Practice Management AB

The contractor is responsible for...

"Perfection" in construction Nothing outside the contract Paying and coordinating sub-Contractors Providing Owner with operation manuals Some design of specific systems (delegated design) for things like curtain wall details, concrete formwork, and steel fabricator shop drawings

1 - Assets 2 - Liabilities 3 - Balance 4 - Equity

1 - Assets: Everything owned by a business that is cash or easily converted to cash 2 - Liabilities: Everything owed by a business 3 - Balance= Assets-Liabilities 4 - Equity: Same as balance (also known as net worth)

1 - Net Profit 2 - Net Billing 3 - Profit Earnings Ratio 4 - Prospect/Suspect

1 - Net Profit: Profit before tax and distributions to firm owners, but after paying wages and bills 2 - Net Billing: Billing that only covers fees for architect's labor 3 - Profit Earnings Ratio=Profit/Net Operating Revenue (defines the health of the business). If our firm brings in $100,000 (after paying our consultants, but before we pay our salaries or rent), and our expenses (salaries and rent) are $80,000, then our profit is the $20,000 left over. We divide the 20k in profit by the 100k in net operating revenue to derive a profit earnings ratio of 0.20. That means that for every dollar we take in, 20 cents is available to our firm owners and investors as profit. 4 - Prospect and Suspect: Potential projects with a >51% (prospect) or <%50 (suspect) chance of income generation

Rules for unpaid interns

1 - Similar experience to education 2 - Must benefit intern 3 - Intern doesn't replace anyone and is monitored closely 4 - No advantage or some disadvantage to firm 5 - No guarantee of job afterwards 6 - Intern and firm are explicit that there is no salary Note that while there is no AIA ethics rule against firms engaging unpaid interns, NCARB does maintain a stance against unpaid interns.

AIA agreement types by letter prefix

A series: Owner-Contractor; Contractor-Subcontractor; Sureties B series: Owner-Architect C series: Architect-Consultant; IPDD series: Miscellaneous E series: Specialty Projects, Services, and Processes G series: Project Management and Administration

Contractor License Bond

A surety bond (insurance) that protects against contractor breaking construction laws

Base design-bid-build contracts

AIA B101 - Owner-Architect Contract AIA A101 - Owner-Contractor Contract

Who contracts directly under the Architect and who contracts under the Owner?

Architect: MEP, Lighting Consultant, Civil Engineer (utilities, land contouring, and all things related to the improvement to the land with the new building), Landscape Architect/Engineer, Cost Estimator, Code ConsultantOwner: Zoning, Traffic, Site, Geotechnical (underground), Surveyor, Civil Engineer (for duties related to permitting, and documenting the existing condition of the site)

How many times does an architect need to goof before they are disciplined by the profession.

As you might imagine, there is no hard minimum number of lapses, beyond which the architect is disciplined by the profession. Instead, trouble arises after failing to "demonstrate a consistent pattern of reasonable care and competence," and like so much else in an architects liability portfolio, that bar to clear is established by "standard of care" norms: other architects practicing in the same locality at the same time.

Base vs direct vs indirect salary

Base salary: Total annual compensation (Base Salary in $/year = Hourly rate * 40hrs/week*52 weeks/yr)Direct salary: Salary derived from billable hours (cost of employee's time charged to client for, say, code analysis)Indirect salary: Salary from non-billable hours (cost of employee's time spent fighting with a jammed copier for 30 minutes)

Basic Services

Basic services in the standard AIA contract include Instruments of DesignSD, DD, Bid, CD, and CA, cost estimation, and coordinationBudget and schedule managementCodes and utilitiesMechanical, electrical, plumbing (MEP) engineering and structural engineering Everything else (programming, acoustical consultant, marketing materials, etc.) is considered a supplemental service or an additional service. . . with an additional up-charge fee.

Tort Claim

Claim made due to injury

Types of bids

Competitive: Lowest immediate costNegotiated: Owner selects a (single) trusted contractor and they negotiate a price to build the museum. Greater speed and quality, but obviously more expensive because the owner has given up the option to benefit from competitive pricing. Invited: Competitive bid with specifically qualified contractors Proposed: The owner negotiates for best quality out of the lowest four bids

What types of damages can be pursued in litigation? Which are called for in AIA B101? Consequential vs liquidated vs direct damages

Consequential damages - Estimated cost of lost owner profit due to project delays (planned potential profit had my lemonade stand been open in time for the summer rush). The contracts prohibit all parties from recovering consequential damages.Liquidated damages - Per-day penalty for a delayed construction project completion, agreed upon at the beginning. The A101 Owner-Contractor Agreement allows for liquidated damages (which in construction are almost always related to per-day-late penalties); The B101 Owner-Architect Agreement forbids claims based on liquidated damages, so the owner may not file a claim against, or withhold payment from, the architect for each day late. Above all, the AIA documents hold the architects blameless. Direct damages - Actual cost of fixing unacceptable work (maximum allowed is = the Architect's fee). The owner may pursue a claim for the cost of repairing the leaky foundation from either the contractor or the architect (or both).

Common project delivery methods

Design-Bid-Build: Unless told otherwise, assume that the ARE is asking you based on this "vanilla" option.Design-Build: A single contract between the owner and a design-build firm employing architects and contractors (or joint-venture entity owned by architect and contractor)IPD: Integrated project delivery. Catch-all category for one-off teamwork-focused contracts where owner, contractor, and architect share the financial risks and rewards of a completed building. Construction Manager: A powerful entity, hired by the owner and answering directly to her, who may serve as a consultant in an advisory role, a legal representative of the owner who hires the architect and contractor, or a one-stop-shop for both advising the owner and then constructing the building. It may seem like the project delivery options are both prescribed and limited in choices. . . because they kind of are prescribed and limited. . . If that feels strange to you, read on (but you have my permission to move onto the next card if the selection of contracts available feels "normal" to you.) By constricting the legal formats available to a small number of options, the AIA contracts can legally protect everyone with a relatively small number of owner-architect-builder agreements, updated regularly to account for new developments in the field (BIM, LEED) as they arise. If every possible legal structure were on the table for every project, basic contract templates could not possibly cover all the options and expensive lawyers would reinvent the wheel for each project, negotiating over little details, while the parties schemed to unscrupulously take advantage of unforeseen loopholes in the fine print. With a limited number of contracts, when disputes arise, there is established case law tied to that particular contract flavor and a process of revising the next iteration of that contract template to address the most common disputes so that they won't need to be settled in the courts going forward. Who gets to decide when there is a new project delivery method available? Generally, the owners do through their collective market power. If you were making an upright-walking species from scratch, you would design it with two spines instead of one, and human frames would be more the shape of a capital H. But because we evolved from beasts that walked on four legs, we were stuck with the single spine that worked best for them. Now many of us suffer from back pain because of that start-from-what-we-already-have process. It's similar evolutionary expediency with the AIA contracts, where what is available is as much a reaction to what was available before than what would be absolutely optimal now. Design-bid-build held a position as the default for a time, but construction took too long and involved too many adversarial parties so the design-build contract option was born. Buildings got complicated and owners were taking too much risk with too little information, so contracts with a construction manager were invented. The owners were happy to give the construction managers more risk for more profit upside so the AIA invented new contracts, each giving the construction manager more responsibility. Finally, BIM allowed all the parties to make a change to a living-breathing digital drawing set, a new generation of entrepreneurial architects emerged who didn't see being a developer as selling out, and some grew tired of the adversarial relationship that the existing contracts fostered between architect, contractor, and owner. . . so the AIA developed IPD contracts. Each contract type evolved from what came before it, but each retained the evolutionary baggage associated with incremental change. And each existing contract type, by virtue of its legacy status, is updated and maintained in perpetuity so as not to waste a lot of past effort and settled case law (and not to waste a marketplace of owners with inertia, content to use the contract type that worked out well last time).

Employment Practice Liability InsuranceIntellectual Property Insurance

Employment Practice Liability Insurance = Insurance to protect from wrongful terminationIntellectual Property Insurance = Insurance to cover claims based on copyright/intellectual property infringement

Fair Labor Standards ActDavis Bacon Act

Fair Labor Standards Act: regulates minimum wage, overtime pay, and child labor Davis Bacon Act: Contractors working on federal construction projects must pay workers no less than the locally prevailing wages.

Common types of small business taxes

Federal and state income tax Self-employment tax Personal property tax

Do business as a sole proprietor or as a limited liability corporation?

For someone with the liability exposure of an architect, an LLC or S-Corporation is almost certainly the best option for operating a business. If the building you design burns, and people are hurt, the aggrieved will find it difficult to take your family's house in a settlement. If doing business as a sole proprietor or partnership, it is much easier for the winner in a case to take your personal house- and the money you've put away for your child's college expenses.

Mediation vs arbitration vs lawsuit

Laid out in B101, either:Mediation -> Arbitration (not always cheaper, often ends in 50/50 settlements)-or-Mediation -> Court System (can be cheaper, fairer, and faster, but is also public)

Who pays for the bid bond

Like an insurance policy that pays the owner the difference between the winning bid and the next lowest if the winning bidder walks away before signing the contract, the owner requires the bidders to purchase their own bid bonds (if she chooses to require bid bonds at all). When the contractor bids, he is bound to build what's laid out in the bidding documents for the winning bid price. If a contractor has a history that includes walking out, it will be difficult for him to even obtain a bid bond because no insurer will want to cover a high risk "runaway bride."

Format types for specifications

MasterFormat: classifies by material: concrete, masonry, metals, etc. (older format, more commonly used)Uniformat: classifies by system: substructure, shell interiors, etc. (newer format, better for BIM)

Contractor's "Cost of Work" includes...

Materials Labor Profit Overhead This is especially important to define up front if the architect's fee is based on a percentage of Cost of Work.

OSHA

Occupational Safety and Health Administration (OSHA): enforces workplace safety regulations for things like construction falls, exposure to dangerous construction solvents, potentially dangerous power tools, and requirements for neon safety vests, glasses, & hardhats on site. OSHA considers office workplaces, like architects' offices, to be low-hazard but requires reporting of workplace deaths or multiple simultaneous workplace hospitalizations, even in offices.

Who are the most common ethics complainants?

Other architects Homeowners

AIA A201 General Conditions

Outlines the site and project specific conditions that modify the project from the typical. See a sample here.*Includes legal modifications

Post-occupancy evaluation

Post-occupancy evaluation: Surveys used to see how well a building is performing, usually administered at least a year after occupancy*Very important! Employees are the major expense for any business, so knowing how design affects their performance is key.

The Owner is responsible for...

Pre-existing site conditions (geological, hazardous materials, surveying)Paying ContractorPaying Owner's subsChange ordersWith or without cause hiring and firing of Architect

Retainer

Retainer: Regular services for a fixed fee, more efficient than hourly over the long term. . . like if a university is regularly updating rooms as small projects (adding A/V equipment, accessibility ramps, upgrading outdated bathrooms) the university might hire an architect on retainer. The architect then can bill the university for the work completed, without having to create a new contract for each door that is replaced.

Surety bond, bid bond, and performance bond

Select a Flash Card: Please Select 1 - Corporation2 - Insurance types3 - Standard of Care4 - Master format/Uniformat5 - Employment and IP Insurance6 - Owner responsible for. . . 7 - Insurance vocabulary8 - Tail insurance9 - Ethical complaint10 - Common ethical complaints11 - Fiduciary duty12 - Retainer13 - Agency14 - Who hires who?15 - Contractor responsibility16 - Architect responsibilities 17 - Federal labor laws18 - General liability insurance19 - Professional liability insurance20 - Mechanic's lien21 - OSHA22 - Taxes23 - Post-occupancy evaluation24 - Contractual liability25 - Subrogation26 - Utilization Rate and Revenue Factor27 - Design fees28 - Risky contract language29 - AIA Documents30 - Accounting31 - Consequential vs liquidated vs direct damages32 - Current Earnings33 - Base vs direct vs indirect salary34 - Balance sheets35 - P-L Statement36 - A20137 - Cash basis vs accrual basis 38 - Net revenue per employee39 - Aged accounts receivable40 - Surety bond, bid bond, and performance bond41 - Assets, liabilities, balance, and equity42 - Contractor license bond43 - Warrantee timeframe44 - Net operating revenue45 - Bid bond46 - Chargeable rate, billable revenue, and direct salary expense umltiplier47 - Risk48 - Schedule Performance Index49 - Municipal bonds50 - Tort Claim51 - Expertise vs experience vs efficiency firms52 - Strategic alliance53 - Overlay district & planned use development54 - Employer rules55 - Conflict resolution56 - Firing the architect57 - LLC58 - Corporations59 - Project delivery methods60 - Add alternate, unit pricing, allowance61 - Cost of Work62 - Unpaid interns63 - Basic services64 - Construction Manager-as-Agent65 - Project delivery66 - Staffing projects67 - Negotiated select team68 - Base design-bid-build contracts69 - Phasing70 - Ownership of drawings71 - Types of bids72 - AIA agreement types by letter prefix73 - Substantial completion vs final completion74 - Delays75 - Utilization rate hours76 - Bidding public buildings77 - Life Cycle Analysis78 - Quality Management79 - Architects fee structure80 - Additional services81 - Design-Bid-Build82 - Bridged Design-Build83 - Integrated Project Delivery84 - Construction Manager as Constructor85 - Construction Manager as Advisor86 - Design-Build87 - Instruments of service88 - Architecture billings index89 - Building not constructed--architect paid?90 - Are benefits taxable?91 - Assigning employees92 - Who sues who93 - Sole proprietor or limited liability corporation94 - Responsible control95 - Stamping the work of consultants96 - Code of Ethics97 - Free architecture services98 - Disciplined by the profession99 - Firing an employee100 - Bribery101 - Full disclosure in public statements102 - Out of your depth103 - Giving credit104 - Taking drawings with you105 - Slow to approve your work experience106 - You stamp boss's drawings?107 - Payroll burden108 - LLC vs S-Corporation109 - Firm expenses110 - Quality management111 - Quality management third party certifications112 - Six Sigma, ISO 9001, and Lean Systems113 - Profit-loss statement114 - Break-even & direct salary expense multiplier115 - Profit-loss statement116 - Profit-loss statement117 - Profit-loss statement118 - Profit-loss statement119 - Profit-loss statement120 - Utilization rate from P-L statement121 - Amber Book sufficient122 - Technical and professional competence123 - Study tips124 - Spearin Doctrine125 - Risk126 - BCR vs FAR127 - Privity128 - Contracts129 - Testing130 - Profit-loss statement vs balance sheet131 - Inflation132 - Pause in design133 - Supplemental services vs additional services134 - Contradictions135 - Architect-consultant agreement136 - Architect-consultant agreement137 - Architect-consultant agreement138 - Joint and several liability139 - All-risk insurance140 - Quick ratio141 - Employment contract vs non-compete clause142 - Illegal questions143 - Do I have to memorize the AIA document numbers?144 - Design-Build145 - Betterment146 - Risk management147 - Architect-consultant agreement148 - Architect-consultant agreement149 - Net multiplier150 - AIA C401151 - Take the exams at home?152 - Evidence-based design153 - Performance standards154 - RFPs155 - RFPs156 - RFPs157 - Design phases158 - Copyright registration159 - Once you get licensed160 - Math blitz161 - Who can sign off on the application for payment162 - Optional: Architecture license ethics163 - NCARB Practice Exam164 - Work plan PREVIOUS CARDNEXT CARD ARE 5.0 Practice Management Card number 40 of 164 Surety bond: A type of insurance policy that the owner requires the contractor to purchase to be eligible to bid for, or work on, the project. It pays the owner to complete the project if the contractor walks off the job. Surety bonds come in two common flavors, bid bonds and performance bonds. Bid bond: Contractor A wins the project by bidding $500,000, which is far lower than any of the others. Contractor B submitted the next-lowest bid, but his bid was much higher at $800,000. As Contractor A learns more about the project in preparation to build it, she discovers that she missed a passage in the specs stipulating that the ice cream factory must remain open, making product, during the entirety of the factory renovation. No wonder the next-lowest bid was so much higher! Realizing that she is contractually bound to conduct the renovation for only $500,000 while still maintaining a clean enough environment for food, she's sure this project will bankrupt her construction company. She thusly walks away from the project, leaving the owner-who just completed an onerous, expensive, and time-consuming bidding process-to find a new contractor. In this case, the bid bond that the owner required all the bidders to purchase will pay the owner the difference: the extra $300,000 needed to hire Contractor B at $800,000. The owner is made whole because he gets his building, as laid out in the bidding documents, for $500,00 out-of-pocket plus the $300,000 that the bid bond insurance policy pays out. Performance bond: Contractor B, who was required by the owner to purchase a performance bond when he signed the contract, is 90% through the ice cream factory renovation when the construction company owner dies. His children engage in a bitter struggle with one another to take control of the company that dad left behind. This leaves Contractor B unable to complete the project in a reasonable time frame; brothers take sisters to court to hash out succession plans in the construction business while the cranes on site languish. The performance bond, insurance required by the owner before the contract was signed, and purchased by the builder, then pays the owner $80,000 to complete the final 10% of the project, ensuring that the owner gets the ice cream factory renovation that he was promised, for the price that he was promised.

