Chapter 3 - Management concepts Flashcards
Three common types of contracts
lump sum, unit price, and cost plus
Four elements must be present for a contract to be valid
mutual agreement (offer and acceptance): an offer is the proposed terms of the contract and the acceptance is the agreement to the offer. Capactiy: both parties must be legally competent and able to get into a contract (legally) Consideration: the promise of exchange of something of value by one party for something of value to another party Lawful object: the contract must be for legal purposes. A contract cannon be created if it is engaging in legal activity
what is the most common type of contract? This stype ofcontract gives the owner a single price to complete the contracted scope of work. Changes are addressed by change orders
Lump sum contract
In this type of contract the contractors provide a price for a unit of work such as square feet of sidewalks or cubic yards of concrete
Unit price contract
In this type of contract a contractor is paid for all direct costs such as labor, material, equipment, subcontracts, and field supervision, plus an agreed upon fee
Cost Plus Contract
GMP
Guranteed max price
1. Which of the following is a fundamental element of a contract? A. exchange of money B. revised scope of work C. time extension D. mutual acceptance
Mutual acceptance
2. Which of the following contract types is generally considered to have the most risk for the contractor? A. lump sum B. unit price C. cost plus D. cost plus with GMP
lump sum
3. Which of the following contract types is best used if the scope is well defined but not the quantities of material? A. lump sum B. unit price C. cost plus D. cost plus with GMP
unit price
3 well known entities that offer standardized contract forms
American Institute of Architects (AIA)
Engineers Joint Contract Documents Comittee (EJDC)
Consesus Docs
In this type of delivery method the owner has seperate contracts directly with the architect and contractor
Design-bid-build
Advantages and Disadvantages of DBB
Advantages
• The process and the roles of each party are well known and understood.
• Projects typically involve competitive bidding, giving the owner the lowest price the market will allow.
• A set price for work included in the contract documents is known before construction begins.
• This method does not require the owner to be involved in the day-to-day construction processes.
Disadvantages
• The contractor has the highest risk from cost overruns, such as labor inefficiencies, cost inflation, or nonperforming subs.
• This method can result in significant added cost to the owner on projects for which the scope is not clearly defined.
• It requires a longer schedule because design and construction phases are done in series.
• The contractor is not involved during preconstruction.
• The relationship between the owner, architect, and contractor is more an arms-length relationship.
In this type of delivery method the owner contracts with a single entity for both design and construction services
Design-Build
Advantages and Disadvantages of DB
Advantages
• Good communication between design and construction teams
• Allows for expedited, fast-track design and construction schedule
• Allows for easier incorporation of changes in work
• Does not require owner to be involved in the day-to-day designer and construction communications or processes
• Allows for value engineering and constructability reviews during preconstruction
• Single point of fault from owner’s perspective for building failures
Disadvantages
• In fast-tracked projects, owner may have limited time to make decisions without affecting cost.
• There are fewer checks and balances than in the design-bid-build method. The owner must rely on the quality and ethics of the firm.
In this type of delivery method an independent agency acts as the owners representative and coordinates work between the design and construction teams
CM agency delivery method.
During construction, the construction manager provides the construction administration for the owner.
Advantages and Disadvantages of CM Agency
Advantages
• Good communication among the owner, designer, and construction teams early in the project
• Allows for value engineering and constructability reviews during preconstruction
• Allows the owner to have control of multiple contracts directly and avoid a middle-man administration fee
• Allows for easier incorporation of changes in work
Disadvantages
• Early contractor selection and involvement may increase cost over competitively bid design-bid-build projects.
• In fast-tracked projects, the owner may have limited time to make decisions without affecting cost.
• The owner is responsible for cost overruns.
In this type of delivery method the contractor acts as the owners representative and coordinates work between the design and construction teams in a manner similar to that of the CM agency
CM at risk.
the CM at risk is responsible for the work and contracts directly with the contractor/subcontractors.
Advantages & Disadvantages of CM at risk
Advantages for Contractors
• Good communication among owner, designer, and construction teams early in the project
• Allows for expedited, fast-track design and construction schedule
• Allows for value engineering and constructability reviews during preconstruction
• Allows for easier incorporation of changes in work
Disadvantages
• Early contractor selection and involvement may increase cost over competitively bid design-bid-build projects.
• In fast-tracked projects, the owner may have limited time to make decisions without affecting cost.
