PcM 02 Flashcards
What are usually the two largest expenses as a business?
Office rent and employee payroll
What are 4 issues that can create cash flow issues?
Not getting invoices out in time or 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”
Amount in a Line of Credit that a firm should have handy to cover expenses.
A month’s worth of expenses
The most important
document in tracking
the health of a business
is what?
Balance Sheet
Who/what generates the Profit-Loss Statement (P&L)
The accountant/accounting software calculates how much money came in (revenue) and how much money went out (expenses)
In order to ensure next month’s expenses are covered, a business owner should ensure the staff is producing enough _____ to produce the necessary revenue.
Billable hours
What is the reason for using a multiplier for determining a staff’s billable rate?
It ensures you have enough money to pay the staff and cover overhead and produce a profit
What is the typical fee structure for a project?
Set maximum price per each stage of the work that is billed hourly up to a maximum amount, or billed by percentage complete
What is a fee structure that is rarely used for a project?
A project billed hourly with no maximum
What are six examples of a “reimbursable expense”?
- Plotting, photocopying or faxes
- Long Distance Phone Calls
- Car Travel, billed 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
Who is responsible to pay the “reimbursable expenses”?
As 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
How do you determine the “Gross Profit” on a Profit & Loss Statement?
Subtract the expenses from the income, a healthy profit margin should be around 20%
With a maintained healthy profit margin, what could a financially strong firm take on after a few years of consistent workload?
Hire new staff
Build out a new office
Experiment with a reduced fee on a
new type of project
A Profit Loss Statement helps to track what?
Utilization rates by employee Overhead Rate Break-even rate Net Multiplier Profit Margin Net revenue per employee
How is a Balance Statement different from a Profit & Loss
Statement?
to expenses, and the Balance Statement tells
the story behind those numbers
The Balance Statement defies 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
Assets
Any valuable property that is owned by the firm, such as real estate or vehicles
Liabilities
Any debt or financial obligations related to the business that need to be paid back over time
This can be credit cards, business loans, car leases, or even future stock options offered to staff
Capital
The financial assets needed to run the company operations
Cash-on-Hand
The total amount of any accessible cash, also referred to as liquidity, this includes things that can be sold quickly
like stocks
Accounts Receivable
The money that is owed to a company by its clients, whether they have been invoiced yet or not
Accounts Payable
The money that a company owes to its creditors, such as rent, leases, loans or credit cards
Equity
The ownership interests of a firm, including the percentage of ownership of each Principal of the firm
Firms need to keep a close eye on what two business items, even if they are too busy?
Sending out invoices in a timely manner and watch the amount of expenses spent
Why is it important to educate employees on a firm’s values and goals?
Overall, a knowledge of an organizations culture has been linked to increased satisfaction and commitment by the employees as well as a decreased turnover rate
Collaborative/Clan Culture Organization
Extended family of employees that are hard to replace. Strong sense of loyalty and tradition with a strong focus on teamwork, participation and consensus
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
Control or Hierarchical Culture
Highly structured and formal feeling
Management aims for security and predictability
Market culture
Result driven organization focused on job completion. Employees are competitive and goal oriented
The emphasis on winning unifies the organization
Success to this type of firm culture is market share and penetration
Professional Liability Insurance
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
General Liability Insurance
This insurance provides protection against damages from an Architect’s office operations and non-professional activities at a job site
Owner and the General Contractor
should carry this type of insurance as
well
Worker’s Compensation
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 costs as part of their bid
Property (Builder’s Risk) Insurance
This insurance is held by the Owners, it covers and damage, loss of work onsite or off-site en route to the site
Loss of Use Insurance
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 hazards that might prevent the project from completing on time
Product & Completed Operations Insurance
This insurance is held by the Contractor, and is liability for damages caused by installed goods after the completion of construction and transfer of the title
Contractual Indemnification
The liability is assumed by the contract and the Contractor agrees to hold the Owner & Architect harmless for any damages that are a result of specific events
Subrogation
The Insurance Company has the right to “step into the shoes” of the policy holder to make a claim for damages caused by others and can sue the responsible party on behalf of the Owner
Waiver of Subrogation
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
How can a practice avoid being exposed to claims?
Practice conflict dispute resolution techniques to avoid or contain potential disputes
Risk Management Strategies
Avoid risk, Transfer Risk, Assume Risk, Control Risk
What should Architect keep aware of to avoid risks?