What are the levels of a Corporation?

Stakeholders Directors Officers

When is a project late: After the substantial completion date or after the final completion date?

Substantial: Ready for move-in, sets the deadline for a late project, start of the warrantee period. Final: Punch list is fully complete

Subrogation

Subrogation: Process of the insurance company assuming agency for an insured party in order to sue another party.For example, an electrical subcontractor error triggers a fire. The contractor's insurance company, Amber Insurance, pays the contractor promptly for the damage, which is the type of prompt service the contractor has been paying for over the years in its monthly premiums.In the policy, the contractor has given permission ahead of time for Amber Insurance to pursue reimbursement from the electrical subcontractor (or the sub's insurance policy). Amber Insurance can then "stand in his shoes" and chase down reimbursement as his agent, as if he (the contractor) were suing. He also gives up his right to sue the subcontractor afterward to collect MORE damages. The catastrophe happened, the insurance company already paid the contractor to make him whole, and now the insurance company alone retains the right to make themselves whole by filing a claim against the party at fault. *BUT the AIA A201 requires a WAIVER of subrogation by all the relevant parties-owner, contractor, subcontractors, architect, consultants-meaning by contract, the insurance companies in construction must still pay the insured. . .but may not go after the others in the group to recover what the insurance company paid out. This is an important protection for the contractor, and one of the relatively few concessions he's entitled to in the standard AIA suite of agreements. I'll offer an example: A building under construction collapses in a hurricane. Maybe the contractor didn't properly secure the half-built structure. If the owner's insurance paid the owner $750,000 right after the collapse, the owner's insurance may NOT attempt to recover that money from the contractor (or the contractor's insurance). . . because everyone has WAIVED subrogation. The owner's insurance may then not "stand in the shoes" of the owner to make themselves whole. . . they're out the $750,000 with no one to recover it from.

Are architects agents of the owner?

The agent creates a legally binding relationship between third party and principal, for instance in a CM as Agent project, the principal is the client and the Contractor is the third party. Architects are NOT agents of the owner (unless the owner would like them to be and a formal agreement is drawn up). That means, the architect can't, while walking the site, claim to speak for the owner when talking to the contractor!

If the owner-architect contract stipulates that the architect's fee will be 7% of construction costs, and the project is abandoned after CDs (and therefore has a construction cost of $0), is the architect entitled to payment?

The architect is paid, even if the project isn't constructed, because the contract is based on the "Owner's budget for the Cost of the Work," not the "Cost of the Work." From the contract: "The Architect shall be entitled to compensation in accordance with this Agreement for all services performed whether or not the Construction Phase is commenced."

Who owns the drawings for a project?

The architect owns the instruments of service - at all phases; The architect grants the owner and contractor a "limited license" to build the project. Unless the architect agrees (and typically is paid for it), the owner can't simply re-use the drawings for her next new Pilates studio.* *The architect can sell the rights, if the new architect indemnifies the old. The owner can also get the right to use the drawings if the architect is terminated for cause.

Construction Manager-as-Agent

The owner contracts with the Construction Manager who acts as his agent and contracts with the Architect, and Contractor.*This option is less risky for the Owner than the CM as Advisor route, gives more authority to the CM, and greater completion speed with a greater cost.

The building structure fails. Why doesn't the owner sue the structural engineer?

The owner doesn't have a contract with the structural engineer. The owner has a contract with the architect and the architect, in turn, has a contract with the structural engineer. There is a "chain of command" for liability, accountability, and communication. In this case, the owner sues the architect for damages and the architect then sues the structural engineer to recover those damages.

You own a firm and provide life insurance to your staff as a benefit of employment. Is that benefit taxable?

The premiums (monthly cost) of the first $50,000 of life insurance is not-taxable, but after that, the rest is subject to tax. The employee will then pay some tax on large life insurance plans. Wages, salaries, and bonuses are considered taxable income. Many benefits, like child care and contributions employees make to health insurance plans may not be subject to taxes.

Name common causes for construction delays? Who is at fault for each?

Unexpectedly bad weather (normal weather days are built into the schedule, no one at fault if that number is exceeded) Change orders caused by the owner or architect (who are at fault) Contractor behind schedule because they are building too slow (the owner can require overtime at contractor's expense to catch up)

Utilization Rate Revenue Factor

Utilization Rate=Direct Salary Expense/Base Salary (also known as the billable or chargeable rate). If an employee, Amber, earns $100,000 per year, and 70% of her hours are charged to the client, we say that she has a utilization rate of 70% (which is a healthy, but realistically healthy, rate) Revenue Factor= Utilization Rate x Direct Salary Expense RatioIf your firm charges the client $3 for each dollar it pays Amber for her time, then we have charged the client $210,000 for Amber's time. We say our firm's Direct Salary Expense Ratio is 3.0.By multiplying Amber's utilization rate (70%) by the firm's Direct Salary Expense ratio (3.0) we get a revenue factor of 2.1. That means that for our $100,000 investment in Amber's salary, we earned the firm $210,000 in revenue.This is your yield on total payroll, which measures productivity, profitability, and efficiency. Think about it: if we halve Amber's utilization rate to 35%, we've reduced our revenue by half. Likewise, if we halve our firm's Direct Salary Expense Ratio to 1.5, we have also cut revenue by half.

What kinds of employee hours apply toward utilization rate?

Utilization rate includes only billable labor (time spent on the project and billed to the owner): - Red-lining - Drawing - Design meetings - Site visits - Coordination/CA Excludes all firm management and marketing labor

Risky contract language

Warrantee Guarantee Indemnify/Indemnification "Highest" standard of care As required/as necessary Hold harmless *Anything that passes liability to the Architect

What rules do you, as an employer, need to follow? Name everything you can before you flip the card (you'll be surprised by how many rules you missed).

With more employees, your firm is subject to additional regulatory hurdles to protect workers. 0-15 employees: FLSA, I-9, HIPAA, ERISA, Equal Pay Act, OSHA, Worker's Compensation, Minimum Wage16-50: add COBRA*, ADEA, ADA, Civil Rights* (*20+)50+: add FMLA, Obamacare, EEO Reporting, Affirmative Action FLSA=Fair Labor Standards Act. Minimum wage, overtime pay, child labor laws. I-9=Employment eligibility verification. Are your employees legally permitted to work in the US? HIPAA=Health Insurance Portability and Accountability Act. Protects privacy of employee health information. You can't tell one employee that another employee is suffering from gout. ERISA=Employee Retirement Income Security Act. Sets minimum standards for retirement and health plans. For instance, the person who manages the retirement plan must act as a fiduciary (puts the best interest of the plan above their own self-interest). Equal Pay Act=Prohibits wage discrimination by gender OSHA=Occupational Safety and Health Administration. Protects employees from workplace injury Workers compensation=Gives those injured at work wage replacement and medical treatment COBRA=You lost your job that came with health insurance? You divorced your spouse or your spouse died and you were covered on her health insurance plan? COBRA allows you to temporarily pay out-of-pocket to stay with your old health insurance until you can find a new plan. ADEA=Age Discrimination in Employment Act. Prohibits age discrimination against those 40 and older. You may discriminate against someone for being too young! Why? Young people don't vote so congress doesn't pass laws to protect them. Civil rights=Civil Rights Act. Protects workers against discrimination on the basis of race, color, religion, gender, and national origin. As of 2020, this also includes sexual orientation. Most people don't know that you can often legally fire someone for any other reason not included above: if you don't like the color of an employee's shoelaces, you may be able to legally fire them for that. And the first amendment protects citizens from government punishment based on speech, but not from employment action. So you can fire someone for saying something offensive or stupid (unless you work for the government). I have found that smart people I work with like to feign legal expertise when it comes to labor law. . . and I've found them to be wrong almost every time I check with the university lawyer to clarify. Obviously, consult a labor lawyer first. FMLA=Family Medical Leave Act. Allows employees to take unpaid, job-protected leave for family and medical reasons (birth, adoption, military deployment). Obamacare=Affordable Care Act (ACA). Large employers must offer affordable health care insurance as an option to those working 30+ hours per week. EEO Reporting=Equal Employment Opportunity. Employer reports hires by race and gender. For 100+ employees. Affirmative Action=Employers must recruit and advance qualified minorities, women, veterans, and persons with disabilities. To watch an Amber Book : 40 Minutes of Competence video reviewing what you just read, click here.

Can you fire an employee because you don't like the color of their shoelaces?

Yes, surprisingly, you can legally dismiss an employee for nearly any reason, provided it is not the employee's race, gender, national origin, disability, religion, or genetic information. In 2020 the supreme court ruled that sexual orientation is also protected, and some states offer other additional protections to employees. You cannot fire someone for their age, but that rule only applies if they are over the age of 40, so you can fire a young person because of their age. Why? Because those under 40 are less likely to vote, so congress doesn't pass laws to protect them. Harassment is both illegal and subject to discipline within the profession, and includes (but is not limited to) offensive slurs, offensive jokes, unwanted physical contact, insults, petty slights, and interference with work performance. Isolated incidents, unless extremely serious violations, do not rise to the level of AIA discipline-it's a pattern that the profession is looking for when meting out punishment.

Can you, as the architect, stamp the work of consultants?

You may stamp the work of a licensed consultant, if you have, "reviewed it, coordinated its preparation, or intend to be responsible for its adequacy."

A civil engineer who was hired by the architect to design the parking lot but not the already-existing driveway to it decides that the driveway needs an additional culvert because of the regrading required for the parking lot? What is the civil engineer to do?

(1) Though not responsible for acts or omissions on the part of the architect and only responsible for the work she was hired to do, by contract, she must point that kind of thing out if she notices it. In this case, because her re-grading led to redirected water, and that had a downstream effect on another site feature, I'm not sure if the courts would hold her responsible if she missed the required culvert. By contrast, if in addition to a new culvert she also noticed that a buried electric line would be in the wrong place relative to the proposed grading, she would still be required to alert the architect, but in that case she may not be responsible for missing such an oversight, as burying the electrical utilities are, in this example, someone else's responsibility. (2) She establishes her extra fee and must get the architect's approval in writing to commence with the extra work We can't have something important like a required culvert be ignored just because the driveway wasn't in the original purview of the consultant, or else the driveway could wash out. . . but we also can't have consultant expenses ballooning uncontrolled without the architect aware of the fees he'll be paying out.

1 - Chargeable Rate 2 - Billable Revenue 3 - Direct Salary Expense Multiplier

1 - Chargeable Rate= what the client pays the firm for an hour of your time 2 -Billable Revenue= payment from the client for billable hours 3 - Direct Salary Expense Multiplier= A number that typically falls between 3.0 and 4.0. If you earn $100,000 for a 50 week year (assuming two weeks paid vacation to simplify the numbers), that works out to $50 per hour. If your firm uses a direct salary expense multiplier of 4.0, they will charge the client $200 for each hour you've devoted to the project to cover your salary, benefits, overhead and profit.

What is a work plan (guess if you aren't familiar with the term)?

A work plan includes what you'd think it would: a document at the very early stages of a project defining how a firm will tackle the project, laying out the scope of the project, the staff who will be involved in the project, and the schedule. Once the work plan has established the scope, schedule, and staffing requirements, the firm can use that information to calculate the fees it intends to charge the client. The work plan may also include a statement of deliverables, a responsibility matrix, or potential building code considerations.