This type of delivery method is most recently developed and is a collaborative multiparty contract with a reward pool to incentivize high standards of performance. The more successful the job, the bigger the reward pool and vice versa
IPD Integrated Project Delivery
Advantages and Disadvantages of IPD
Advantages
• Good communication among owner, designer, and construction teams early in the project
• Improves collaboration and aligns all parties’ goals with the success of the project, thus creating a win-win construction/design environment.
• Open-book bidding and change orders, which reduces the risk of cost overruns
• Fewer claims and disputes, which reduce costs from reduced liability
• More efficient design and building process
• Negotiated pricing rather than bidding
Disadvantages
• Typically requires a higher level of owner involvement
• Newer and less tested delivery method
• Little to no case law in the event of disputes
• More risk associated with construction for owner and designer and more risk associated with a poor design for contractor
• Little experience with delivery method for most major players
• Difficulty changing thought process from self-serving to community risk sharing
1. In which delivery method is the construction administrator most like a consultant? A. lump sum B. CM agency C. CM at risk D. integrated project delivery
CM agency
- Which statement is true about the design-build delivery method from the owner’s perspective?
A. Design is complete when contractor is hired.
B. Fast tracking is difficult with this delivery method.
C. There is a single source of fault for building system failures.
D. Design Build firms are rarely temporary joint ventures.
There is a single source of fault for building system failures
3. Which delivery method has the most risk for the contractor? A. design-bid-build B. design-build C. CM at risk D. integrated project delivery
design-build
- Which of the following is a major difference between a CM agency and a CM at risk?
A. manages construction on the owner’s behalf
B. has a contract with the designer
C. provides a lump sum price for construction services
D. caps the construction costs the owner is required to pay
caps the construction costs the owner has to pay
This type of business entity are owned , operated, and managed by a single person
Sole proprieterships
This type of business entity is owned by two or more people
partnerships
This type of business entity are independent legal entities. stockholders are not personally liable for company losses like sole proprietorships and partnerships. Only assets that belong to the corporation may be used in settlements.
Corporations
This type of business entity is a hybrid type of business similar to sole proprietorships and partnerships regarding tax and operational benefits.
LLC Limited Liability Company
How does someone go about forming an LLC?
Members must file a document called articles of organization with the state in which they due business in and pay associated fees
This type of business entity is an agreement between two or more individuals or companies formed to complete a single business enterprise. Often temporary arrangements
Joint venture
1. Under which legal structure are the least total taxes paid for the goods and services provided by the company? A. sole proprietorship B. federalist C. corporation D. joint venture
Sole proprietorship
- Which is an advantage of forming a corporation?
A. Shareholders have reduced personal liability.
B. The corporation’s value can’t go down from its initial purchase price.
C. Less taxes are paid than in a limited liability corporation.
D. Quick decision making is possible, especially for large companies.
Shareholders have reduced personal liability
Two main methods of recognizing income
Completed contract method: All revenue, expenses, income, and/or losses are recognized in the fiscal period the project is completed
Percentage of completion (accrual method): All revenue, expenses, income, and/or losses are based on measurement/estimate of completed progress
What is the most common method or recognizing income and why?
Percentage of completion method because most projects are completed over the course of more than one fiscal period
What type of financial report indicates the financial position of a company at a particular point in time?
Balance Sheet
A balance sheet comprises of 3 parts:
Assets: current assets such as cash, accounts receivable, inventory, etc.
Total Assets = Total Liabilities + Net Worth
Liabilities include current liabilities such as accounts payable, notes payable, etc. and long-term liabilities such as long-term debt
Owner’s equity (net worth): Inlcudes paid-in-capital and retained earnings
What type of financial report indicates the results of a company financial operations over a period of time
Income statement
Main components of an income statement:
Net sales (revenue): how much revenue the company has earned over a specific period of time
Direct costs: all costs directly attributable to performance of work, such as project labor, material, subcontract, and equipment work
Gross profit: Revenue - Direct Cost
Indirect Costs: all costs not directly attributable to performance of work, such as overhead, general, and administrative costs
Net profit: Gross Profit - Indirect Cost
What type of financial report indicates cash generated and used during a specific period of time and a firm’s liquidity
Statement of Cash flow
What type of debt-measurement tool indicates a companies ability to pay its current obligations with its current assets? And what is the formula??
Curent ratio
Current Assets / Current Liabilities
What type of debt-measurement tool is similar to the current ratio but uses currents assets with greater liquidity? And what is the formula?
