Midterm Flashcards
Why does CM have a high failure rate?
competition, low profit margin, inexperience, and being “one job away from bankruptcy”
AGC
Associated General Contractors
Motto: Skill, Integrity, Responsibility
Entrepreneur
Someone who takes advantage of business opportunities assuming risk
Home based business
Most common due to no commute, little overhead, tax advantages
Fast growing business
Usually started by someone who has started a business before
What is needed to start up a business?
Business plan, Market analysis, Start up Cost, location
Each segments of the market is responsible for
- Acquisition of work
- Performance of the work
- Management of the financial capital and human resources
Major External Influences on business failure
- Prolonged economic recession
- loss of major customer
- new competition
- shortage of skilled labor
Major Internal Influences on Business failure
- Pursuit of volume
- Lack of comprehensive business plan
- Diversifying into unfamiliar projects
- Lack of management maturity
- etc
Planning
defining goals, establish strategies, developing plans
Leading
Creating a vision for the company , establishing company standards
External Customers
Firms and individuals that purchase construction services from the construction company
Internal Customers
employees who receive support from various departments in the company
Proprietorship
easy/inexpensive/minimal start-up costs/total control by owner, but unlimited liability of owner/termination upon death of owner/difficult to attract capital
General Partnerships
pooling of resources, talent, and responsibilities/easier to attract capital than proprietorships, but unlimited liability of partners/any partner can obligate partnership/termination upon departure or death of partner.
Limited Partnerships
pooling of resources, talent, and responsibilities/limited liability of limited partners/easier to attract capital than general partnerships, but unlimited liability of general partners/any general partner can obligate partnership/termination upon departure or death of a general partner
C-Corporation
limited liability of owners/pooling of talent and responsibilities/perpetual life/easier to attract capital than partnerships, but closely regulated/state charter required/expensive to create/extensive record-keeping required/double taxation of profits.
Corporation
same as C Corporation but no double taxation/limited on number of stockholders and business volume.
Joint Venture
pooling of financial resources, equipment, talent, expertise, responsibilities, risk, but less control/sharing of profits
LLP
protects partners from malpractice debt and claims. Architects/accountants/attorneys only.
Risk categories
people, property, process
Insurance cost
can account for up to 20% of overhead cost
Builder’s risk insurance
First-party insurance that provides cover for the cost of damages to the project during construction
Workers comp insurance
Mandated by law
surety
part that assumes responsibility for the performance of another party
Surety bond
three party contract where the company purchases a bong from a surety guaranteeing that they will perform
indemnity agreement
provides the company will pay the surety back for any losses that the surety incurs in making good on the guarantee to the surety
Bid Bond
A guarantee that the bidder will furnish performance of the construction contract
payment bond
ensures the contractor will compensate any entity that provided labor. Protect owner from mechanics liens and subcontractors from non payment
All employers in California that have at least one employee must carry Workman’s Compensation Insurance. Failure to do so is subject to:
Criminal Penalties
The benefit of a Wrap Policy is that one policy covers the following parties on a project:
Owner, contractor, subcontractor, and consultants
Leverage is the strategy of
using borrowed money to generate returns
3 c’s of bonding
character, capacity, cash
General conditions do not contain
Required means, materials, and methods
Brooks act
mandates the negotiation of design contracts at fair and reasonable prices
Risk management strategies
Avoid, Accept, Transfer
LLC
limited liability of owners/pooling of talent and responsibilities/easier to attract capital than partnerships/less regulated than corporations, but regulated/state charter required/more expensive to form than partnerships