What is "joint and several liability"

A: A delivery driver of precast structural Ts was injured when he drove onto the site and his truck hit a live wire hanging way too low. He sues both the electrical subcontractor that hung the wire too low and another random subcontractor who waived his truck to the path of the wire. The judge finds in the favor of the injured driver for $1M and holds both subcontractors liable: the electrical sub is liable for $750k and the other random sub liable for the other $250k. But in this case, the other random sub is insolvent and has since gone out of business. The principle of joint and several liability allows the driver to secure all $1M from the still-in-business electrical sub, and allows the still-in-business electrical sub to TRY to recover the 250k paid out from the now-defunct random sub. In short, it is a pro-plaintiff rule that holds all negligent parties responsible for the whole of the damages, making it easier to collect everything from the party with deeper pockets. It is important to note that tort law (I was hurt and I'm suing you for my injury) is totally separate from contract law (you broke an agreement we both signed). The concept of joint and several liability is limited to tort law (ambulance chasers) and has no bearing on contract law. All the parties in the construction contracts (owner, architect, consultants, contractors) agree to indemnify the others BUT ONLY FOR CASES WHERE ONE OF THEM WAS NEGLIGENT AND THE OTHERS WEREN'T. So if a structural engineer undersized a beam-column connection and it needs to be replaced before a collapse further endangers the endangered animals at the zoo's pavilion, and the zoo files a claim. . . the zoo will likely file the claim against the architect because the owner and architect have the contractual relationship (and the owner and engineer don't), and the architect's insurance will need to later be reimbursed by the engineer's insurance . . . but the contracts state that the architect isn't liable for the contract law mistakes of the engineer, owner, or contractor. Of course, determining which single party is at fault isn't always straightforward. To summarize. . . Contract breach, professional negligence not causing someone to be physically injured: each party pays for its own mistakes, but claims are paid up the "usual" branches in the construction contract tree and the insurance companies settle everything later. . . contractor pays owner for sub's breach and gets reimbursed from sub; architect pays owner for consultant's breach and gets reimbursed from consultant. Tort law (ambulance chasers. . . totally separate from contract law): The contracts protect the owner, architect, and consultants from tort cases related to construction site injuries-those generally fall to the contractor and subs. But if an interior designer, working as a consultant to an architect, specifies a gripp-y floor tile in a grocery store, and the contractor convinces the owner to swap for another, more-slippery tile, and the architect and interior designer approve the reasonable, but less-safe, swap with an email document trail demonstrating insistence from the owner, and the owner's employee left the floor wet because she incorrectly adjusted the timed automatic vegetable sprayer. . . It's obviously more complicated who's at fault when a store customer slips and falls. That's a case-by-case situation. Know that NCARB doesn't spend a lot of time on the tort law side of risk, so focus on the contract law side.

Add alternate vs unit pricing vs allowance

Add alternate: The owner may want an outdoor pool as part of his hotel project, so he's curious about the extra cost. Once he's defined the extra cost, he'll put that in his spreadsheet to confirm that the pool will pay for itself in extra nights booked. You will design a hotel and add a pool to the drawings; in the bidding documents, you'll make clear that the pool is an add alternate and that bidders will offer two cost numbers: one for a pool-less hotel option, and a second that includes the add alternate pool. Unit pricing: The owner will be building a hotel, but has not yet decided on its size. He needs a solid price for the hotel (without the rooms. . . just the lobby, restaurant, laundry facilities, etc.) plus a unit price for each hotel room. That way, the owner can analyze market data and effectively study feasibility against the cost of building to a certain number of rooms. After the schematic design phase, you, as the architect, can give him a cost estimate of $4.2 million for the base hotel with 40 rooms, plus a unit price of $290,000 additional for each hotel room. Now he can talk to his investors and market research people to decide the optimal size for his hotel armed with specific knowledge about the unit price of each extra room. Unit pricing works best for repetitive elements in a project (street lights, an array of barns for aging whiskey) where the owner wants to buy time before committing (to gather financing for extra landscaping that isn't yet in the budget, to determine if the public's interest in consuming bourbon is permanent or just a passing fad). It also works for elements that are easily quantifiable (earth excavation, linear feet of site-cast concrete retaining wall), also when the owner wants to buy time before committing to an amount of something. Unit pricing does not work well with complex elements of projects (for instance, if an owner would like to buy time before committing to a building form). Allowance: Options for TV model availability change rapidly with advancing technology, so you don't yet select a specific television model for the hotel rooms, knowing that the hotel won't be completed for another 2.5 years. You'd rather wait and pick out a TV model then. But leaving the televisions out of the drawings invites the contractor to fleece the owner in a future change order for all those TV wall mounts. You need to get the mounts into the contract up front, while the owner has negotiating leverage, so you ask for an allowance for TV mounts. The contractors' bids then come back to the owner with the TV mounts accounted for, even though model numbers aren't in your specifications. The winning bid includes an allowance for $40,000 for all TV wall mounts, provided the television weighs less than 55 pounds and there is no special wiring required. Now, with the allowance already in the contract, as long as a "normal" TV is selected by the owner, the contractor can't jack up the price later when the owner is desperate to complete the campus-adjacent hotel before college football season begins. The allowance must always include all costs: parts, labor, taxes, delivery to the site, etc., so the owner won't be surprised by a bill for taxes, labor, and delivery charges during construction, and the owner can properly evaluate all the contractors' bids on equal footing. If one contractor's bid included the cost of the mounts but didn't include taxes, labor, or shipping-but the other bids did include those elements- it would be difficult to compare different bids as "apples-to-apples." Just for the TV mounts the difference between the bids that are all-inclusive and the bids that are for parts-only could easily be tens of thousands of dollars!

What questions are forbidden to ask of a candidate in a job interview?

Age, race, ethnicity, color, gender, sexual orientation, gender identity, country of origin, religion, disability*, marital status, how many kids, salary history (in some states). *an employer can ask "Are you able to perform this job's duties with or without reasonable accommodation?'. . . the idea being that ADA requires employers to accommodate disabled workers, so the employer, with this question, is trying to understand the employee's needs so the employer can make the ADA-required accommodations.

Aged accounts receivable

Aged accounts receivable: How many days, on average, between when our firm sends a bill to its client and when we receive the payment from that same client. If it's more than 90 days, you're waiting too long to get paid

Aggregate Limit, Premium, Deductible, Claim

Aggregate Limit - Total coverage amountPremium - Monthly/yearly billDeductible - Maximum paid by you, prior to coverage kicking in and payingClaim - You think you experienced a covered event and demand payment from the insurance company

What is "all risks insurance?"

All risks: A type of insurance, carried by property owners, to cover anything not explicitly listed as not covered by the policy. For instance, if I have an all risks insurance policy, and the policy says nothing about terrorism damage, and my business is damaged by terrorists. . . I'm covered! The opposite of all-risks insurance is "named perils insurance," in which I'm only covered for the perils specifically enumerated on the insurance policy. So in the example above, if my named perils insurance policy explicitly covers me for only fire, flood, theft, and structural deterioration, and my business is damaged by terrorists. . . I'm screwed! Architects are not required to obtain all-risks insurance as part of the standard B101 agreement, though some of their required policies may be of that flavor. A reminder: architects are required by the owner, through that contract, to carry four types of insurance. . . General liability/employer's liability (visitor gets hand stuck in a plotter) Professional liability (our drawings forgot to include the location of an underground fiberoptic cable that runs through the site and the backhoe just tore through it downing the internet for the neighborhood) Automobile liability (you'd be surprised how commonly the reason for the firm's legal troubles stem from a car crash) Workers Compensation (firm's draftsman acquired a repetitive stress injury on the job; he agrees to forgo suing the firm and in exchange, the firm's workers comp policy pays him lost wages and provides him with workplace-injury-related medical care)

Is it ethical for an architect with no knowledge, background, or experience in oil refinery design to take responsibility for the architecture of an oil refinery?

An architect may provide professional services in an area beyond their technical qualifications, provided they engage relevant consultants to guide them (or seek the appropriate education/training on their own).

Which of the following is associated with an architecture firm quality management (QM) strategy? (select four of the six) ASTM 9 ISO 9001 Lean Systems Project audits Six Sigma Separate quality management into its own department

Answer: architecture firm quality management (QM) strategy? (select four of the six) ASTM 9 -ISO 9001 -Lean Systems -Project audits -Six Sigma Separate quality management into its own department

What is the legal concept of "Betterment?"

Betterment: A small leak in the roof appears just after substantial completion and the owner demands that the contractor replace the entire shingle roof with expensive slate; the legal doctrine of "betterment" arises in the dispute—the contractor believes the owner is using the warranty to get a better roof than he agreed to in the contract, and unjustly enriching himself.

Examine the profit-loss statement of your firm. Where are the profound mismatches between the financial outcomes as they actually unfolded relative to the budget as it was planned?

By far the most profound mismatch between the budget for the year, and the firm's actual financial performance for the year, is in the paid time off category. For some reason your firm is paying an awful lot of money to architects that are taking vacation.

What building typology carries the most risk?

Condo projects and single family residential projects Why? The condo board is an organized entity with high expectations, a bored lawyer living somewhere in the building, and a propensity to sue architects for the noisy floor assembly above, harsh afternoon sun, or wilting landscaping. Be sure to tell your professional liability insurance company before taking on such a job. Residential projects feature inexperienced clients with high expectations and a personal stake in the design.

How long does a Contractor's warrantee last?

Contractor's warrantee typically extends one year, but can contract for longer**Or until statute of limitations/repose runs out (for work that doesn't conform to the contract)

Which is the most important design phase to make a decision that impacts a building (cost, buildability, energy efficiency, performance)?

Early!

Employment contract vs non-compete agreement

Employment contract: Architecture firm's hires must sign an agreement to follow the firm's rules: What are the salary and benefits and work schedule expectations? Is moonlighting allowed? Is this ongoing employment, or will your work here automatically sunset without a new contract? What are the responsibilities of the job? Noncompete agreement: This may be part of the employment contract, or a separate document. Noncompete clauses establish that you can't steal our clients and bring them to a new firm for six months or a year after your work at our firm ends.

Have you taken the NCARB PcM and PjM practice exams yet? (Mandatory)

Go to MyNCARB, sign in, and find them on the right-hand side. CE is worthwhile too, but not mandatory.

How does the consultant, in this case, a water park technical design specialist I hired, know which portions of the project she will be responsible for. Does she go through the project requirements and identify her deliverables, tasks, and responsibilities (and I confirm them when she presents them to me)? Or is it the other way around where I, as the architect, go through the project and identify her responsibilities (and she confirms them)?

Good question! Per the AIA C401, the consultant works out what she's going to do for the project and proposes it to the architect for approval (not the other way around).

The Code of Ethics states, "Professional Recognition: Members should build their professional reputation on the merits of their own service and performance and should recognize and give credit to others for the professional work they have performed."

Ha! Insert your own example of this ethics code being broken here _______. Please do better at sharing credit than your predecessors have.

What will you do once you get licensed? (Optional viewing, if you have the time.)

How do you start a firm? (some of this will be relevant for the exam, but mostly this is useful for thinking about designing your career). Watch this Amber Book : 40 Minutes of Competence.

I received this email and thought it may be helpful to you: Hi Michael, Thank you! Just letting you know, back in September I passed 5 out of 6 exams in two weeks! Your strategy has been fantastic, and I've recommended it to multiple colleagues. The experience of taking the exams became so routine, and almost fun. After studying with your videos off and on all summer while quarantining, I kept pushing back my scheduled exams every couple weeks since I didn't feel ready enough (and the rescheduling fees are waived right now). A friend convinced me just to go for it, a couple days before my first exam was still scheduled. I did, and didn't look back. Honestly, I don't understand why the trend seems to be to spread them out and study for each individually. I feel that with Amber Book, I hacked the puzzle of the AREs, on top of learning a lot about my own profession. I don't know what I'll do with all my free time now. Lastly, I think the best advice you gave was not to tell anyone I was taking them. People underestimate the added anxiety they've put on themselves by announcing their upcoming test date. Keeping it to myself made me feel like I was in control and not at the mercy of NCARB. If I failed, I'd just go in and do it again. I failed CE 60 days ago, studied this past week, and just retook it this morning with a "likely to pass". Thank you again!

I include the note in this flash card not because it is rare, but because I get notes just like this all the time. Treat these exams as a single, six-part test; don't tell anyone your testing date until after you've passed, and once you're done, share your experiences by emailing me at [email protected]

AIA Code of Ethics

If you have time before the PcM exam, you may wish to review the AIA Code of Ethics here (it's not that long).

Optional: Looking for more practice on the ARE math content?

If you want more math problems to practice with, click here. If you think you don't need more help, trust that you don't. https://www.youtube.com/watch?v=7SlE0dHRLFE

Should I take the exams at home or in the proctoring center?

I think you should take the exams at the testing center, but I no longer feel strongly about that recommendation and now think that taking them at home isn't a horrible idea either. If you decide to take your exams at home or in the office by remote proctoring. . . 70% still take the exam at the testing center. (Is there any building type that architects have designed worse than testing centers?) While 4% of testing center exams run into technical problems, the rate soared above 25% for those who are testing remotely when at-home testing was first offered, before stabilizing at 9%. With that in mind, some AIA chapters outfitted exam testing rooms to give their members a quiet space, a proven internet connection, a working camera, where the proctor won't make you take down all the framed photos on the wall of your office's conference room. If you are going to test at home, at a conference room at work, or at your local AIA chapter know this: Before taking an online-proctored exam, we recommended that you take a free PSI test run to confirm with a proctor that your computer and testing environment meet the requirements to take an online exam. You can schedule this appointment through the "Exams" tab in your MyNCARB page. An actual proctor will work with you to check your system for you, tell you if your room is spartan enough, confirm that your camera works, etc.. Do it on a day of the week and time of the day similar to your planned "real" exam so that if your roommate is always playing video games and monopolizing bandwidth on weekday evenings, the test run will account for that. NCARB recommends you do the test run at least a week before your scheduled exam and have the room set up as it will be on test day (nothing on the walls, clean, read below) I'm a super-happy person and others think it's because I'm an optimist; but I'm happy because I'm a pessimist and would never expect to take an important test from home and assume it will work the first time. When you finally get to a point you can start or re-start your test, you don't want to be seething on-tilt. For all the details, read NCARB's ARE 5.0 Guidelines here and scroll to page 24. . . . if all this seems too difficult and uncertain, I don't blame you. That's why most still take it at the testing center.

Mechanic's lien

Mechanic's lien: A claim placed against owner's property due to unpaid debts. Used when the contractor fails to pay sub-contractors but can also be used when the owner does not pay the Architect. The land and building can be sold to settle the debts if the owner can't pay cash. If the owner owes money to the contractor, or the owner owes money to the architect, and the owner can't or won't pay her debts, a court can order the property to be sold to raise to cash to pay the debts. But the property can also be used to make unpaid subcontractors whole. If the contractor owes money to subcontractors, and the contractor skips town, the subs can go after the owner. If the owner can't pay, a "lien" is put on the project and a court can force the owner to sell to square up with the subs. This is one of the reasons that the owner confirms that the contractor pays their subcontractors throughout the process. . . the owner doesn't want to be on the hook later for the contractor's unpaid bills.

