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ARE 5.0 - PCM Exam > Module 2 - AE Prep > Flashcards

Module 2 - AE Prep Flashcards

1
Q

What are usually the two largest expenses as a business?

A

Office rent and employee payroll

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2
Q

What is an issue that can create cash flow issues?

A

Not getting invoices out in time for the client is late on a payment.

Staff is late on filing their timesheets.

Contract requires payment in a lump sum at the end of the project or contract is a fixed fee and the time spent on the project was underestimated.

Client puts the project on hold

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3
Q

What amount should a firm have handy to cover expenses? (In a line of credit)

A

A months worth of expenses

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4
Q

The most important document and tracking the health of a business is what?

A

Balance sheet

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5
Q

Who/what generates the profit loss statement (P&L)

A

The accountant/accounting software calculates how much money came in (revenue) and how much money went out (expenses)

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6
Q

In order to ensure next months expenses are covered, a business owner should ensure the staff is producing enough ____ to produce the necessary revenue?

A

Billable hours

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7
Q

What is the reason for using a multiplier for determining a staffs billable rate?

A

Insurance you have enough money to pay the staff and cover overhead and produce a profit

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8
Q

What is the typical fee structure for a project?

A

Set maximum price per each stage of the work that is billed hourly up to a maximum amount, or billed by percentage complete

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9
Q

What is a fee structure that is really used for a project?

A

Project project billed hourly with no maximum

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10
Q

What is an example of a reimbursable expense?

A

Plotting, photocopying or faxes.

Long distance phone calls.

Car travel, build by the mile, to the project site.

Travel expenses for the project, including airfare or hotel.

Courier, shipping and postage.

Meals, parking or rental cars related to trips for the project

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11
Q

Who is responsible to pay the reimbursable expenses?

A

I spelled out in the owner architect agreement the owner must pay these and the architect can charge overhead on it as well.

The owner pays these, if the architect had to pay these it would take away from the profitability and would incentivize the architect to spend less on the project and therefore the quality of the work might suffer

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12
Q

How do you determine the gross profit on a profit and loss statement?

A

Subtract the expenses from the income, healthy profit margin should be around 20%

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13
Q

With a maintained healthy profit margin, what kind of financially strong for them take on after a few years of consistent workload?

A

Hire new staff.

Build out a new office.

Experiment with a reduced fee on a new type of project.

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14
Q

A profit loss statement helps to track what?

A

Utilization rates by employee.

Overhead rate.

Breakeven rate.

Net multiplier.

Profit margin.

Net revenue per employee

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15
Q

How is a balance statement different from a profit and loss statement?

A

A profit and loss statement compares income to expenses, and the balance statement tells a story behind those numbers.

The balance statement defines assets liabilities and capital at a particular point in time.

The balance statement will define the difference between current liabilities (things due this year) and long-term liabilities

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16
Q

Assets

A

Any valuable property that is owned by the firm, such as real estate or vehicles

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17
Q

Liabilities

A

Any depth or financial obligations related to the Business that needs to be paid back overtime.

This could be credit cards, business loans, car leases, or even future stock options offered to staff

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18
Q

Capital

A

Financial assets needed to run the company operations

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19
Q

Cash on hand

A

The total amount of any accessible cash, also referred to as liquidity, includes things I can be sold quickly like stocks.

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20
Q

Accounts receivable

A

The money that is owed to a company by its clients, whether they have been invoiced yet or not

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21
Q

Accounts payable

A

The money of the company owes to its creditors, such as rent, leases, loans or credit cards

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22
Q

Equity

A

The ownership interest of a firm, including the percentage of ownership of each principle of the firm

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23
Q

Firms need to keep a close eye on what two business items, even if they are too busy?

A

Sending out invoices in a timely manner and watch the amount of expenses spent

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24
Q

Why is it important to educate employees on a firms value and goals?

A

Overall, a knowledge of an organization‘s culture has been linked to increased satisfaction and commitment by the employees as well as a decreased turnover rate

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25
Q

Collaborative/clan culture organization

A

Extended family as employees that are hard to replace.

Strong sense of loyalty and tradition with a strong focus on teamwork, participation, and consensus

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26
Q

Creative culture firm organization

A

Dynamic, entrepreneurial and creative group, known for taking risks and being innovative.