Changes in government regulations or new building materials, systems, codes, standards and technologies
Adoption of new rating systems, such as LEED
Awareness of what other design professionals are doing, how they are rendering their services and what services they are providing
Indemnification
Is insurance terminology for the “hold harmless” clause
Common Claims against Architects
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
What are 7 good forms of documentation that Architects can take?
Daily notebook or site observation reports of electronic devises 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 & memos of phone conversations
Progress Payment logs
Equipment use records
4 Reasons Architects should consider the purchase of professional liability insurance:
Business Survival
Continuing Operations
Contract requirements
Social Responsibility
Amount of years for Statute of Limitations for patent defects from the date of substantial completion
4 years
Varies from State to State
Amount of years for Statute of Limitations for latent defects from the date of substantial completion
10 years
Varies from State to State
6 Methods to Limit Liability
Carry the necessary types and appropriate amounts of insurance
Select projects carefully by working within the firm’s 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 and communication with project team, Owner and Contractor
Document key decisions and approvals
Provide Contract Administration Services
Who is responsible for the means, methods, techniques, sequences and safety of a project during construction?
The Contractor
The Architect is NOT responsible for what during construction?
Exhaustive on-site visits
Continuous on-site inspections
Means, Methods, Techniques, Sequences, and Safety
Who can stop the Work of a project under construction?
The Owner, the Contractor (if unpaid) and a Local Building Official have the authority to stop the Work, not the Architect
What is the Architect’s role in observation of a project while it is under construction?
To observe the progress and the quality of the work in order to determine if it conforms to the drawings and contract documents. Any findings should be reported to the Owner
An Architect cannot negotiate the terms of any settlement without the ___’s permission.
Insurer’s
Client Dispute resolution include what type of practices?
Engaging the Client, Communicate with the client and secure closure for any issues that may have occurred, and provide documentation
Arbitration
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, in weeks or months rather than years in litigation
Arbitration Process
One party files a Demand for arbitration, the other party can then
1. Files the answer in response to the allegations
2. Files 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 a hearing is held the arbitrator will render a decision within 30 days
Mediation
A mediator assists the parties in settling a dispute
Litigation
Involves the court system and is an expensive and long process involving attorneys
Methods that lead to better agreements
Establish Standard In-House Practices
Get professional support
Use Standard Agreement Forms
Construction Means and Methods
Are the responsibility of the Contractor
Customized Agreements to have on hand
Full services agreements of the types most frequently used Small or Limited Scope Agreements Notice to Proceed Consultant agreements Common Exhibits
Design Professional Liens
Used if construction has not started yet but a building permit or other government approval has been obtained
Requirements vary by state
For a Design Professional Lien: The Amount of Days the Professional must give the landowner written demand letter for payment specifying the amount owned.
10 days
Mechanics Liens
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
Mechanics Liens - amount of days notice for Preliminary Notice
20 days for subcontractors/vendors. The Architect and General Contractor do not have to send the 20 day notice as they are in direct contact with the Owner
May vary by state
What is a notice of Cessation?
A notice that the work has formally stopped. This is filed by the Owner
The Owner wants to file this in order to reduce the time in which claimants can file a lien
Stop Notice
A lien against funds, similar to a Mechanics Lien, but it can be used on private or public projects
Notice of Non-Responsibility
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
5 ways to protect the Owner from Liens
Require the Owner to purchase a Performance Bond and Payment Bond
Receive signed lien releases from the subcontractors at the time of payment
Collect and hold retainage
Collect contractor’s affidavit of Release of Liens
What are 7 terms that are open to negotiation in the contract?
Scope of services or additional services
Project Schedule
Owner’s responsibilities or coordination responsibilities
Project Insurance and limitations of liability
Ownership and reuse of documents
Reimbursable Expenses
Hourly Rates
What items fall under Copyright Protection
Intangible Assets associated with inventions and design such as Digital Data, design methodologies, and software
Owners use of the Instruments of Service
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
7 Common Limitations that the Architect should consider securing
Disclaiming the Architect’s responsibility for the contractor’s means and methods of construction and for job site safety
Limiting the Architect’s liability for the accuracy of cost estimates to redesigning at the architect’s expense
Disclaiming liability for 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
Disclaiming responsibility for a decision made by the owner without the architect’s approval
Disclaiming responsibility for hazardous materials
Using checklists would be an example of?