Building the MEP portion of the project exceeded the budget in the architect's cost estimate. Does the MEP engineer charge the architect to redesign to meet budget?

No. In the same way that the architect must redesign for free if the whole building exceeds the budget, the consultant must also redesign without additional compensation if his portion of the project blows his portion of the construction budget.

Construction Manager as Constructor

Owner contracts with Architect and CM (who also acts as the builder) at the same time. *This type of project is the least risky for the Owner, most risky for the CM, and has higher speed and cost. The final price (GMP) is known by the end of SD. Because of the speed and increased authority of the CM, the Architect must maintain a stricter process of quality control.

Public project process and Qualities of winning bids

RFP -> Kickoff -> Contractor questions and answers -> Sealed bids -> All bids are opened at once -> Choice is made 1 - Lowest responsive bid (bidder followed the bidding rules and accounted for everything in the drawings/specs when bidding a price) 2 - Lowest responsible bid (bidder has the financial and technical wherewithal to build the project to a minimum quality, on time)

S-Corporation C-Corporation B-Corporation

S-Corporation: Small or large company without public stocks ("closely held") - singly taxed. Personal property protected from client lawsuits. Good option for an architecture firm.C-Corporation: Large company with public stocks - double taxed B-Corporation: Company with goals beyond profit-seeking: environmental or social mission, as well as making money.

Schedule Performance Index

Schedule Performance Index= Earned Value/Planned Value This metric returns information about project schedule and efficiency For example: A project has a budgeted design cost of $100,000. That's how much the owner plans on paying the architect for the entire project, in total. According to the schedule you've created, 20% of the project should have been completed after two months. 20% of 100,000 is $20,000. . . that is the "planned value." Ideally, your firm has worked $20,000 worth of time on this project after two months, and if it has, ideally your firm has invoiced and been paid $20,000 (or will be paid that soon). But after two months, your firm has put $30,000 worth of time into the project. This kind of schematic design creep is not uncommon, and it means some hard choice are ahead: put less time in at the end (CD or CA) because you've run out of hours to devote to this project, or put more time into the project than you budgeted (and will be paid for), which endangers the financial health of the firm because you're donating unbilled extra design hours to the client. Alternatively, you may charge the client for the extra hours, but they won't be happy with a blown design budget. Because you planned on $20,000 worth of work at this point, and you've put in $30,000 worth of work, the Schedule Performance Index= Earned Value/Planned Value So Schedule Performance Index= 30k/20k = 1.5 A Schedule Performance Index greater than 1.0 means you've put too many hours in, relative to where you are in the project timeline. A Schedule Performance Index less than 1.0 is also a problem. If you've only put $10,000 worth of hours into the project, your Schedule Performance Index= 10k/20k = 0.5 So you're either behind schedule because you haven't devoted enough hours to the project or low on quality for not putting enough design muscle behind this project as it moves forward. Your target, therefore, is a Schedule Performance Index equal to 1.0, where the earned value = the planned value. Planning correctly, keeping track of this in real time, and adjusting staff responsibilities as needed to stay at 1.0, is tedious but necessary.

Spearin Doctrine

Spearin Doctrine: The contractor has the right to expect accurate and proper plans/specifications, and isn't liable for errors in them. Based on a 100-year-old landmark Supreme Court construction law case, US vs Spearin. Big projects are expensive and establishing risk-who's responsible when things go wrong- is a big deal, especially to owners and insurance companies

Examine the profit-loss statement of your friend. What kind of things can she do to get back on budget? Where is she farthest from her budget as a percentage and where is the "low-hanging fruit" where an adjustment in her behavior to align more closely with her budget will have the biggest dollar impact.

Stop helping her brother out financially Stop going out for coffee Get rid of her car Stop paying for guitar lessons and learn from YouTube Adjust her budget to allow for one or more of these things, but cut instead from somewhere else.

Describe the AIA C 401 Architect-Consultant Agreement

The C401 Architect-Consultant Agreement almost exactly mirrors the B101 Owner-Architect agreement, but obligates the consultant only to the relevant "portion of the project." For a lighting consultant, the portion of the project is the lighting, for a signage consultant, the portion of the project is signage, and so forth. The consultant enjoys the "standard of care" that the architect does, the consultant has to buy the same insurance that the architect does, the consultant owns the copyright to her drawings the way the architect does, the consultant has to design something (their portion of the project) that comes in under budget the way the architect does, and the consultants must redesign her portion of the project for free if she goes over budget and the owner doesn't want to find more money. Indeed, the architect's contract with the owner (AIA B101) is stapled to the Architect-Consultant Agreement (AIA C401) as a sidecar document, though the architect has the option of redacting the part that enumerates what the owner pays the architect.

Owner wants a new architect

The owner can fire architect without cause (for convenience), though has to pay work-to-date, including overhead and profit The architect can't transfer the project to another architect because first architect got too busy to finish.Each party is responsible for sharing concerns as soon as possible

The Architect is responsible for...

The project being on time and on budget The instruments of service The standard of care and protecting the health, safety, and wellness of the public Coordination and administration of project team and processes Enforcement of contract terms (as able) Adherence to applicable codes NOT means and methods of construction, existing site conditions, safety on the job site, anything outside the contract (additional services)

What is the difference between "direct salary expense multiplier" and "net multiplier?"

There is no difference. They are the same number (though derived in different ways), and the terms can be used interchangeably.

If this course covers all six exams, why does Amber Book include more content on technical competence than on professional competence?

There's more technical content in the course because there is more content on technical competence than on professional competence in the ARE. I'll explain with a narrative. . . Picture all six exam divisions as a single test, taken over six days, with about 600 questions in total. It's approximately evenly split, so we can put three hundred of the questions in the technical competence basket and 300 of the questions in the professional competence basket. To master these exams, you'll need to learn approximately 1000 technical concepts (i.e. how heat moves from inside to outside, what type of soil is least steady to build on, etc.). The 300 technical problems then will be a sampling-an audit-of those 1,000 concepts. Many of the concepts you'll learn won't be tested on at all, but you don't know which ones, so you'll need to learn most of them. To master these exams you'll also need to learn approximately 100 professional practice concepts (i.e. how to read a profit-loss statement, the relative advantages of a cost-plus project delivery contract, etc.). The 300 professional practice test items, then, will circle back to the same concepts again and again because there are 300 pro-practice questions to cover only 100 pro-practice concepts. A single concept in the professional competence basket will typically be touched on by three separate test questions. The take-away from all of this: don't feel out of balance because you studied more technical content. . . but be certain you know all 100 professional practice concepts, and have them locked down because almost all of them will be on the exam. If you want to go over the Amber Book again before you test, but fear that you don't have enough time to retake the full course, retake the professional competence basket first. That way, if you run out of time before exam day, you'll know you own the content most likely to be over-tested. Folks tell us that about 80% of what they saw on each of the six exams is covered in this course. If you own the content in this course, you'll likely own the exams. If you fail some of the divisions, and feel like you won't get much from re-taking the Amber Book because you still own the content we covered, only then you should think about branching out to other study resources while you wait the 60 days for the retake. I know this is not what most people tell you, but it is what people who have taken the Amber Book and become licensed have told us. That said, if you are in the 15% of emerging professionals who enjoy studying for these exams, and you are not in a hurry to earn your license, my advice changes. In that case, I encourage you to study other materials (though you can always study them after you become licensed with the Amber Book alone). We are the only subscription you will ever have that will be thrilled when you leave us. To be clear, as a subscription, we earn less revenue if you push through these exams quickly. The business-minded people I know think it's self-defeating for me to encourage you to be efficient and purposeful in your studying regimen. But that's who I am: I'm driven to get you licensed, and know from experience that the best way to do that is to follow an aggressive timeline.

How do you write an RFP response to win and advance to a shortlist interview?

Treat the RFP-response process like a design problem: approach it with intentionality, intensity, organization, efficiency, and iteration. Develop a reusable template with common information requested in RFPs: one-page firm profile; project management philosophy; current workload; firm quality assurance program; list of responsibilities of key personnel; design philosophies; resumes; past projects & awards; and claims history (clients want to know what you've been sued for in the past!) Actually read the RFP. . . the full document. Have an eye to long-lead-time items: You may need to find a minority- or woman-owned business as a partner, your project manager may need a certification or government clearance that takes weeks to obtain, you may need to find a consultant that specializes in the design of large saltwater aquariums. Does the RFPs narrative offer clues to what's important for the project? Low-energy use? Secrecy? Client's employee productivity? Make a checklist for the RFP: What are the RFP's deliverables? Who's responsible for which pages of the document? What are their individual deadlines? Make a mock-up of the pages on the wall, color-coded by who's responsible for which pages Work with marketing from the beginning Use the client's evaluation criteria (often included in the RFP) to determine what to highlight. For instance, if the quality of key personnel is worth 80 out of a total possible 100 points, spend more time on the resumes. If firm experience in a building type is worth 80/100 points, spend more time on the past projects section of your response. Clients may have thousands of pages of RFPs to sort through and studies suggest they spend an average of only 18 minutes on each one, so be concise. Less is more. Avoid archispeak jargon, be specific, and write in an active voice (active voice = avoid too much is, are, was, were, and will be in your verb selection. . . we could all use that advice in our writing within architecture. Try it: it's difficult) Be responsive to all the RFP requirements. Clients overwhelmed with too many RFPs will use responsiveness as a shortcut first pas to cull to a reasonable number of quarterfinalists You have longstanding relationships with consultants you're comfortable working with, but consider picking your team based on the consultants' likelihood to help you win the job instead. Maintain a spreadsheet of consultants you meet or read about that might help you win a future job. Proofread your submission. (I've found architecture students-so careful at iterating design-to be impatient with actually reading what they wrote and satisfied to submit a first-draft written narrative with a final design board. Just like with design, writing requires far more time editing than creating the first draft. I suspect architects in practice sometimes forget that too.) Clients hold pre-proposer conferences or walk-throughs for those who might be interested in responding to an RFP. Attend those!

What's the most important thing that a firm can do to manage risk?

Use standard AIA contracts. They've responded over a century to common disputes, and your insurance company is most likely to cover you if you use them.

What is the year-to-date utilization rate of the firm described in this profit-loss statement?

Utilization rate is billable (direct) salary, divided by total salary. $1950/($1950+$25+$1290+$450+0+$1000)=41% Meaning that only 41 cents on every dollar paid to employees was billed to a client. This is unusually low, and in a firm that didn't have the same outsized revenues that this firm earns, this number would likely make the firm unsustainable. Note that if we were to eliminate the substantial paid time off, and assumed that all of that time was billable instead, our new utilization rate would be: $1950+$1000/($1950+$25+$1290+$450+0+$1000)=68%, which is more likely sustainable in a typical firm.

What is the year-to-date utilization rate of the firm described in this profit-loss statement?

Utilization rate is billable (direct) salary, divided by total salary. $1950/($1950+$25+$1290+$450+0+$1000)=41% Meaning that only 41 cents on every dollar paid to employees was billed to a client. This is unusually low, and in a firm that didn't have the same outsized revenues that this firm earns, this number would likely make the firm unsustainable. Note that if we were to eliminate the substantial paid time off, and assumed that all of that time was billable instead, our new utilization rate would be: $1950+$1000/($1950+$25+$1290+$450+0+$1000)=68%, which is more likely sustainable in a typical firm.

Profit-loss statements include: Utilization rate, Overhead rate, Break-even rate, Net multiplier, and Profit-to-earnings ratio What are each of these metrics?

Utilization rate: If 65% of a firm's hours are billable to a client for design services, and the remaining 35% accounts for unbillable time and registration fees spent on things like attending AIA conferences, than it's utilization rate is 65% (which is a typical value for a healthy firm). For ease of visualizing, let's assume that our firm pays its architect a generous $100 per hour. Overhead rate: If our firm spends $150 on non-billable expenses (like AIA conferences) for every $100 it spends on staff salaries for billable client work, than we say that our overhead rate is 1.5 (also typical) Break-even rate: In the example above, for every $100 we pay in direct (billable time) salary, we need to charge the client $250 to cover both the $100 staff salary and the $150 overhead. We then derive a break even rate of 2.5. That means that for every salary dollar we pay for our architect's billable time, we have to charge 2.5 dollars just to break-even (this is still before we add more to the client bill to account for profit). Break-even rate always equals Overhead rate + 1.0. Net multiplier: If we charge the client $300 for the $100 we paid our architect, our net multiplier is 3.0 (also typical for a firm). This allows for us to pay our architect $100 for the work, to pay the $150 for overhead (things like AIA conference attendance), and leaves us with $50 left over for profit. Profit-to-earnings ratio: Our profit is $50 for every $300 we charge the client. 50/300=17% (this is the low end of typical. . . generally, the higher this number is, the better off our firm is)

How do you decide how much to charge a client?

Value Pricing - Based on quality Effort Pricing - Based on time spent (this is the ARE's assumption in the exams) % Cost Pricing - Based on percentage of total construction cost Fixed fee pricing - Fixed cost to client typically derived based on triangulating estimates of the other three models

Can an unlicensed architect sign the contractor's pay application (if she works under a licensed architect?)

Yes The licensing act and the reason for being licensed is more about whether the work performed by the architect - the licensed architect, that is - meets the standard of care. That applies to the drawings and specifications being prepared or supervised by the architect, and not necessarily whether the application for payment is executed by a licensed architect. Traditionally, approving a pay app is not about making sure that the work is performed in accordance with the standard of care. Rather, the architect approves the work of the contractor such that is in conformance with the intent of the Contract Documents. Yes, a junior architect could screw up big and approve payment when the request for funds is not in conformance with the intent of the CDs, but the junior architect could screw any task up. Remember, the architect is not necessarily approving that the wall was constructed properly (even if the drawings show how to construct the wall), or that the wall will not fall over. . . she is confirming that the wall exists and can therefore be paid for.

Is the Amber Book sufficient, without other material, to prepare me for the Practice Management and Project Management exams?

Yes! For most people Amber Book alone is sufficient to prepare you for the Practice Management and Project Management exams. It's not that you won't get anything out of studying other resources, but I don't think that using others is a good use of your time if you are looking to get licensed efficiently.

New York Times: "This hotel is 642 feet tall. Its 'architect' said he never saw the plans" Have time to read a very short and relevant news story about some shady stuff (optional read)?

https://www.curbed.com/2022/06/architect-hudson-yard-hotel-scandal.html

Types of project delivery contract structures

1 - Design-Bid-Build 2 - Design-Build 3 - Integrated Project Delivery 4 - Construction Manager as Agent 5 - Construction Manager as Advisor 6 - Construction Manager as Constructor 7 - Bridged Design-Build Explain each of these to yourself now.

