ARE PcM 5.0: Practice Management

When is construction cost determined for the CM-Constructor project delivery method? How many construction contracts?

1) After design 2) One

When is construction cost determined for the Bridging Design-Build project delivery method? How many construction contracts?

1) After design (by the AE) 2) One

When is construction cost determined for the traditional Design-Bid-Build method? How many construction contracts?

1) After design (stipulated sum) 2) One construction contract

What are the two main differences between a C Corporation and an S Corporation?

1) An S Corporation doesn't retain profits, so the income/losses are allocated directly to shareholders, who are taxed individually (in a C Corporation, the corporation's profits and the shareholders' dividends are taxed separately). 2) An S Corporation designation is limited to small business corporations that are domestic companies with up to 100 shareholders (all of whom must be US citizens or residents).

When is construction cost determined for the CM-Agent project delivery method? How many construction contracts?

1) At completion of the project 2) Many

When is construction cost determined for the standard Design-Build project delivery method? How many construction contracts?

1) Before design 2) One

What are the three ways in which architects' Duties are established (legally speaking)?

1) By written/oral contract. 2) Legislative enactment (i.e. building codes and architecture licensing laws) 3) Implied duties based on architects' conduct.

What are key risk considerations for the Owner?

1) Can the project accomplish its goals within the constraints of time and budget? 2) Does the owner have the capability to understand the project and support the decisions necessary to complete it?

When is construction cost determined for the CM-Advisor project delivery method? How many construction contracts?

1) N/A 2) Many

How can an architect explicitly claim building copyright (two ways)?

1) Specifically claim ownership rights to the building copyright in the owner-architect agreement. 2) The architect should register the work with the US Copyright Office within (3) months of publication (completion of the building).

How much of a retainer should architects require before work begins?

10-20% of the fee, or an amount based on an average monthly billing amount.

Firmwide Profit Margin Equation

= Profit / Net Revenue Most architecture firms have a profit margin of 6%, but some report up to 15%.

What is true about general and limited partnerships (select two)? A) In a general partnership, income is shared and reported on personal tax forms. B) In a limited partnership, there are no general partners. C) Limited partners receive a portion of profits and are liable only to the extent of their investments. D) Limited partners have management roles and requirements. E) General partners do not share in risks or management.

A & C

How does IPD project management work with a multi-party agreement?

A PM Team and a Project Executive team (each with one representative from each major party to the agreement) provide two levels of project oversight & conflict resolution.

Tort

A civil wrong resulting from negligence, rather than a criminal act.

What does the Current Ratio measure?

A firm's ability to meet current obligations.

What is Design-Assist Contracting?

A process in which specialty subcontractors and trades are brought in early in the design or documentation phases.

What is a typical Overhead Rate? A) 1.30 to 1.50 B) 1.50 to 2.00 C) 2.00 to 2.30 D) 2.50 to 3.00

A) 1.30 to 1.50

What is a typical Break-Even Rate? A) 2.30 to 2.50 B) 1.50 to 1.70 C) 3.00 to 3.20 D) 2.00 to 2.25

A) 2.30 to 2.50

What are the primary driver and secondary driver(s) for the traditional Design-Bid-Build method? A) Cost B) Quality C) Time D) Scope E) Risk

A) Cost E) Risk

Accrual Accounting vs. Cash Accounting (T/F): A) AA is more often used by small businesses. B) AA gives a better picture of long-term financial status. C) CA is required by the IRS for businesses above a certain size or that maintain inventory. D) CA is better at tracking actual cash flow.

A) F B) T C) F D) T

Which of the following are true/false with regard to Fast-Tracking (select T/F for each)? A) Construction begins only after the design process is completed. B) It can only be used when a CM is involved. C) It requires many prime contracts and coordination, but can greatly reduce time and cost. D) Architecture and engineering drawings are issued in phases, call bid packages. E) The design of the project will proceed in a linear fashion.