Individual initiative and freedom are encouraged. The environment can be competitive

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27
Q

Control or hierarchical culture

A

Highly structured and formal feeling. Management aims for security and predictability

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28
Q

Market culture

A

Results-driven organization focused on job completion. Employees are competitive and goal-oriented.

Emphasis on winning unifies the organization. Success to this type of firm culture is market share and penetration

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29
Q

Professional liability insurance

A

Insurance coverage that provides protection against damages by claims caused by negligence by the architect including errors and omissions in the drawings that might cause damage to the owner, contractor or other party

30
Q

General liability insurance

A

This insurance provides protection against damages from an architects office operations and non-professional activities at a job site.

Owner and the general contractor should carry this type of insurance as well

31
Q

Workers compensation

A

Insurance for employees in case of illness, injury or disability stemming from their employment.

This is only required when architects have employees.

By law, all employers should have this type of protection.

The contractor includes the cost for this insurance in their overhead cost as part of their bid

32
Q

Property (builders risk) insurance

A

This insurance is held by the owners, it covers any damage, loss of work on site or offsite en route to the site

33
Q

Loss of use insurance

A

Held by the owner and covers any loss suffered by the owner due to delays in construction from the construction damage, accidents, fire, explosions, or any hazard that might prevent the project from completing on time

34
Q

Product and completed operations insurance

A

This insurance is held by the contractor, and his liability for damages caused by installed goods after the completion of construction and transfer of the title

35
Q

Contractual indemnification

A

The liability is assumed by the contract and the contractor agrees to hold the owner and architect harmless for any damages that are a result of specific events

36
Q

Subrogation

A

The insurance company has the right to step into the shoes of the policyholder to make a claim for damages caused by others and consider responsible party on behalf of the owner

37
Q

Waiver of subrogation

A

The A201 general conditions contains a clause for a waiver of subrogation in order to minimize lawsuits and claims against the parties.

This places the risk of loss on the insurance company but prevents the insurance company from suing parties that might not be at fault.

Waiving subrogation works well if all parties agree to it as everyone is exposed to the same level of risk

38
Q

How can a practice avoid being exposed to claims?

A

Practice conflict dispute resolution techniques to avoid or contain potential disputes

39
Q

Risk management strategies

A

Avoid risk, transfer risk, assume risk, control risk

40
Q

What should an architect keep aware of to avoid risks?

A

Changes in government regulations or new building materials, systems, codes, standards and technologies.

Adoption of new reading systems, such as LEED.

Awareness of what other design professionals are doing, how they are rendering their services and what services they are providing

41
Q

Indemnification

A

Is insurance terminology for the “hold harmless” clause

42
Q

Common claims against Architects

A

Negligence: by duty, breach, cause and damage.

Breach of contract.

Vicarious liability.

Alternative project relationships.

Third-party actions: architects can be held liable for negligence by parties the architect had no contractual relationship with

43
Q

What are some good forms of documentation that Architect can take?

A

Daily notebook or site observation reports if electronic devices are not used.

Write in ink, use bound or spiral notebooks, number pages sequentially, and add dates.

Photographs and videos.

Status letters and issue letters.

Meeting minutes in memos of phone conversations.

Progress payment logs.

Equipment use records.

44
Q

Reasons architect should consider the purchase of professional liability insurance:

A

Business survival.

Continuing operations.

Contract requirements.

Social responsibility.

45
Q

Amount of years for statute of limitations for patent defects from the date of substantial completion

A

For years, varies from state to state

46
Q

Amount of years for statute of limitations for latent defects from the date of substantial completion

A

10 years, varies from state to state

47
Q

Methods to limit liability

A

Carry the necessary types and appropriate amounts of insurance.

Select projects carefully by working within the firms capacity, ability and expertise.

Utilize a written contract (in many states, it is illegal for an architect to work without a contract).

Efficient in-house organization in communication with project team, owner and contractor.

Document key decisions and approvals.

Provide contract administration services

48
Q

Who is responsible for the means, methods, techniques, sequences and safety of a project during construction?

A

The contractor

49
Q

The architect is not responsible for what during construction?