What is the process to file an ethical complaint against an architect?

1 - File the complaint through AIA National (National Ethics Council)2 - Advisory board and chair will be chosen3 - Pre-hearing, hearing, start, claim, defense, end, judgement**Confidential, no counter-claims, can't fine or enforce behavior, but can admonish/suspend

AIA B101 requires which insurances? And for what?

1 - General Liability - Covers the physical office space 2 - Professional Liability - Covers errors and omissions 3 - Workers' Compensation Insurance - Covers employee injuries or illness-medical care and lost wages. 4 - Auto Liability - Covers company vehicles and personal cars used for business purposes 5 - Employers' Liability - Covers employers if they get sued for causing a workplace injury (works together with workers' compenstation_ - settlements, court costs, legal fees

How do you choose whom to staff to a project?

1 - Utilization rate (low rate means they have time to give to the project; high rate means they are already busy with another billable project) 2 - Experience/expertise/role 3 - Does the Architect have a license in the state?

AIA Documents: A701; C401; A305; G701; G702; G704

A701 - Instructions to Bidders C401 - Architect-Consultant Agreement A305 - Contractor's Qualification Statement G701 - Change Order G702 - Application and Certificate of Payment G704- Certificate of Substantial Completion While it is worth becoming familiar with these because concepts like change orders, paying the contractor, bidding, and declaring substantial completion are HIGHLY prescribed and VERY important in this exam, I don't think it's worth your time memorizing the numbers of these AIA documents.

Do I have to memorize the AIA document numbers (click here)?

A: Maybe. Most PcM, PjM and CE exams require no memorization of the actual numbers (AIA G704, AIA G716, etc.), but instead an understanding of the meaning of a construction change directive, a payment application form, an RFI, etc. . . . That said, some small number of exams do require memorization of these numbers. If you've already been through the other flashcards for PjM—and maybe even if you haven't yet—you won't need to "memorize" the uses for the AIA A101, A201, and the B101. You own those. Below are the other numbers worth memorizing before your exam. . . A132 - Owner-contractor agreement when also using a CM as-adviser or a CM as-agent (this one causes people all kinds of confusion because the title of the document includes CM as-adviser but not CM as-agent. . . it is indeed used in both cases, even if that's not clearly denoted) A133 - Owner-CM (constructor) agreement A195- IPD agreement C401 - Architect-consultant agreement (you probably already knew that one) G701 - Change order G702 - Application for payment G703 - Continuation sheet (sidecar to the application for payment) G704 - Certificate of substantial completion G716 - RFI

An owner hires an architect to design a high-tech fulfillment center, complete with miles of conveyor belts and hundreds of robots. Partway through, the project is put on hold for four years. When the project is finally un-paused, the owner gives the architect written permission to reuse the old instruments of service-those prepared before the project was paused. When completed, the owner is dissatisfied with the four-year-old technology incorporated into the building and wishes the architect had adapted newer technology. Is the architect responsible for the outdated technology? And why or why not?

A: not responsible, because the "standard of care" only requires the architect to design to a level comparable to other architects designing in the same locality, at the same time. 1. With this exam, you must always assume that the architect is protected by the "standard of care" expectation. The assumption, unless otherwise specified, is the default design-bid-build set of agreements, and those each use the standard of care threshold. Between the six divisions, you'll get about a dozen questions just asking you if you understand the important role that this threshold has in our profession. 2. Were this to go to court, the jury might rule in the architect's favor because the owner gave permission (not because of the Standard of Care concept). Anyone can be liable for anything in court, as long as a jury—unpredictable, with a keen sense of fairness, and no background in construction law—finds you liable. . . and here, the developer did give the approval to use the old work and continue with it. . . But within the bounds of construction law and contract law, the "standard of care" threshold is the better protection than the "owner said it was okay" defense. 3. If many of the questions in this exam seem fuzzy, that's because many of the questions in this exam are fuzzy. In 2017, responding to a survey that NCARB conducted among professionals with results complaining of not enough pro-practice content in the licensure exams, the ARE 5.0 birthed the Practice Management exam division. Because real-life practice management is almost never one-size-fits-all, the exam is computer-graded, and computer-grading doesn't play well with benevolent ambiguity, it's likely that NCARB regretted adding this exam division immediately. To achieve what they considered to be repeatability and validity (two important concepts in assessments) the volunteer test item makers were then stuck with questions that rote-ly excerpted or summarized passages directly out of the Architect's Handbook of Professional Practice (AHPP). I, personally, am so disappointed by this development, but alas, there's not much to do (other than to encourage you—if you're emailed an NCARB or AIA survey in the future related to the direction of the ARE—to respond to the survey and ask to return the exams' balance back to something like 80%/20% in favor of technical competence over professional competence.) 4. The standard of care means that the architect is only responsible for creating content that is comparable to other architects practicing at the same time and in the same locality. . . and so, with the time part included, an architect designing something in 2017 cannot be responsible for the technology that emerges in 2021. It's a funny concept, but holding an architect responsible for more than "what some other schmo would do" is like holding your dentist responsible for giving you a bad haircut. The legal expectations of our work's quality are shockingly low and we're notoriously difficult to win a claim from, provided we signed the standard AIA agreements. Our profession doesn't enjoy the lucrative upside of the real estate and construction industries, so we are contractually protected from the significant legal downside risk associated with the real estate and construction legal-industrial complex.

The owner-architect agreement specifies that the owner will possess the rights to the whole project's instruments of service at the completion of the project, but the architect-consultant agreement specifies that the lighting designer retains the rights to her own instruments of service. Who gets to own those drawings after the project is completed?

A: the consultant Where inconsistencies exist between the AIA B101 Owner-Architect Agreement and the AIA C401 Architect-Consultant Agreement, the Architect-Consultant Agreement prevails. . . which makes sense because the consultant shouldn't be bound by what the architect signed away unless the consultant also agreed to the provision.

Six Sigma vs ISO 9001 vs Lean Systems

All three are recognized and long-established quality management programs, all three are customer-focused, all three involve a firm's commitment to continuous improvement, all three take common-sense ideas and make them an intentional part of the organization, and all three are implemented firm-wide. Six Sigma: Standardizes results and eliminates variation. Can be third-party certified, but not always. ISO 9001: involves lengthy (up to three years) third-party certification process for accountability; more appropriate for large firms with multiple offices; and measures teamwork, leadership, purpose, decision making, consistency, and communication with a focus on mutually beneficial relationships. If you're curious to learn more, see this. Lean Systems: more of a philosophy than a formal program with certification; all about eliminating waste in the firm's processes. Do we really need to plot out a third copy of this drawing set? Do we really need a third visit to the site? Do we really need 10 days to turn around an RFI?

An architecture billings index (ABI) of 48 in "inquiries" means _______.

An ABI of 48 means that, in aggregate, the financial future outlook for architects ticked down last month by some very small amount. The architecture billings index (ABI) is a running monthly number: an economic indicator for construction activity. A number more than 50 means the financial outlook improved over last month; a number below 50 means the financial outlook declined relative to last month. There are separate ABI numbers for billings, new design contracts, and inquiries. . . for residential, industrial, public, and commercial sectors. . . and for the Midwest, Northeast, South and West regions of the US. The ABI has successfully predicted the last two recessions 11 months before each one started. To see the ABI right now, go here and scroll down a bit. To see it graphically over the last five years, go here and scroll down a bit (note the Covid plunge in 2020 https://www.aia.org/resources/10046-the-architecture-billings-index

Examine the profit-loss statement of your firm. Did it have a realistic budget? One that could be met?

Answer: Yes it's a realistic budget, because it tracks fairly closely with what has happened to the firm's finances this year; and no, it's not realistic in a way, because both this budget and the firm are more profitable than most firm's typically would be. How did the firm get so profitable? Perhaps it designs door hardware and lucratively licenses those door pulls to a manufacturer. Perhaps it specializes in the design of something obscure (toll booths) and charges by the job (not by the hour); their level of expertise allows them to command high fees for their work. Look at the firm's administrative labor costs. . . they seem quite low to me relative to the size of the design firm's revenue, so perhaps part of their success is in reducing HR, office management, and IT staffing expenses.

Which of the following is most associated with an architecture firm quality management (QM) strategy? (select four of the six) Assess risk Eliminate waste in processes Track employee time in smaller increments Treat your consultants as customers Utilize check sheets Utilize scorecards

Answer: architecture firm quality management (QM) strategy: Assess risk Eliminate waste in processes Track employee time in smaller increments Treat your consultants as customers Utilize check sheets Utilize scorecards https://www.youtube.com/watch?list=PLRqQUel8W0R71cVQvIkcQ529D93rr2ggh&v=yi7hzAuEz8Y&feature=youtu.be

Is an architect who is working with a developer allowed to stand up in a city council meeting and speak in support of the developer's project?

Architects can make public statements on architectural issues but must disclose that they have an economic interest in the outcome.

What is "responsible control"

As the licensed architect, you can stamp the work if you achieved responsible control; and you have achieved "responsible control" over a drawing set (including specs, reports, etc.) if you possess a knowledge of, or maintain supervision over, that set consistent with the standard of care. In other words, you can stamp plans that you didn't create, but you can't stamp plans you know little about. How much do you have to know about the set before you can ethically stamp them? Enough to be consistent with what other architects in your area are doing for similar projects (that's the "standard of care" part).

Balance Sheets

At the scale of an individual, your paycheck tells you how much you are making (your income) and your bank account describes what you've saved (your wealth). Similarly, at the scale of your firm, its profit-loss statement lays out what the firm is making in profit (its income) and the balance sheet describes what the firm owns (its wealth) The balance sheet includes Solvency = current assets/current liabilitiesLiquidity = expected assets/expected liabilitiesLeverage = liabilities/equityReturn on Equity = profit/equity *remember that Assets = things your company owns (computers, plotters, office furniture, dollar value of intellectual property your company has generated, dollar value of your company's reputation in the community, cash in the bank). Ask yourself, "How much do I have?". . . if it has value, it's an asset. Liabilities = what your company owes (total owed in business loans, total owed in mortgage payments for the office building your purchased, total owed on a company car purchased last year, total owed to your employees for the last week's worth of work because we are in between paydays). Ask yourself, "How much do I owe?" . . . if you've promised to pay someone else, but haven't yet done so, that's a liability. Equity = the net worth of the business, were it to be sold today; Tally up all your firm's assets and subtract all of your firm's liabilities . . . that's your firm's equity. Profit=How much money your firm is making this month or year. This is different than equity, which describes how much money your firm is worth. If you're still not sure of the difference between profit and equity, try this analogy: Madison earns $100,000 a year at her job and over her life she's saved up $200,000 in a bank account. Think of her profit as $100,000 and her equity as $200,000. These kind of flow vs quantity relationships are all over these six exams (power vs electricity, peak cooling load vs annual cooling load, linear feet of foundation vs total cubic yards of concrete, water runoff rate vs detention pond size). *For this exam, it is WAY more important to understand all of these concepts than to memorize all of these terms and definitions.

Cash basis accounting vs accrual basis accounting

Cash basis accounting - You have $1,000 in the bank. In cash-basis, it makes no difference that tomorrow you will receive a large check from a client, nor that the next day you will pay your structural engineer with another large check. Account only for the $1,000. Accrual basis accounting -You have $1,000 in the bank, but now you account for the $100,000 check you will receive tomorrow from your client, as well as the $10,000 check you will pay your engineer the day after. From an accrual basis point-of-view, there are separate lines for the money you have, the money you're about to get, and the money you're about to pay out, but you have a total of $1,000+$100,000-$10,000=$91,000 accounted for on the spreadsheet. For obvious reasons, the accrual basis accounting method allows you to make intelligent decisions in guiding your business in a way that cash basis doesn't. If you're weighing whether to hire a new intern for the summer, and need to start the interview process, it's better to think about the $91,000 that you'll almost certainly have in the bank the day after tomorrow, than to make that hiring decision based on the $1,000 you have in the bank today. Cash basis is what you will use to calculate your taxes. If today is December 31, you pay taxes on the profit that you made this calendar year. . . that $100,000 that will be deposited tomorrow from your client and the $10,000 you'll pay the day after to your engineer: those go into figuring out next year's tax liabilities and don't show up on this year's "cash basis" books.

Which RFPs should you apply to and which ones should you skip? Take a beat in each of these cards to answer to yourself before flipping the card. . . it's that seemingly-inefficient process that cements the content in your brain. So it's slightly more time-consuming but still more efficient when measuring learning outcomes.

Clients put out requests for proposals (RFPs) that architects respond to. Often the owners choose which architect to hire based on the architects' responses to these. Time spent on more proposals means less time spent on each proposal so put the initial euphoria about the job prospect aside and be a rifle-not a shotgun. Don't chase longshots and stop being an eager golden retriever. Develop a clear-eyed intentional firm "go/no-go" policy to determine which RFPs to respond to What is the realistic likelihood of winning the job? Does it align with the firm's mission? The firm's market sector? The firm's target geographic radius? Can we realistically make the RFP deadline with a good proposal? Does the client have a reputation of paying on time? Are they sufficiently funded to see the project through? To watch an Amber Book : 40 Minutes of Competence on the subject, click here.

Contractual liability insurance

Contractual liability insurance: Covers you when something goes wrong and you, by virtue of a contract you signed, are held responsible for it. Contractual liability coverage typically is included in your general liability insurance (the one that covers your business for non-professional incidents, like a slip-and-fall or dog bite at the office). Architects sign many kinds of contracts in the course of day-to-day business: leases, purchase orders, agreements to engage an accountant, etc. (professional liability protection from errors and omissions claims falls in a separate category of insurance). Contractual liability insurance covers you when one of those signed contracts puts the burden of a problem on the architect. For example, Lauren, an employee of your firm, tours a quarry with a client to select stone for an office building courtyard. In order to tour the quarry, Lauren signed a common release form, the type you sign all the time, indemnifying the quarry should something go wrong. Something did go wrong on the tour and Lauren was injured. Because she signed the release form holding the quarry harmless, your firm, rather than the quarry, is held responsible. And because you have contractual liability insurance as part of your general liability insurance policy, you're covered for Lauren's injury. (You're probably covered. . . with insurance, it's always hard to say for sure without knowing the specifics of the incident and the contract . . and even knowing that, the lawyers may need to hash it out because of a difference of interpretation.)