A) False B) False (But it is more viable and common when a CM is involved) C) True D) True E) False (Pieces of the project may be developed asynchronously to meet the bid package phase requirements)

Which of the following are true/false regarding the Design-Build project delivery method? Select T/F for each. A) It is a slower project delivery method overall B) It is usually used by owners with experience in building projects, because of the precision required when setting project requirements C) The owner has a lot of control over the design and construction D) The contractor can give advice early in the design process, when time- and cost-saving measures can be implemented E) The price is usually higher than other project delivery methods F) The owner receives a fixed price later on in the process

A) False B) True C) False D) True E) False F) False; the owner receives a fixed price early on.

A Single-Purpose Entity (select T/F for each statement): A) Is usually used for smaller, less complex projects. B) Is required by AIA form C195 to contract with an architect (who becomes part of the SPE) for planning, design, CA, etc. C) Is an independent LLC created for the planning, design, and construction of a specific project. D) Has an architect whose roles are similar to those outlined in AIA A201. E) Is a C Corporation created because of a complex project.

A) False B) True C) True D) False; the architect's roles only become similar to those outlined in AIA A201 during CA. E) False

For Design-Assist Contracting, which of these responsibilities falls under the Owner vs. the Architect? Answer for each: A) Provide a clear statement and scope of work B) Help select the best subcontractors based on design, budget, & schedule requirements C) Assist in developing requirements of the work D) Provide budget E) Provide the schedule for the work

A) Owner B) Architect C) Architect D) Owner E) Owner

What is true about an Aged Accounts Receivable Report? A) It shows the status of invoices for all projects. B) If an invoice is older than 30 days, it means the firm is essentially "lending" money to a client without charging interest. C) If an invoice is older than 60 days, it needs the attention of the principal or person responsible for collections. D) The average collection period runs between 50 to 90 days.

A) True B) False; this is true if the invoice is older than 90 days. C) True D) False; the average collection period runs between 60 to 75 days.

Which of the following should an Architect consider before accepting a project (select four)? A) The client's budget. B) The firm's current workload. C) The overhead rate. D) The reliability & reputation of the client. E) Payroll taxes. F) The feasibility of a project. G) Liability insurance costs. H) All of the above.

A, B, D, & F

Direct Personnel Expense Includes (Select the three that apply): A) Employee Salaries B) Overhead Costs C) Payroll Taxes D) Health Insurance Costs E) Rent Costs F) Shareholder Taxes

A, C, & D

When does the Architect's CA responsibilities begin when the Owner uses a CMc (select three possibilities)? A) When the Owner issues a notice to proceed to the CMc. B) When the design development phase is complete. C) When the Owner approves the CMC's control estimate. D) When the Owner accepts the CMC's GMP. E) When CM submits their first RFI. F) When the final bid package is issued. G) When the Owner signs the first certificate/application for payment.

A, C, & D

Which of these are required for the establishment of a corporation? A) Articles of Incorporation must be drawn up by an attorney and filed with the appropriate state department B) Duplicate filings must be made with the IRS C) A Federal Tax ID number must be obtained D) Many states require a COA (certificate of authority/authorization) E) A municipal business license F) A formal agreement must be drawn up between directors

A, C, & D

Which of the following describe the CM-Contractor (CMc or CM@R) delivery method (select three)? A) At a predetermined phase, the CM's role transitions to the traditional DBB GC role. B) The CMc typically bases cost estimates & GMP on fully completed contract documents. C) The CMc provides a GMP based on design documents (typically design development documents). D) The Owner-CMc agreements assign the CMc's services into one phase. E) The CMc acts as a quality control entity, potentially saving on change orders. F) Fast-tracking the project is not viable with a CMc.

A, C, & E (D is false because there is a preconstruction and construction phase, portions of which may proceed concurrently to fast track the process. Fast-tracking is typically more viable with a CM, which is why F is also false.)

Which of these are the (3) ways to establish the contractual relationships between the primary participants in Integrated Project Delivery? A) Multi-party agreement B) AIA B101 Contract C) Transitional Forms D) Oral agreement E) Creating a Design-Build Entity F) Creating a Single-Purpose Entity

A, C, & F

What types of insurance does AIA Document B101 require architects to maintain (select the five that apply)? A) Professional Liability Insurance B) Property Insurance C) Automobile Liability Insurance D) General Liability Insurance E) Worker's Compensation Insurance F) Life Insurance G) Rental Insurance H) Employer's Liability Insurance

A, C, D, E, H

Which of the following are some Implied Duties of an architect (select four)? A) Cooperating with the contractor. B) Determining contractors' means and methods. C) Not interfering with the contractor's work. D) Communicating with the subcontractors. E) Giving relevant information to contractors. F) Assisting owner in coordinating work. G) Ensuring job-site safety.