A

Exhaustive on site visits.

Continuous on site inspections.

Means, methods, techniques, and safety

50
Q

Who can stop the work of a project under construction?

A

The owner, the contractor (if unpaid) and a local building official have the authority to stop the work, not the architect

51
Q

What is the architects role in observation of a project what is under construction?

A

To observe the progress in the quality of the work in order to determine if it conforms to the drawings in contract documents. Any finding should be reported to the owner

52
Q

An architect not negotiate the terms of any settlement without ___’s permission

A

Insurers

53
Q

Client dispute resolution’s include what type of practices

A

Engaging the client, communicate with the client and secure closure for any issues that may have occurred, and provide documentation

54
Q

Arbitration

A

This is the preferred method of dispute resolution.

The arbitrator is more knowledgeable in the industry while a judge or jury may not be.

Disputes can be solved quickly, and weeks or months rather than years in litigation

55
Q

Arbitration process

A

One party files a demand for arbitration, the other party can then:

1) Answer in response to the allegations.
2) File a counterclaim or
3) Does nothing and the demand will be considered to have been denied.

Then an arbitrator will be selected and agreed upon by both parties.

After the hearing is held the arbitrator will render a decision within 30 days

56
Q

Mediation

A

A mediator assist the parties and settling a dispute

57
Q

Litigation

A

Involves the court system and is an expensive and long process involving attorneys

58
Q

Methods that lead to better agreements

A

Establish standard in-house practices. Get professional support. Use standard agreement forms.

59
Q

Construction means and methods

A

Are the responsibility of the contractor

60
Q

Customized agreements to have on hand

A

Full services agreement of the types most frequently used.

Small or limited scope agreements.

Notice to proceed.

Consultant agreements.

Common exhibits

61
Q

Design professional liens

A

Used if construction has not started yet but a building permit or other government approval has been obtained. Requirements vary by state

62
Q

For design professional lien: the amount of days the professional must give the landowner written demand letter for payment specifying the amount owed

A

10 days

63
Q

Mechanics liens

A

Used if construction has started on the project and filed against the owner for service or materials owed that have not been paid.

Mechanics liens are not allowed on public projects

64
Q

Mechanics liens - Amount of days notice for preliminary notice

A

20 days for subcontractors/vendors.

The architect and the general contractor do not have to send a 20-day notice as they are in direct contact with the owner. May vary by state

65
Q

What is the notice of cessation?

A

I noticed that the work has formally stopped. This is filled by the owner.

The owner wants to file this in order to reduce the time in which claimants can file a lien

66
Q

Stop notice

A

A lien against funds, similar to a mechanics lien, but it can be used on private or public projects

67
Q

Notice of non-responsibility

A

When a tenant of a space is performing work on a building and the owner of the building wants to protect themselves from any liens that stem from that work

68
Q

How to protect the owner from liens

A

Require the owner to purchase a performance bond and payment bond.

Receive signed lien release from the subcontractors at the time of payment.

Collect and hold retainage.

Collect contractors affidavit of release of liens

69
Q

What are some terms that are open to negotiation in the contract?

A

Scope of services or additional services.

Project schedule.

Owners’ responsibilities or coordination responsibilities.

Project insurance and limitations of liability.

Ownership and reuse of documents.

Reimbursable expenses.

Hourly rates

70
Q

What items fall under copyright protection

A

Intangible assets associated with inventions and design such as digital data, design methodologies, and software

71
Q

Owners use of the instruments of service

A

The owner must retain the architect for their instruments of service (drawings), if they don’t and they decide to use another architect using the same instruments of service, the owner and the new architect take responsibility for any errors or omissions

72
Q

Common limitations that the architect should consider securing

A

Disclaiming the architects responsibility for the contractors means and methods of construction and for jobsite safety.

Limiting the architect’s liability for the accuracy of cost estimates to redesigning at the architect’s expense.

Disclaiming liability for the results of interpretations and decisions made in good faith.

Disclaiming third-party beneficiary status to a third-party.

Waiving subrogation for damages caused by property insurance.

Just claiming responsibility for a decision made by the owner without the architect’s approval.

Disclaiming responsibility for hazardous materials

ARE 5.0 - PCM Exam (14 decks)

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