Tail insurance

Covers the architect's projects after the architect's retirement The insurance is liability insurance for the projects the architect has already done prior to retirement which are still within the relevant statutes of limitations/repose - so that should there be a problem resulting in a lawsuit, the retired architect is still covered. Tail insurance is much cheaper than the insurance carried by a professional, practicing architect, because the risks are more defined and limited for the insurer - since the architect has retired, no new projects will be being built, and all of the projects that need to be covered by the tail insurance are known.

Professional liability insurance

Covers the cost of mistakes made by the Architect, as well as disciplinary, regulatory, and administrative expenses (e.g. if OSHA is violated in the Architect's office)*Also called "errors and omissions" insurance

General liability insurance

Covers the physical property of the firm, usually has a limit to total claims *Landlords can require

Current Earnings

Current Earnings: profit left over after taxes and expenses are deducted from income

What is a firm's current ratio (solvency)? What is a firm's quick ratio (liquidity)?

Current ratio: value of current assets as a ratio to current liabilities. . .To calculate, take everything the firm owns and will likely be cash in the next 12 months (cash in the bank today, plus accounts receivable (invoices to clients who haven't paid them yet but will soon), plus inventory, plus prepaid expenses, etc.) and divide that number by what the firm owes in the next 12 months (what's owed on a line of credit, plus the next 12 months' principal owed on a traditional term loan, etc). A number above 1-a good target for a healthy firm- means that the firm owns more than it owes in the medium-term; a number below 1 means that the firm owes more than it owns in the medium-term. Current ratio is also called "solvency." Quick ratio (very similar to the current ratio, but quick ratio only counts the MOST liquid assets in the numerator): value of all the CASH the firm owns or is about to be paid (cash + accounts receivable) divided by everything the firm owes in the next 12 months. A number above 1-a good target for a healthy firm- means that the firm has more cash than debts; a number below 1 means that the firm has more debts than cash. This is also called "liquidity." What's the difference between the two? The quick ratio is more conservative because doesn't give credit for inventory (which is not really part of what most architecture (or other professional services firms) keep anyway, nor does it give credit to supplies on hand or prepaid debts. Quick ratio is less optimistic (slightly) than the current ratio. For most architecture firms, the two metrics are the same or almost the same. Do the following calculation problem on your own. Then scroll down to see the answer. Firm balance sheet Current assets Cash on hand: $90,000 Invoices sent out but not yet paid (again, this is called "accounts receivable". . . isn't that a stupid name for this concept?): $100,000 Revit subscription prepaid for the year: $10,000 Current liabilities The firm owes, in the next 12 months, $50,000 in principal on a loan it took out What is the current ratio? What is the quick ratio? Scroll down far for the answer (no peeking) Current ratio [$90,000 in the bank + $100,000 accounts receivable + $10,000 prepaid software subscription] / [$50,000 owed in the next 12 months (not including interest)]= [90 + 100 + 10] / [50]= 200 / 50 = A current ratio of 4 to 1 (the company is healthy!) Quick ratio [$90,000 in the bank + $100,000 accounts receivable + $0 you can't count software subscription] / [$50,000 owed in the next 12 months (not including interest)]= [90 + 100 ] / [50]= 190 / 50 = A current ratio of 3.8 to 1 (the company is still healthy!)

Design-Build

Design-Build: Owner contracts with an Architect-Contractor team.*This project type lowers risk and cost to owner, while increasing speed, but has the potential for lower quality, as the Owner has no agent. For instance, the light fixtures that were specified are no longer available from the manufacturer. The builder wants to replace the light fixtures with those of comparable material expense, but (slightly) inferior ones that require less labor to install because the replacement fixtures don't hide the low voltage transformers in the basement the way that the original ones had. The owner may not have the wherewithal to recognize the new fixtures as inferior. If the architect and contractor are a team hired together by the owner, there is less incentive for the architect to call out the contractor's replacement fixture as inferior.

Fill in the empty box

Direct expenses: paying the employee who is working on the project for the hours that they dedicate to the project Indirect expenses: paying the office manager, conference travel expenses, and the employee efforts not tied to a specific project Reimbursable expenses: paying for the plotter and architect's travel to the construction site, then charged (with a modest extra percentage) to the client Profit: Firms typically charge 3x to 4x the direct expenses for the employee's time to account for indirect expenses and profit

The architect hires a civil engineer to design a church parking lot. Required to address stormwater runoff, the engineer selects an off-the-shelf under-pavement tank to hold the runoff and slowly release rainwater back into the ground. The engineer relies on the manufacturer's literature (not written by an engineer, though the civil engineer didn't know that) to write the prescriptive specifications for the buried tank. The contractor, who bid on the project and by doing so agreed to build it both perfectly and to build it as-drawn, expressed concern that the tank would not preform properly because it sat above the water table. The contractor submitted an RFI expressing the concern, through the architect to the civil engineer (as is required), and the civil engineer responded through the architect to the contractor (as is required) with a dismissive, "It's fine. . . install it as it was drawn, despite your water table concerns." The tank was installed as-drawn and it caused a parking lot collapse that delayed the church's opening by 16 months. Choose who is at fault: The manufacturer (because the tank was not adequate) The architect (because the drawings were not adequate) The civil engineer (because the drawings were not adequate) The owner (because the Spearin Doctrine holds that the contractor isn't responsible for faulty drawings) The contractor (because he warranties that his work won't collapse)

Don't kick your pet out of frustration if you didn't know the correct answer. This is based on a actual Virginia case from 2011, so the parties involved, and their respective insurance companies, also couldn't agree on blame. I include it here not because the exams will present cases quite this challenging, but because you might have intuited that there is a hole in the responsibility outlined by (1) the architect's Standard of Care threshold, (2) the contractor's warrantee and promise to adhere to the contract documents, and (3) the Spearin Doctrine that protects the contractor from bad drawings. The edge cases then remain fuzzy, open to interpretation, not able to account for every eventuality, and likely to leave the owner on the hook if a problem falls in the gap between these concepts. Your intuition and doubt are well-founded. This may have avoided court or arbitration with a change order-signed by the architect, owner, and contractor-that outlined some compromise solution, likely involving a bunch of money moving from one party to another, a change in schedule, and new drawings. . . but no change order was agreed upon, so the case went to court. Judges and juries don't have the technical wherewithal to sort this out, so often the side with the most convincing expert witness wins. The architect is held to a "Standard of Care" in the AIA contract, so she is not responsible if she can prove that she behaved consistent with other architects practicing in her locality under her circumstances. It is a low bar to clear, indeed, and owners will try to convince the architect to operate at a higher standard (guarantee that the building earns LEED certification, drawings are warnanteed, etc.), but were she to sign a contract holding her to a higher bar, her liability insurance likely wouldn't have covered her in this case! Because the standard AIA owner-architect agreement was signed, the architect need only meet the quality expected of her peers and her expert witness testified that she meet that threshold. The civil engineer is also held to a "Standard of Care." Her expert witness testified that relying on manufacturer literature was normal at the time and location of the work. The owner has a right to the work that they paid for, without a parking lot collapse. Litigation like this often unfolds when the owner lacks deep experience in construction, and has (unreasonably?) high expectations. The church's expert witnesses argued that the engineer was at fault. The contractor held that the Spearin Doctrine protects him from liability-that although contractors must warrantee their work, the drawings and specs were not sufficient to build the project properly (and that they said as much in real time with an RFI). Who did the courts find culpable? They ruled that the engineer didn't meet the Standard of Care because she relied on the non-engineers working for the manufacturer, and that other civil engineers working in Northern Virginia at that time wouldn't have done so. And because the engineer works for the architect, who works for the owner, the architect pays the owner, then the engineer pays the architect back. Or more specifically, because the owner and engineer don't have a mutual contract, the architect's insurance pays the owner and the engineer's insurance reimburses the architect's insurance. To watch an Amber Book : 40 Minutes of Competence video on this topic, click here (not necessary if you understood what you just read).

What is evidence-based design?

Evidence-based design is just what you'd think: architecture using the best available science to make design decisions to affect a desired outcome. It's most common in the design of healthcare facilities, where we have the financial incentive to send patients home sooner, the ethical incentive to help occupants heal, and a client interest owing to a long tradition of evidence-based design in medicine. (Florence Nightingale invented the evidence-based design concept 160 years ago, recognizing the link between healing on the one hand, and fresh air, quiet hospitals, proper lighting, and clean water on the other.) Governments have generally abandoned funding the kind of research needed to properly link design decisions to occupant outcomes, so recently, the healthcare industry seems to be the only one supporting relevant academic study. (Canada's the exception; their government is doing amazing work in this area.) Architecture, as a profession, should be also stepping up to fill the void . . . if you are part of a large firm, and would like to know, for instance, the impact of air quality and ventilation rates in preschool childhood development or the best design practices to limit glare on computer screens, consider contacting your local university, your alma matter, or an expert at some other university, and funding a study.

Standard of Care

Expected quality of service for architect by area. The standard of care often decides whether architect is at fault when Architect made an error or omission.

Expertise vs experience vs efficiency firm structures

Expertise: exceptional talent or deep knowledge. i.e. Pritzker Prize winners.Experience: Special programmatic areas, routine but complex, challenge to match task to experience level. i.e. data centers.Efficiency: Inexpensive, repeatable, routine, lots of junior staff. I suspect most of the work done by these "efficiency" firms will be outsourced abroad over the next decades because if you plan to win projects based on your low fees, it will be difficult to compete with overseas labor costs.

What are the instruments of service?

Instruments of service include pretty much everything the architect created for the project, including the final CD set and specifications. . . but also the site analysis, notes, study models, environmental review documents, cost estimates, sketches, early versions of the design that were abandoned. . . all the creative work, tangible and intangible.

Integrated Project Delivery

Integrated Project Delivery (IPD): Owner, Architect, and Contractor each take ownership in a fourth business as an integrated team, pooling resources and sharing risks and benefits. For instance, a hospital system teams with a builder and you, the architect, to design and construct a new hospital building adjacent to a new parking garage. All three parties give up the right to sue one another and adopt a "what's good for the project" mentality. If the hospital is completed on time, this fourth company that you have partial ownership in earns a bonus. If it finishes under budget. . . another bonus. If nurses' surveys show a minimum level of satisfaction. . . another bonus. If energy use after the first year is below a target level. . . yet another bonus rolls in one year after substantial completion. The fourth company will own and run the parking garage and earn recurring revenue as receipts for parking garage fees roll in over time. If the garage does poorly because the team didn't anticipate the widespread use of ridesharing technologies like Uber, the team will lose money on that segment of the project. In this way, you take on more of the project's risk, and earn more of the upside benefit, than you would in a legacy contract structure. IPD is not simply an evolution of a new type AIA agreement, but serves as a difference in kind of contract. The goal is not only to act collaboratively and share ownership, but also to reduce waste. A federal government analysis demonstrated that, since 1964, all non-farm industries increased productivity by at least 200%-except one. The US construction industry over that same time window was the lone loser, actually decreasing productivity over time! A third goal of the IPD contract is to reduce inefficiencies. By opening up communication and incentivizing collaboration, less time will ostensibly be spent hunkering down, and more time can be spent huddling up. *This type of project is usually used for large and complex projects and works especially well with BIM. IPD is, above all else, flexible. Each project sets its own system of rewards and penalties, its own financial structure, and its own teams (in the example above, perhaps a health insurance company, a health care charity, and the MEP engineer are also stakeholders in the new hospital-building company). (The relative positions of the three (or more) entities in this diagram does not matter. They are teammates.)

Is it unethical for an architect to offer free services?

It is not unethical for an architect to offer free services. The AIA used to be in the business of establishing fees, outlawing discounts, and regulating when an architect could submit a bid to undercut the fee established by another firm. They took this role to protect the profession from a "race to the bottom," whereby architects would undercut one another on price ad infinitum-but those protectionist policies ran afoul of antitrust laws. The federal government deemed that practice to be too much like a cartel, and contrary to the free-market tradition of competitive bidding.

Lifecycle Cost Analysis Includes and excludes... And differs from Life Cycle Assessment because...

Life-Cycle Cost Analysis (LCCA): The evaluation of the cost of, for instance, boiler systems in a building from installation to replacement.Includes the cost to install, plus the predicted costs: fuel to run, cost to maintain, salvage value after the useful life has concluded, and considers how long one system is expected to last as compared to another. Boiler A costs less to install but more to operate; Boiler B costs more to install but less to operate. LCCA attempts to identify which boiler choice offers a better value, accounting for inflation. Useful for a fuller accounting of value beyond simple installation cost comparisons LCCA excludes sunk costs (like if the two boilers cost the same in design fees and pipe installation, those will not come into play) *Not to be confused with Life-Cycle Assessment (LCA), which also compares building design options-but whereas LCCA serves as an accounting tool, LCA serves as a sustainability tool. LCA measures the cradle-to-grave environmental benefits and liabilities from raw material extraction through production, transportation, use, and disposal of a good. In Life-Cycle Assessment two roofing membranes may be compared for everything from the water and petroleum used in their manufacturing, to the thermal building loads and heat-island-effect associated with their use, to their usable life and recyclability upon replacement.

LLC

Limited liability company- Separates personal assets from company assets; protects personal assets from client lawsuits - Small to medium sized company - File with state (for this and any corporation) Filing as an LLC is a good option for a new architecture firm.

Examine the profit-loss statement of your friend. Go through every cell on the spreadsheet and put the cell's meaning in your own words. For instance, the top-left cell means that "she's earned $4200 in the month of May, before taxes (gross), from her primary job's salary."

Look at Ameber Book

What do you do if an exam question asks you which firm employee to assign to a project?

Look at the table with the employees' names and information about each employee 1.) Look for a staff member who has experience in the building program type. For instance, if the assignment is to design a school, look for an employee who has experience in education projects. Now you've perhaps narrowed it down to three employees out of the original twelve. 2.) Then, from those three, find the ones with the lowest utilization rates. A 90% utilization rate means that 90% of that employee's time is billable to a client, so best not to assign it to that busy team member and find one with more availability. When you look at the other two, you may find one education-experienced person with 30% utilization rate and one with a 50% rate. That means they each have time available to dedicate to a new project. 3.)From the final two, pick the one that makes the most sense for the task. One maybe a lower-level intern with 1 year experience and a commensurate low hourly wage and the other may be a senior project manager with decades of experience and a high hourly rate. If the task is updating the drawings to reflect redlines, the rookie is your best pick. If the task is making the redline edits for a complex school design, better pick the veteran.

Does the architect need to register her work with the US Copyright Office?