A, C, E, & F

Claims-Made Insurance Policy (select the three that apply): A) Must be in effect at the time the claim is made. B) Typically applies to general liability policies. C) Covers claims if the policy was in effect at the time the incident occurred. D) Typically applies to professional liability policies. E) Only covers claims for incidents that occurred after a retroactive date.

A, D, & E

The Standard of Care is the level of skill & diligence that a reasonably prudent architect would exercise given the same X, X, and X? A) Time frame B) Fee structure C) Project delivery method D) Community E) Facts & Circumstances

A, D, & E

Which of these are techniques for good coordination with consultants (select three)? A) Schedule progress meetings and reviews. B) Establish a cost-plus-fee approach to payment. C) Select consultants you have no references for or research on. D) Be explicit about extent of work and quality from the beginning. E) Plan and outline work needed before giving it to a consultant. F) Do not review consultant work, as it is their responsibility.

A, D, & E

Which of the following are possible disadvantages with the CMa method (select three)? A) It may lead to a more complicated management structure. B) The CMa can coordinate a fast-track construction. C) The CMa works as the owner's agent. D) The CMa cannot provide the owner with a guaranteed maximum price (GMP). E) The CMa's cost early cost estimates may not be accurate. F) If the CMa provides a GMP or negotiates contracts before design is completed, then there is no competitive bidding on the cost of building the project.

A, E, & F

Gross Revenue

All revenue generated during a stated period of time (before fees, expenses, and taxes are deducted).

Who does an Owner hire to help with Bridging in the Design-Build project delivery method?

An AE (Architect/Engineer) who acts as a PM/advisor and helps the Owner develop project criteria. The AE often develops preliminary scope drawings and specifications. The Owner then uses these documents to make the project available for bidding by Design-Build entities.

How does one use the Break-Even Rate?

An employee's base salary can be multiplied by the break-even rate to determine the minimum hourly fee to charge a client.

Occurrence Insurance Policy (select the two that apply): A) Must be in effect at the time the claim is made. B) Typically applies to general liability policies. C) Covers claims if the policy was in effect at the time the incident occurred. D) Typically applies to professional liability policies. E) Coverage terminates when policy terminates.

B & C

What are some ways architects can minimize exposure to third-party claims (select the two that apply)? A) Give directions concerning the methods of construction. B) Don't include language in the contract promising to provide "management, supervision, coordination, or planning of construction." C) Point out safety problems to the contractor, and follow up in writing to both the GC and owner(s). D) When pointing out safety problems, allow construction to continue even if the problem is not corrected. E) Point out safety problems to subcontractors.

B & C

What does Modified Accrual Basis Accounting Method include? A) Records fees that have been earned but not yet billed to the client. B) Records fee revenue and expenses billed to the client. C) Records invoices to the firm by outside consultants.

B & C

Which of the following describe the Architect's role when a CMa is involved? A) The Architect has no CA service requirements. B) The Architect must advise and consult with both the Owner and CMa during the CA phase. C) The Architect assists in certifying applications for payment, rejecting work, reviewing submittals, determining dates of substantial completion, etc. D) The Architect schedules activities of the GC/prime contractors, facilitates communication between Owner and Contractor(s), prepares change orders, etc.

B & C (D is false because these are the responsibilities of the CMa. but the CMa must keep the architect informed about these actions).

A Time Analysis Report (select the two that apply): A) Shows only the indirect labor hours for administrative employees. B) Shows the chargeable/utilization rate for each employee. C) Lists all current and past employees' vacation time, sick leave, and holidays. D) Lists employees and their direct and indirect labor hours.