Quick ratio
(cash and equivalents + accounts recievable) / Current Liabilities
What type of debt-measurement tool indicates the average number of days a company takes to receive payment? And what is the formula?
Days recievable
365/ (revenue/trade receivables)
What type of debt-measurement too indicates the average number of days a company takes to make payments? And what is the formula?
Days payable
365 / (Direct Cost/ Accounts Payable)
What type of debt-measurement tool measures available funds for investment in operations to generate future revenue and profit? And what is the formula?
Working Capital
Current Assets - Current Liabilities
What type of debt-measurement too is the ratio that measures the amount in which the owner’s equity is invested in fixed assets. l And what is the formula?
(Net fixed Assets) / Tangible Net worth
What type of debt-measurement tool is the ratio of capital contributed by creditors and the capital contributed by the owners? And what is the formula?
Total Liabilities / Tangible Net Worth
What type of debt-measurement tool measures the effectiveness and rate of return on invested capital? And what is the formula?
ROI Return on Investment
(Net profit before taxes/Tangible Net worth) * 100
What type of debt-measurement tool measures the effectiveness of an asset utilization? And what is the formula?
ROA Return on Assets
1. A company has $10,000 in cash, $20,000 in equipment, and $20,000 in accounts payable. The tax rate is 13%. What is the current ratio? A. 0.5 B. 0.67 C. 1.3 D. 1.5
.5
2. What is the return on assets assuming a net profit before tax of $15,000 and $30,000 total assets? A. 0.5% B. 2% C. 50% D. 200%
50%
3. A company has $50,000 in equipment, $20,000 in cash, and $30,000 in accounts payable. How much working capital does it have? A. ($10,000) B. $10,000 C. $20,000 D. $40,000
$10,000
Generally defined as the collecting of data so it can be analyzed, and analyzing the data to provide useful information to the benefit of the project
Project Controls
a type of project controls chart that is used to show the relative frequency of an observation
Histogram (look on page 54 of PDF)
a type of project controls chart that uses rectangular bars over a category to show the magnitude or frequency of grouped data
Bar chart(look on page 54 of PDF)
a type of project controls chart that is a circular graph in which sections or slices represent a portion of the whole. The area of the section is proportional to the frequency or magnitude of the data being represented
Pie chart (look on page 54 of PDF)
a type of project controls chart that shows data points on a graph at the intersection the data descriptors shown on the x-axis and y-axis
Line chart (look on page 54 of PDF)
The process of using computer software to collect and manage building components information in the virtual environment
a Management system derives from the Toyota PRoduction System (TPS). Made mainstream by Jeffery Liker in his book the Toyota Way. He identified 14 principals that made toyota successful and unique among its competitors.
Lean construction
a management system that guidelines primarily for the manufacturing and service industries. it focuses on quality to ensure the companies meet their customer’s needs
ISO 9000
management tool developed by motorola in 1988 and its core concept is that if product defects are quantified they can be systematically removed. The goal is 0 product defects product line
Sig Sigma
a management system that grew widely in the late 1980s as a way to create an environment in which companies could provide higher-quality products and services to their customers
TQM Total Quality Management
1. Which chart would be the most appropriate to show the percentage of fall protection safety violations compared to all safety violations? A. histogram B. bar chart C. pie chart D. line chart
pei chart
2. Which of the following is a management system used to improve customer satisfaction? A. TQM B. Six Sigma C. Lean D. All the above
All
3. Which management system was developed based on Toyota’s Production System? A. TQM B. Six Sigma C. Lean D. ISO 9000
lean
Standards of professional conduct:
- A Constructor shall have full regard to the public interest in fulfilling his or her responsibilities to the employer or client.
- A Constructor shall not engage in any deceptive practice, or in any practice which creates an unfair advantage for the Constructor or another.
- A Constructor shall not maliciously or recklessly injure or attempt to injure, whether directly or indirectly, the professional reputation of others.
- A Constructor shall ensure that when providing a service which includes advice, such advice shall be fair and unbiased.
- A Constructor shall not divulge to any person, firm, or company information of a confidential nature acquired during the course of professional activities.
- A Constructor shall carry out responsibilities in accordance with current professional practice, so far as it lies within his or her power.
- A Constructor shall keep informed of new thoughts and development in the construction process appropriate to the type and level of his or her responsibilities and shall support research and the educational processes associated with the construction profession.