Mostly no (but filing with the copyright office is not the worst idea anyway). A 1990 federal law automatically protects works of architecture, so an architect needn't specifically file the work with the copyright office. But, filing with the copyright office does give the architect the option to sue for more types of damages if someone rips off her work. What's protected? The law protects building compositions (The Guggenheim Museum concepts in New York or Bilbao) but doesn't protect common ideas (the idea of log cabin or glass skyscraper) or common building parts (the everyday window or the front stoop)

Municipal bonds vs revenue bonds vs corporate bonds

Municipal bonds are loans, made by investors, to a government. If your city wants to build a new firehouse, they will need to issue a bond, which is basically like borrowing money at the governmental level. If the building needs $20M the city will issue $20M in promises to pay back investors, with interest. Hedge funds, pension funds, sovereign funds, and other investors will invest their capital into these bonds-they will purchase the bonds from the city. The city will then pay the bond holders back the principal, plus interest, for a fixed period of time. So if I purchase a bond for $100, the city promises to pay me back, say, $8 per year for 20 years. I don't have to keep that bond for the whole 20 years. . . I can sell it to another investor for some market value after five years if I want to unload it, and they'll reap the $8 annual payment instead of me. Why not borrow from a bank? Banks don't like to lend that much money for one project (too much concentrated risk) so issuing a bond allows hundred or thousands of investors to each take a small part of the risk. U.S. town, city, county, and state governments issue hundreds of billions of dollars worth of municipal bonds every year. National governments issue bonds too. Revenue bonds are municipal bonds issued to finance facilities for revenue-producing public enterprises (Also known as rate-supported bonds). For example, a government issues a bond for something that makes money on its own, like a stadium or toll bridge. Corporate bonds: Private companies also issue bonds to borrow money for building projects (or to finance ongoing operations, hire employees, pay down debt, or support R&D). The value of a bond is based on the credit-worthiness of the issuer, the length of the bond, and the interest rate of the bond relative to the going bank interest rate at the time.

Net Operating Revenue

Net Operating Revenue: All the money we've taken in from clients, minus what we've paid out to consultants (engineers) and what we've paid out for reimbursables (our cost for travel to the site, which was charged to the client, but now we have to pay for that travel from the money we collected) Net Operating Revenue is the money (net revenue) we have left over to 1. pay our architects to draw (direct expenses), 2. pay our utilities (indirect expenses) 3. pay our partners (profit)

Net revenue per employee

Net revenue per employee: If we charged our clients $300,000 this year and we had three total employees, our net revenue per employee would be $100,000 (a good goal for a healthy firm). The higher this number is, the healthier the firm is because a high number means that it is bringing in a lot of money from clients but has few employees to pay.

Does the architect have a fiduciary duty to the client: a legal obligation to act in the owner's best financial interest?

No, architects do not serve as an owner's fiduciary. Fiduciary duty: The obligation a professional has to act in the best interests of their client Generally, the term is used for professions who protect the financial interest of the people they represent. Certified financial planners (CFPs) can't recommend a particular investment if they do so because the CFP gets a higher commission from the brokerage if that particular investment is purchased; lawyers or accountants can't advise their client to move forward with a deal because the lawyer or accountant owns the property to be sold; and a corporate director can't steer the company to sign a worse deal because the person on the other side of that deal is her brother-in-law. (Of course, if the brother-in-law really has the best corporate travel agency and charges the company the lowest fees, it is probably not a breach of fiduciary duty.) If you, as a fiduciary, breach your duty, you are liable in court, though as you would imagine, proving a breach is difficult in practice. The concept of fiduciary was set up because professions like attorneys, accountants and physicians are granted a monopoly to practice their craft, and hold power or knowledge asymmetries over their clients. While architects are granted a monopoly to practice by the state and do hold knowledge asymmetries, they are not fiduciaries. Clients often assume a professional is bound by fiduciary duty, when in fact she is not. For instance, a stockbroker is not a fiduciary. She can legally steer you to a particular stock only because she gets the largest commission for selling that stock-even if purchasing that stock is not in your financial best interest. Fiduciary duty is the highest standard of care level that can be imposed under law, and thus it far exceeds the "standard of care" threshold for architects' performance established in the AIA contracts. Owner-generated contracts sometimes sneak in a clause binding the architect to fiduciary duty, but because your professional liability insurance almost certainly won't cover that level of expectation, you will need to strike that fiduciary clause out of the contract. If the owner generates her own non-standard contract, you might even want to go out of your way to include a clause that establishes that the architect is not held to a fiduciary standard. Why isn't an architect held to a fiduciary standard? Perhaps because we protect the health, safety, and welfare of the public. Have a story where doing financially right by the owner conflicted with doing right by the public? Share it with me at [email protected] and perhaps I'll add it to the bottom of this flash card (anonymized). Or maybe architects aren't held to the higher standard because the AIA, with an obligation to protect the architects, is the entity writing the industry-standard contracts.

Your boss is slow to approve your work experience hours through NCARB. Is that ethical?

No, it is not ethical to foot-drag on experience reporting. Rule 5.201 stipulates that, "Members who have agreed to work with individuals engaged in an architectural internship program or an experience requirement for licensure shall reasonably assist in proper and timely documentation in accordance with that program."

I, as an architect, hire an interior design firm for a project and they get too busy to finish my job. Can they farm the work out to another subconsultant to meet my deadline?

No, they can't farm it out (without my written permission). I hired THEM for THEIR TALENTS, not the scrubs they brought in because they took on too much work. This is required per the AIA C-401 Architect-consultant agreement and applies to any consultant hired with the standard agreement.

You leave your firm. Are you entitled to take up to three drawings or reports with you?

Of course you may not take drawings with you when you leave your firm without permission. Those drawings belong to the firm, even if you were the one who created them through your hard work. That's what they paid you for. If however you served the firm as an independent contractor (IRS form 1099 instead of W-2 at the end of the year), and you didn't sign a form handing over rights to your work, you may have ownership of the work, just as an architect hired by an owner has rights to their work. Check with a lawyer. But there's a twist! While it is unethical to take work when you leave without permission, the ethics code stipulates that the employer may not unreasonably withhold permission from a departing employee requesting to take copies of non-confidential work.

Overlay district vs planned use development

Overlay district: additional zoning requirements for a defined area of town, regardless of the underlying base zoning classification. For instance, for fear of mudslides, the buildings along a bluff, whether zoned for residential, commercial, or industrial, are required to obtain a geotechnical soil report before permission to build is granted. Overlay districts might utilize additional zoning rules to establish historic districts in older parts of the city, protect wildlife in eco-corridors, or promote density along a light rail transit line. Planned use development (PUD): Change in the zoning/code for a specific plot in exchange for other good building practices or public amenities (the city council must approve the PUD). This often grants the developer more zoning flexibility in large-scale, mixed-use land development. For example, a developer interested in purchasing 175 acres currently zoned only for single-family detached homes hires your firm to design a walkable neighborhood replete with shops, schools, street trees, parks, and sidewalks. You then present the proposal to city council to allow the shops in what is currently residential-only zoning. If approved, the municipal government will allow the shops in exchange for the street trees, parks, and sidewalks. They sign off on your plan and will draw up a contract ensuring that you abide by the spirit of it, in exchange for the new zoning flexibility

Construction Manager as Advisor

Owner contracts with Architect, Contractor, and CM.*This type of project brings the CM on early as a consultant for the Owner, typically a CM with expertise in a specific market (like performing arts centers). This allows for greater speed.

Bridged Design-Build

Owner contracts with a design architect ("bridging consultant") to design the project through SD, then a "production architect-contractor team" bids to develop the documents and build the project. This contract retains some of the (good for the owner) adversarial relationship between the architect and contractor because the bridging consultant (design architect) works for the owner and has her best interest in mind; and it retains some of the (good for the owner) speed and expediency associated with design-build projects because the production architect and contractor work for a single entity and ostensibly trust one another without the blame-shifting ("It was the architects fault!") or cover-your-ass culture ("We can fix this design flaw ourselves, but send an RFI and wait for an answer anyway") associated with design-bid-build. The bridging consultant (design architect) continues to review the production architect's drawings after the hand-off, on behalf of the owner, to ensure that the design architect's intent was followed through to detailing and technical specs.*This type of project increases quality, lowers risk, and offers greater speed than design-bid-build (but less speed than design-build). Not good if the owner needs to have the architect "on her side" throughout the whole process.

Design-Bid-Build

Owner contracts with the Architect to draw, and then the Contractor who bids a fixed price based on those drawings.*This project type is linear and clearly defined, with the lowest immediate cost, a longer schedule, and a higher chance of large change orders. Due to the change order risk, the drawings need to more complete earlier in the process. *This was, for a long time, the most common type of contract and serves as the default option assumed in the ARE unless otherwise specified

Negotiated select team

Owner hires the contractor she likes from the beginning of the project, before drawings are completed (or even started). This project style is a subset of Design-Bid-Build. *This option allows fabrication to start early on complex parts of a project (i.e. special curtain walls) by including the contractor from the beginning. It also ensures a quality project: the contractor was selected because of her craftsmanship, integrity, professionalism, etc, not because she had the lowest price. Offers greater speed and quality than basic Design-Bid-Build, but is obviously more expensive because there's no bidding.

Time is money.

Owners don't typically pay for buildings with cash-they pay with loans. Delays in the project for any reason have a cost beyond the obvious construction costs like crane rental fees. There is a cost to capital. Owners must pay interest on the loans they take out. The corporate tenants were scheduled to be in the completed building, paying rent, by January. The developer has to begin paying the bank back the mortgage payment beginning in February. Where does the cash come from to pay the bank if there's no rent to collect. A month's delay could mean the difference between the owner making a profit and taking a loss on the entire project, declaring bankruptcy because of a cash shortage. From the contractor's point of view, the cost of materials and labor increases slowly over time with inflation, so if there's a delay, the project's economics may no longer work. Inflation may seem like a rounding error, but on large projects, the numbers associated with inflation can be staggering. At only 2% annual inflation, a 180 million dollar project, will lose $300,000 per month in inflationary costs!

What is "payroll burden?"

Payroll burden (also called labor burden) is the cost to the firm for employing you, not including your salary: costs from employer-provided health insurance; paid time off/paid sick leave; payroll taxes due from the employer such as social security, Medicare, and unemployment tax (termed "FICA taxes"); pensions and matching contributions to a 401k fund. Payroll burden is typically expressed as an aggregate percentage of salaries, so if your firm has a payroll burden of 10%, it means that for every $100 of salary paid to employees, the firm must account for an additional $10 toward these extras.

Phasing

Phasing: construction can be planned as a series of stages, rather than as one continuous effort. Helps with complex systems: Especially common if the owner needs to stay open during construction. ("We'll move our operations to the west side of the building while you work on the east side.") Helps with uncertain funding: to make sure that a portion of the project is occupiable, even if funding dries up before the whole thing is completed. ("Start with Building A, and if our IPO turns out to be a boon for the company, we'll complete the already-designed corporate campus with construction of Buildings B and C.") Pros: lower initial investment so less initial risk; income can be generated by the portion of the restaurant that is open during construction Cons: the total project will take longer to complete; more expensive to bring cranes to the site twice, route construction deliveries out of sight of diners, etc.; must maintain security, cleanliness, and worksite safety to meet both the needs of the construction site and the restaurant operation.

Your RFP won and advanced you to the next round—the shortlist interview. Now what?

Prepare. Rehearse. Prepare. Rehearse. Learn who is on the selection committee (if possible) and tailor to them Learn what other firms are short-listed (if possible) Remember always that you are there to answer the question, "Why us?" This is not an "everyone on the team gets equal time in front of the selection committee" kind of presentation. The person on the team who will be calling the shots through the design process (usually partner-in-charge or project manager) needs to exhibit leadership in the interview and establish themselves as the point of contact for the process. The team leader should be warm and human. The client will be working with that person for the next 20 months, and we'd all rather work with real humans than robots. Make eye contact. Don't read slides or re-read your RFP to the committee. Make the interview as conversational as possible (rather than a one-directional oratory). Bring additional "leave-behind" written material and images to leave behind with the committee, but don't hand that material out until the end—you want all eyes on the presenter during the meeting if you hand out the props at the beginning, the committees' eyes will be buried in your literature. When asked a question you don't know the answer to, explain that you'll get back to them on that issue. Then follow up with a thank you letter. It'll give you a chance to answer the questions you couldn't answer in real-time and help get your firm front-of-mind if they're debating between you and one other firm.

Privity vs indemnity

Privity: A concept where, if we have no legal contract together, you have no legal recourse to file a claim against me. For instance, I, as the architect, don't have a contract with you, the construction worker, and therefore you, as a third party, can't sue me if you are injured. Beginning in the 1950s, many states no longer adhere to this concept for the architect where my negligence and your personal injury overlap. You, the construction worker can win a suit if you prove me negligent and you were injured (or even suffered property damage because something from the building fell on your truck). Architects' liability extends beyond construction workers to building occupants and even to passersby. In practice, when someone is injured, they take everyone to court, because if they don't, the defendants will often blame the party that is not present as their defense. In seeking economic damages (instead of personal injury or property damages) from an architect, i.e. economic losses from a delay in construction, the claimant must actually have a contract with the architect to sue: they must have "privity of contract." But even that protection is waning in many state courts. For this reason, a flag should go up in your head if someone gives you a contract to sign that implies a relationship or warranty between you and a third party. Indemnity: I'm signing a contract that frees you of liability and puts the blame back on me. So when you rent a jet ski, the proprietor may ask you to sign a waiver of liability: a form that indemnifies the proprietor of liability if you ram a swimmer with their jet ski. Because in construction the risks are significant and the stakes are high, everyone is looking for indemnity. They want to pass the risk of a claim onto you. Don't let them do that. In insurance contracts the concepts of privity and indemnity dance together. If you are the landlord for my firm's office, I can sign something that indemnifies you: you're not responsible for the fire I set that spreads to other tenants' offices. I can also make you an additional insured: you are now on my insurance policy with privity of contract so my insurance coverage will pay for the fire. Which is better for you, the landlord, to be given indemnity or privity? The answer is you want both. That way, after the fire, you can go after me in court because unlike the insurance policy, there is no limit to the dollar value of my liability. . . and you can go after my insurance policy to pay up because they likely have deeper pockets than I do. These terms come up in AIA agreements because Privity: the architect and contractor have no direct contract with one another, making it difficult for the contractor to sue the architect (directly) for undersizing the footer on one of the drawings. Indemnity: The owner, architect, and contractor indemnify one another for errors caused solely by any one of them. So if the contractor fails to fence off the construction site and a child wanders in and gets hurt, and the parents sue the architect for $100,000 because juries don't understand construction law and the kid was really cute before the injury. . . the contractor's insurance should cover the architect's settlement and legal costs because the fencing was 100% the contractor's responsibility by contract.