B & D

In which of the following project delivery methods is the Constructor contract determined before the typical CD phase (select all that apply)? A) Traditional Design-Bid-Build B) Standard Design-Build C) Bridging D) CM-Agent E) CM-Constructor F) DBB with a Negotiated Select Team

B (Determined before predesign) C (Determined before CD phase) D (This may occur with a CMa early on, but may not always) E (Determined before predesign) F (Can be determined before DD)

What are the primary driver and secondary driver(s) for the DBB Negotiated select team method? A) Cost B) Quality C) Time D) Scope E) Risk

B) Quality A) Cost

In a Limited Liability Company or Partnership (select three true statements): A) It's not possible for a non-member to be a manager B) Investors are considered to be members C) The LLC is not taxed as a separate entity according to federal law; profits/losses are taxed through each member D) No states tax the LLC as a separate entity E) Members of the LLC are considered self-employed F) An LLC is legally considered a Corporation

B, C, & E

Which of the following describe the CM-Agent (CMa) project delivery method (select three)? A) The CMa typically provides services using a cost-plus-fixed-fee method. B) The CMa may act on behalf of the owner to assemble/coordinate construction trades prior to construction. C) The CMa can provide early cost estimating, value analysis, material purchasing, and project scheduling. D) The CMa increases the owner's management requirements. E) The CMa often manages multiple prime contracts. F) It is uncommon for a CMa to coordinate a fast-track construction. G) The CMa never gives a guaranteed price or completion date.

B, C, & E (A is wrong because the CMa typically provides their services for a fixed fee, assuming no risk for construction costs but passes savings/overruns directly to the owner.)

Break-Even Rate Equation

Break-Even Rate = Total Cost of Operations / Total Cost Spent on Labor

What is the organizational structure of a corporation? A) Shareholders elect Officers, who select Directors (who manage and make policy decisions) B) Officers elect Directors, who select Shareholders C) Shareholders elect Directors, who elect Officers (who manage the firm) D) Directors (who have a fiduciary duty to the Shareholders) elect Shareholders, who elect Officers

C

What does an AE/Criteria Architect do after a Design-Build firm is selected (select two)? A) The AE must review the final contract documents because they are legally responsible for them. B) The AE must must develop performance specifications and criteria for the DB firm to use. C) The AE represents the owner's interests throughout the process. D) The AE must review the final contract documents, but they are not legally responsible for them.

C & D

Which of the following describe the CM-Adviser project delivery method (select two)? A) The adviser acts only as a constructability consultant to the architect during the design and construction process. B) The adviser will build the building. C) The CM advises the owner on cost management and constructability early in the design and construction process. D) Projects using a CM-Adviser can be delivered using any DBB method.

C & D

In which of the following project delivery methods is the cost of construction determined before the subcontractors are selected (select two)? A) Traditional Design-Bid-Build B) Standard Design-Build C) Bridging D) CM-Agent E) CM-Constructor F) DBB with a Cost-plus-fixed-fee

C & E In Bridging, the cost is determined after the DD phase when the DB firm bids on the project. With a CMc, the CM often provides a GMP after DD is completed.

A project peer-review is: A) A third-party review of the firm to examine a specific project B) An internal review of the firm, completed by project managers C) A third-party review of a single project to catch mistakes before construction D) A design-charrette

C) (And this third-party reviewer can be an employee in-house who did not work on the project)

What is an optimal Current Ratio? A) 1.00 B) 1.25 C) 1.50 D) 2.00

C) 1.50 indicates a healthy business. (1.0 is the minimum acceptable CR.)

Current assets are resources of a business that are converted into cash within: A) One month B) One week C) One year D) One pay period

C) One Year

What are the primary driver and secondary driver(s) for the CM-Constructor project delivery method? A) Cost B) Quality C) Time D) Scope E) Risk

C) Time A) Cost & E) Risk

Which of these are not considered reimbursable expenses that can be billed to the Owner (select three)? A) Transport & Travel B) Plotting & Printing C) Direct Salary Expenses D) Overtime Not Authorized by Owner E) Architect's Consultants' Expenses F) General Liability Insurance

C, D, & F (certain insurances can be paid for by the Owner if the Owner requires an amount beyond what the Architect is normally insured for)

What are key risk considerations for the Architect & Consultants?

