5. Valuable papers insurance 6. Business life insurance

Net multiplier, and its acceptable value

Net revenue of the firm / Cost of direct labor This accounts for fringe benefits, indirect labor, overhead, and profit. Acceptable value: 2.7 - 3.0 For example, at a firm using a net multiplier of 3.0, if an employee is paid $40/hour, the billing rate to the client for that employee would be $120/hour.

Sole Proprietorship; main advantages and disadvantages

Owned by an individual. Advantages: Ease of setup, total management control by owner, possible tax advantages (because business expenses and losses may be deducted from gross income) Disadvantages: Owner is personally liable for company's debts and losses. If a client sues, the owner's personal income and property, etc. can be seized. Raising capital and establishing credit depend entirely on owner's personal credit rating and assets. Difficult to sell.

Design-build method of project delivery

Owner contracts with one entity to provide both design and construction services. That entity then subcontracts portions of the work to others as needed.

Floating holidays

Paid days that employees are able to take off to observe any holiday not included in the employer's list of recognized paid holidays. A variation from this is to provide mental health or personal leave days.

Chargeable ratio / Utilization rate

Percentage of time (or dollars) spent on direct labor, divided by total time (or dollars) spent on direct and indirect labor, vacation, holiday, and sick leave. Direct labor time / Indirect labor time

The most fundamental equation for financial planning (shown 2 different ways, and explain them):

Profit + Expenses = Revenue The business makes its targeted profit, and then the business has to control expenses (reduce overhead) and generate enough revenue (increase the amount of work the firm does or increase fees) to make it work. Revenue - Expenses = Profit Profit is whatever is leftover after expenses are subtracted.

Age Discrimination in Employment Act of 1967 (ADEA)

Prohibits age discrimination in employment for persons age 40 or over, including hiring, firing, segregation in the workplace, and reducing wages or salary

Civil Rights Act of 1991

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

Joint Venture Definition, when it is used, what a firm should do before they enter into one

Temporary association of 2 or more people for the purpose of completing a specific project. Typically used by architectural firms when a project is too large or too complex to be completed by one firm alone. Treated like a partnership; it is not itself a legal entity independent from its members, and it can't be sued like a corporation can. Profits may be taxed as a partnership , or the individual members of the joint venture may be taxed separately (depending on state laws). Before a joint venture is formed, a teaming agreement (or memorandum of understanding) should be developed that defines the roles, responsibilities, and contractual relationships that will be established. This is not a formal business organization.

Revenue per technical staff, and how it can be used

The amount of net revenue produced per technical staff member, or those staff members most directly involved with charging direct time and producing jobs. This can be used to estimate the required net operating revenue for future budgets. If a firm's operating revenue is known, revenue per technical staff can be used to estimate staffing levels.

When a construction manager is involved, what are the architect's construction administration services?

The architect must advise and consult with both the owner and CM to report 1. Deviations from the contract documents 2. Deviations from the construction schedule 3. Observed defects and deficiencies in the work

How does an architect pay taxes on goods purchased from out of state? Furniture and equipment used by the business?

The architect must file a use tax certificate and pay what amounts to a sales tax. Some states charge a personal property tax on furniture and equipment that is used by the business.

If the architect finds out that the owner still has another contract with another design professional for the same project, what should they do?

The architect should not accept work from the owner until the agreement with the other architect has been dissolved.

In addition to the contract, how else should the architect claim ownership rights to the building copyright?

The architect should register the work with the U.S. Copyright Office within 3 months of completion of the building. Not technically required, but advisable, and it allows the architect to bring a lawsuit for infringement, to collect attorneys' fees, and to recover statutory damages.

Who owns the copyright protection for architectural work, and where is this stated?

The architect, unless the architect is an employee of the building owner or specifically assigns the copyright to the owner. Should be clearly stated in the Owner-Architect Agreement B101.

CMc method of project delivery, description

The construction manager is part of the contracting firm. Contracting firm has a single agreement with the owner covering the construction management services as well as the construction services provided.