Profit-loss statement vs balance sheet

Profit-loss statement: flow of money (income). How much came in this month in revenue? How much went out in expenses. Balance sheet: snapshot of equity (wealth). How much was in the bank before the month began and again after the month ended? A great (and very short) Kahn Academy video here can help you if you still get mixed up between the two. Know that he uses the term "income statement" instead of "profiit-loss statement;" the two terms are synonymous. There are flow vs quantity relationships that parallel the income-wealth relationship all over these exams: peak heating load vs annual heating; flow vs quantity of water; power vs electricity; pounds per linear foot on a beam vs pounds per square foot on a floor.

What is quality management in architecture?

Quality Management (QM): Intentional and formal process of developing and revising the instruments of service and internal firm systems. For instance, establishing how many cycles of redlining and revising drawings each project will have, or how many times per month the project architect will check in with the client by phone during design. (Also called Quality Control (QC).)

LLC vs S-Corporation The two are similar: Each protects your personal assets, so if the building you design burns down, the victims will have a difficult time winning your children's college fund when they sue you in court. Sole proprietorships, or just starting a business without filing with the state as a business entity. . . those paths don't offer this protection. Neither LLCs or S-corporations are double-taxed the way that C-corporations are. GE, Microsoft, Coca-Cola and other large entities file as C-corporations because once a company gets big enough, it is almost required to become a C-corp. If your C-corporation makes a profit this year, the government first taxes it at the corporate level. Then if it uses that profit to pay dividends to its owners (shareholders), those shareholders are taxed again at the individual level-we say that C-corps are "double-taxed.

So what's the difference between an LLC and an S-corporation? S-corporations take a bit more effort (though not much) to set up and have a few more rules (though not many more). . . The meaningful difference is that if you have a very profitable year, S-corporations can be taxed at a lower rate than LLCs. I'll explain. The federal government taxes income at a higher rate than it taxes investments, so someone who makes the same amount of money as you do this year, but makes it by earning bank account interest and stock dividends instead of salary, will pay a meaningfully lower rate than you will as a working person. Remember that when you read the next paragraph. If at the end of the year, an LLC has $500,000 left over in profit, the owner will be taxed as if they earned that $500,000 working. This means a higher base rate, plus more in FICA taxes (social security, Medicare). If however the owner had filed as an S-corp, they are required to pay themselves a "reasonable" salary, tied to industry standards, but their profit above that salary can be taxed as if they were an investor in their own company, and their company paid them a dividend for their shares of stock. So, maybe the first $100,000 is taxed as a reasonable salary for the principal of a small architecture firm, but the next $400,000 in a S-corporation can be defined as a "distribution," and taxed the same way that any other investment would be taxed: at a lower rate than salary earnings.

What is the difference between supplemental services provided by the architect and additional services provided by the architect?

Supplemental services: extras that can be defined by the owner and architect beforehand and easily enumerated and valued in the contract, like hiring a landscape architect or providing multiple preliminary design options. Additional services: extra requirements on the architect that will arise during construction and not able to be accurately predicted and specifically included in the contract, like two extra required visits to the site, or responding to a new change to the code. The contract will set an hourly rate for the architect's time and the owner will pay for additional services by-the-hour. *In both cases, the architect should be paid more than the basic services sum.

An architect and builder resolve to join forces in order to win a job. Now what?

The architect and builder sign a teaming agreement (also called a memorandum of understanding (MOU)) broadly clarifying how fees will be split, what will happen if the builder discovers a major omission in the drawing set, etc. Once the job is won, the two entities will sign a formal joint venture agreement, cementing down the specifics. They'll establish cost-savings opportunities in using just the architect's marketing team to take building photos and then freely license those photos to the builder's marketing department for use on their website, etc.

What is the best way to prepare for these exams?

The best way to prepare is to put concepts in your own words as you are studying them. Human brains posses almost unlimited storage of information, but recollection is the weakest link of the chain. The good news: recollection is like a muscle that can be improved with practice. So recall (briefly), in your own words, what you studied yesterday, one week ago, and one month ago. This will require a calendar and some organization. If you have enough time, create your own good questions for a homemade practice exam. A good question is one likely to be answered correctly by a person who understands the concept (but didn't necessarily memorize the vocabulary), and is likely to be answered incorrectly by someone who doesn't understand the concept (but may have memorized the vocabulary). Know that while this is a very good way to learn the material for the test, it takes a lot of time to do and will slow down your studying. For this reason, consider the make-your-own-test method to be optional, and use it if you are struggling or if you are not in a hurry to be licensed. When you see a multiple choice or select-all-that-apply question on the exam, try to answer it in your own words to yourself before looking at the answer choices. That way, if you see an answer choice that is similar to what you already answered to yourself, you'll know it's the correct selection without having to overthink an incorrect "distracter" answer choice.

In your own words, what is most important to the contractor? To the owner? To the architect? What parts of the process does each party want to control?

The contractor wants to win the job, period. She knows that bid price will often be the deciding factor determining whether she lands the contract. She may have to pad her revenue with change orders later to make a profit because she under-bid to get the job. She wants clarity in the drawings and a fast turn-around on decisions (RFIs, applications for payment, submittal approvals) so that she can stay on-schedule. The owner wants the lowest bid price and no change orders. He seeks the earliest possible project completion. He loves negotiating opaque contracts because he wins most negotiations and has more lawyers. The architecture firm wants to win the job, period. It may underbid to get the contract and then see no path to profitability. The architecture firm has the least risk and is likely least comfortable with (and least insured for) risk. It wants to be in control of most small and medium-sized decisions and for the contractor to build exactly what is drawn. If it's done right, all three parties want a high-quality building, though how they define quality will vary. It's not even close. . . the architect's definition of quality is better! The standard contracts try to give each party what it wants most. When in doubt, assume that the contracts . . . Require the architecture firm to design something that meets the construction budget Set up absurdly strict rules for bidding to lock in a price Establish deadlines for quick architecture firm decision-making Penalize contractors for delays Protect the architect from claims (standard of care) Limit the scope of the architecture firm's base services, but encourage the architect to add an upcharge for expanded services that architects secretly want to do anyway so much that they are dying to give away these services for free Require the contractor to build exactly what the architect drew and specified Ensure that all changes come in written form, and that most changes after the bid is accepted require signatures Stipulate that the path of communication and culpability travel from subs to the contractor first, and from consultants to the architect first. That way the architect, contractor, and owner can sit around a table and make decisions without fear that a steel fabricator short-circuited the process by taking a concern straight to a structural engineer (who doesn't know where the ducts will be routed)

Strategic alliance

The temporary sharing of technology, resources, and risk to get and build a project. This uses a teaming agreement to lay out credit, copyrights, non-competition clauses, roles, etc.. For instance, an architect and engineer work well together and wish to formalize their relationship with a proper agreement. They decide to join forces to pursue projects, and with input from their respective insurance companies and lawyers, they establish a repeatable contract so that they don't have to involve the insurance companies and lawyers each time they respond to an RFP. Each entity feels that they are more likely to be awarded the project by teaming with the other; each feels that they enjoy a competitive advantage by avoiding the costly legal hurdles associated with negotiating a new architect-consultant contract for each RFP; and each delights in making great buildings with a trusted partner who cares about the quality of the drawings as much as the other one does. Unlike a joint venture, two companies didn't establish a new, third, company. And unlike a partnership, the two companies haven't merged into a single company. They went into the strategic alliance as two companies and came out of it as two companies. Had they entered a partnership, the two firms would have permanently become one single firm. Had they created a joint venture, the two firms would have each taken ownership of a new third firm.

Why do the contract clauses read as so specific and seem so random?

The whole process is fraught with high-stakes contradictions: Above all, the owner wants a fixed price. . . but no one REALLY knows how much a building is going to cost beforehand. Above all, the contractor wants to earn a profit . . . but he won the job by UNDERBIDDING. Above all, the architect wants to remain blameless. . . but her drawings are inevitably INCOMPLETE There's so much money at stake, that for the owner and contractor, the difference between enjoying a healthy bottom line and suffering a devastating financial loss comes down to which change orders are approved and how disputes are resolved. Before the construction contract is signed, the owner has all the negotiating leverage . . . but after construction starts, the power shifts abruptly to the contractor.

Stipulated lump sum Fixed fee + expenses Percentage of construction cost Hourly to a maximum + expenses Hourly—open-ended (no established maximum) + expenses Fee per unit/sf + expenses

These are the most common ways that architects will be paid. Which flavor used is usually determined by what the owner wants. Stipulated lump sum: fixed price for owner and fixed fee for architect. Don't use if scope, responsibilities, or task assignments aren't clearly defined. If architect works too many hours, she loses money on the job; if she works too few, she makes more profit and owner is fleeced. Everyone must trust one another. Fixed fee + expenses: with or without a cap limit on expenses Percentage of construction cost: If labor or materials were donated to build the project, their value should be included in calculating construction cost Hourly to a maximum + expenses: just what it sounds like Hourly—open-ended (no established maximum) + expenses: just what it sounds like Fee per unit (or fee per square foot) + expenses: typically only used in residential design *Public sector projects will almost always be stipulated lump sum or percentage of construction cost *Private sector will use any of these *Some of these terms are also used to describe options for how the owner pays the contractor

Examples of Supplementary Services

These go beyond the standard owner-architect contract, so you'll charge an additional design fee. They can be enumerated and a fee may be estimated BEFORE design and are therefore we call these SUPPLEMENTAL services. Offering more than one design optionCertified designs (LEED, etc.)Fast-trackBIM coordinationInterior design, or furniture, fixtures & equipment (FFE)Post occupancy evaluationsExisting facilities surveyA/V or security design More than anything, the list above (and more similar items listed in the contract) let the owner know what the architect will not be doing under a standard agreement without compensatory extra fees. That way, when an owner asks later for LEED or a post-occupancy survey, all parties will understand that this is an extra topping on the pizza, and as such, requires an extra fee. Separately, the list below also goes beyond the standard owner-architect contract, so we'll also charge an additional design fee. But this list CANNOT be enumerated or anticipated so a fee may NOT be estimated BEFORE design and are therefore we call these (and charge for these hourly as) ADDITIONAL services. For instance, Amazon initiated same-day delivery to our area, changing the retail market midway through the design process, and the owner asked for a re-design to accommodate smaller retail shopping mall. Or the municipal body that green-lights the project is requiring unforeseen convincing that necessitates slick renderings of the project that weren't part of the contract. Or a new CEO is hired and she wants to see a physical basswood model of the project before construction begins. Or other unforeseen events that require an architect, who has already signed the B101, to put in more effort than reasonably expected relative to the contract. Typically the hourly fee for additional services-whatever they may be-is worked out in the original B101 contract and typically the architect must receive permission from the owner before commencing paid additional services. As you might imagine, the AIA has a form for requesting that permission: G801-Notice of Additional Services. All of this is to say, when an owner hires an architect, she cannot expect an all-you-can-eat buffet of services. Yes, every project is different, and there's a fuzzy grey area associated with the boundaries of the architect's responsibilities. . . but, while sometimes fuzzy, boundaries DO exist.

Your boss, who is not licensed, and did not have to be because the firm historically has limited its work to single-family residential projects, has asked you to get licensed because they wish to expand to commercial work. Is it legal/ethical/safe for you to stamp drawings for your unlicensed boss?

This is a complicated question, with a complicated answer. It is one, believe it or not, that I've been asked often. First, stamping a drawing based on your judgement is kind of like your right as a licensed professional, so you can legally stamp a drawing if you had responsible control over it. This deference is what licensure earns you and it is what you are working toward with all of the studying you are currently engaged in. It may not be legal in certain states because of laws that, for instance, require that a firm owner or equity partner be licensed. So it is often, but not always legal to stamp drawings for your boss if you choose to. The second question is ethics, and to that, I can find nothing from the AIA Code of Ethics or online sources that prohibits an employee without firm ownership from stamping a drawing set. Of course, one may have personal qualms with the ethics of asking someone to accept the risk and liability of using their seal without offering them the upside of firm equity in return. The final concern is liability, and on this count you almost certainly should not stamp the drawings for your boss without consulting an attorney of your own. While the firm's errors and omissions policy may (or may not) cover you through litigation, you'd need to confirm in writing that it covers you if you leave the firm before the ten year statute of limitations runs out-otherwise you'd be personally on the hook for being sued after the parapet leak is discovered, even though you were laid off three years ago! In this case, you may need to purchase liability insurance on your own when you leave the firm to protect yourself!

What are "performance standards"

This is a term that shows up in the Architect's Handbook of Professional Practice in four different contexts: "The building failed to meet a LEED performance standard," . . . as a measure of building achievement or operation "This employee failed to meet our firm's performance standard and will need to be coached or disciplined,". . . as a measure of firm quality control "This steel bolt can be used on the job because it meets the specification's ASTM performance standard," . . . as a technical measure of a material's worthiness "This contract holds the building's design to achieve a performance standard, which may be seen later in the courts as an (uninsurable) guarantee," . . . legal wording in a contract to be avoided

Can an architect contribute to a campaign of a local politician in the hope of winning a contract to design a new firehouse, should that politician become elected?

This one is a tough call, but an architect can probably contribute to a campaign in the hopes of winning a contract later. Architects are prohibited from offering payments or gifts to public officials with the intent of influencing the official's judgement related to a juicy building project. But that rule does not apply when making legal campaign contributions!

Examine the profit-loss statement of your friend. Did she have a realistic budget? One that could be met?

Yes, her budget was reasonable. At this point in the year she was expecting to have spent $14,500 and to have earned $15,200. In reality, she earned nearly that at $15,070. This is similar to the kind of firm P-L statement that you will be responsible for deciphering in the exams, so if this is difficult or unintuitive for you to follow, take great care on this series of flash cards (and watch the answer explanation videos). If this comes easy to you, breeze through it and treat it as review.

Break-even multiplier vs direct salary expense multiplier

You pay an architect $25/hour and charge the client $100/hour for the architects billable time. The break even multiplier is 2.0, which means that for every $25 you pay the architect on your staff, there is another $25 to cover the architect's health insurance, retirement, AIA membership, office furniture, and rent for the firm's office. The direct salary expense multiplier is 4.0, which is how we came up with the $100/hour we charge the client. The direct salary expense multiplier is similar to the break even multiplier, but the direct salary expense multiplier also includes profit for the firm. Obviously, then, if the break even multiplier is larger than direct salary expense multiplier, our firm loses money on each job it takes.