Can the project be accomplished within the standard of care at an acceptable level of quality, within the owner's parameters, the architect's own capabilities and skill, and the strictures of the fee?

Current Ratio Equation

Current Ratio = Total Assets / Total Current Liabilities

Liability for malpractice in a Professional Corporation is: A) Shared among all Shareholders. B) Shared among all Officers. C) Limited to licensed Shareholders. D) Limited to the person(s) responsible.

D

Which additional requirement is added for establishment of a professional corporation? A) Stockholders must be licensed architects B) Directors must be licensed professionals C) A duplicate filing must bed made with the IRS D) Shareholders, directors, and officers must be licensed architects E) LLP certificate is required

D

Which of the following is false in regard to a Sole Proprietorship? A) The owner is liable for the company's debts and losses B) It is easy to set up and manage C) There are possible tax advantages D) It is easy to sell the company

D

Which one of these is NOT included in the four basic steps to collecting accounts receivable? A) Put the terms of fee collection in the contract. B) Submit invoices properly and in a timely fashion. C) Submit complete invoices. D) Charge a fee for late invoices. E) Have regular procedures for tracking accounts.

D

An organizational peer-review is: A) An internal review of the firm, completed by the principals B) A third-party review of the firm to examine a specific project C) An internal review of the firm, completed by the admin and technical staff D) An external consulting or architecture firm reviews the policies and procedures of the firm

D) (And the external firm usually reviews things like HR, finance, QC procedures, business development, technical competence development).

Which of these is the most common Design-Build entity? A) An architect with engineer & construction contractor subs B) An organization with in-house design & construction C) Real estate developer with architecture & contractor subs D) A construction contractor with architect & engineer consultants

D) A construction contractor with architect & engineer consultants

What are the primary driver and secondary driver(s) for the DBB method with a cost-plus-fixed-fee payment method? A) Cost B) Quality C) Time D) Scope E) Risk

D) Scope

What is the typical Net Multiplier? A) 1.50 to 1.75 B) 1.7 to 2.0 C) 2.5 to 2.9 D) 2.7 to 3.0

D) This is usually calculated based on salary, benefits, overhead, and target profit. The Net Multiplier = (Net Revenue, excluding Consultants' Fees & Reimbursables) / (Cost of Direct Labor)

How can an architect be held liable for negligence? What four conditions must exist?

Duty: owe a legal duty to the person making the claim. In other words, the Architect had a legal obligation to do something or refrain from doing something. Breach: the Architect failed to perform the duty or did something that should not have been done. Cause: an Architect's breach of duty is the source of the harm to the person making the claim. The claimant had to have been injured or harmed as a consequence of the act or omission of the Architect without any intervening cause. Damage: Actual harm or damage must have resulted from the breach. Sore feelings do not count, but the monetary loss is a type of damage.

Which of the following is the Owner NOT responsible for in a standard Design-Build project delivery process? A) Visiting the site B) Reviewing & approving submittals C) Reviewing & approving changes submitted by the DB entity D) Rejecting nonconforming work E) Developing the project manual F) Certifying substantial completion

E

What are the primary driver and secondary driver(s) for the standard Design-Build project delivery method? A) Cost B) Quality C) Time D) Scope E) Risk

E) Risk A) Cost

What are the primary driver and secondary driver(s) for the Bridging Design-Build project delivery method? A) Cost B) Quality C) Time D) Scope E) Risk

E) Risk B) Quality

What are the primary driver and secondary driver(s) for the CM-Advisor project delivery method? A) Cost B) Quality C) Time D) Scope E) Risk

E) Risk B) Quality

What are the primary driver and secondary driver(s) for the CM-Agent project delivery method? A) Cost B) Quality C) Time D) Scope E) Risk

E) Risk C) Time

What does the Patient Protection and Affordable Care Act of 2010 require firms to provide?

Employer-sponsored health insurance.

How many weeks per year of unpaid leave (and for what conditions) does the Family and Medical Leave Act require?

Employers must provide eligible employees with up to 12 weeks per year of unpaid leave for serious health conditions; for the arrival of a child; for an employee's sick spouse, parent or child; or if any immediate family are active duty military. Eligible employees can also take up to 26 weeks of leave to care for an injured service member who suffered in the line of duty. To receive these benefits, the employee typically had to have worked for the firm for at least a year and at least 1,250 hours.

What size firm does the Age Discrimination in Employment Act apply to?

Employers with 20 or more employees.

What size firm does the Family and Medical Leave Act apply to?

Employers with 50 or more employees.

What size firm does the Patient Protection and Affordable Care Act of 2010 apply to?

Employers with 50 or more employees.

Overhead includes what types of expenses?

Expenses to keep a business operating regardless of revenue-generating projects, i.e. rent, software leases, telephone service, power, etc.

What is true about the statute of limitations and statute of repose? A) Neither begin until substantial completion or some other fixed date. B) The statute of limitations sets a longer time limit. C) Only one of them sets a time limit within which a claim can be made. D) In many states, the statute of repose begins with the date of discovery of the construction defect. E) The statute of limitations does not begin until substantial completion or some other fixed date. F) The statute of limitations is usually 2 to 3 years.

F

Indirect Expense Factor Equation

Indirect Expense Factor = Total Indirect Expense / Direct Salary Expense

What are key risk considerations for the Contractor and Subcontractors?

Is it possible to complete the project within a contractually stipulated time frame and/or cost, given market conditions, availability of subcontractors, and the contractor's experience and capabilities?

How does Evidence-Based Design differ from pure architectural research?

It is intended to be used for a specific design project (but can inform study/research conclusions for other projects).

What is a CMc's control estimate?

It is the sum of the CM's estimate of the cost of construction work, plus the CM's fee. The control estimate establishes the expected date of substantial completion. It includes a list of drawings/specs/etc. used by the CMc to prepare the control estimate.

Net Operating Revenue

Money that remains from billing are deducting fees, expenses, reimbursable expenses, and non-reimbursable project-related expenses.

Is the Quick Ratio more or less conservative than the Current Ratio?

More conservative, because it doesn't include current assets that are difficult to convert to cash.

Per AIA201 - General Conditions of the contract, if the Contractor encounters concealed/unknown conditions during construction, how many days do they have to notify the Owner and Architect?

No later than 21 days after the first observance, and they must notify the Owner/Architect before these conditions are disturbed.

Overhead Rate Equation

Overhead Rate = Total Office Overhead Costs / Total Direct Labor Costs

If the Owner requires the Architect to carry insurance at limits greater than the Architect normally does, the _____ is responsible for paying the additional cost.

Owner

Privity

Privity is a doctrine of contract law that says contracts are only binding on the parties to a contract and that no third party can enforce the contract or be sued under it.

Quick Ratio Equation

Quick Ratio = (Cash + AR + Revenue Earned But Not Billed) / (Total Current Liabilities)

Fixed Assets

Resources used/retained for a long time, i.e. equipment or property.

Fair Labor Standards Act

The Act sets 40 hours a week as the maximum full time employment. It also details which employees are allowed to be exempt from certain rules. If an employee is paid an annual salary, they might be considered exempt and not be required to receive overtime pay for working more than 40 hours a week.

Per AIA 201 - General Conditions: if the Contractor encounters human remains, archeological sites, or wetlands not shown in the Contract Documents, what must the Contractor do? What must the Owner do?

The Contractor must immediately suspend work and notify the Owner and the Architect. After being notified, the Owner shall take action to obtain any required government authorization so the Contractor can resume operations.

How are architect's responsibilities in the Design-Build project delivery method determined?

The Owner, Design-Builder, and Architect will select a set of services that the architect will provide from the AIA B143.

Responsible Control

The amount of control over the content of all architectural instruments of service during their preparation, ordinarily exercised by architects applying the professional standard of care.

What are typical target chargeable ratios / utilization rates?

Typical break-even point/minimum for the whole firm: 65% For professional/technical staff, the CR/UR should be 75% to 85%. CR/UR = % of time or money spent on direct labor, divided by the total time or money spent on labor, vacation, holidays, and sick leave.