Quality Assurance / Quality Control (QA/QC)
What kind of projects can benefit from a Constructability Review?
Complex or large projects with staging concerns
Projects with tight schedules
Projects using new construction methods
Innovative projects
Give 3 reasons to when an RFI can be written to the Architect from Contractor
- Unforeseen condition of circumstance
- An omission
- A conflict or discrepancy
Name the 4 project delivery methods
- Traditional Design- Bid- Build
- Construction Management at Risk (CM@R)
- Design Build
- Integrated Project Delivery (IPD)
How should conflicts between agencies be addressed?
- Schedule meeting with agencies that are responsible for enforcing the are of conflict and request they issue you written direction on which one to follow
- Bring Owner to meeting
Which compensation option is the most flexible and preferably used when no exact scope of services can be defined?
Hourly billing rates and Fee multipliers
What are 2 types of Fee Multipliers?
- Multiple of Direct Salary Expense (DSE)
2. Multiple of Direct Personnel Expense (DPE)
Name 2 disadvantages of using Percentage of Construction cost
- Client may think Architect will intentionally drive up construction costs to increase their fees
- Conflict in relationship between Owner and Architect
Which AIA series would you find a contract agreement between Architect and Owner?
B Series
Owner + Architect Agreements
What is included in the Architect’s and Consultant’s “Instruments of Service”?
- Drawings
- Specifications
- Construction Documents
Who retains copyrights of the “Instruments of Service”?
- Architect
2. Architect’s consultants
Which AIA series would you use if you wanted an agreement for a Joint Venture?
C- Series
Architect + Consultant Agreements (including joint ventures)
Should the Contractor fail to fulfill their contractual obligations to the owner, this amount is stipulated in the contract known as…..
Liquidated Damages
The responsibility of providing geotechnical engineering data and land surveying is by ….
Owner
Responsibilities of the Architect and their Basic Services is found in what AIA contract form?
B101
Standard form of agreement between Owner and Architect
Responsibilities of the Architect and their Basic Services is found in what AIA contract form?
A101
Standard form of agreement between Owner and contractor
Liquidated Damages
An amount of money stipulated in the contract to be charged to the Contractor as a reimbursement for damages suffered by Owner because of the Contractor’s failure to fulfill contractual obligations
Why is it important to regularly send out invoices to clients?
To maintain the cash flow coming into the business and pay staff and bills on time
Retainage
The process by which the Owner withholds money from the Contractor as a protection in case the Contractor fails to complete the work according to the contract document
What is the Contract Sum?
Contract Sum is the total amount payable by the Owner to the Contractor for performance of the Work under the Contract Documents
What 3 contracts can be paired with the B102?
B201 Design and Construction Contract Administration
B202 Programming
B203 Site Evaluation and Planning
Each of these contracts are titled Standard Form of Architect’s Services: Programming (for example)
Boiler Plate
This refers to general paragraphs in a contract that ould apply to anyone, and be reused over and over again without needing to be modified.
For example, the clause, “perform the services with professional skill and care” would apply to almost any contract
Self Awareness for the Firm
Internal Analysis
Helps assess the firm’s capabilities when considering new work
What does RFI stand for?
Request For Information
An RFI is a document used by the General Contractor and the construction team when they discover any of the following:
• Unforeseen condition or circumstance
• An omission
• A conflict or discrepancy
When the Architect receives an RFI, the Architect shall review and respond in a timely manner
Architect can tie their compensation to revenue, cost, or profitability results achieved by this type of compensation option
Outcome-Based Value Pricing
What are 3 types of project types used in Outcome- Based Value Pricing?
- Sales in retail facilities
- Leasing success in housing
- Commercial office development
This compensation method that ties the architect’s compensation to the budgeted or actual construction cost of a project which is rarely used is known as…
Percentage of Construction Cost
This is work that is done without an expectation of payment (no fees).
Pro-Bono Work
Why do the AIA contracts reflect the best contractual advice from practicing professionals, including contractors, consultants, and insurance companies?
The AIA documents balance the interests of all the parties involved, no one, including the Architect, is unfairly represented. They are timed tested and widely used throughout the industry
What is a fiduciary?
A person who holds a legal or ethical relationship of trust with one or more other parties
Financial Resources
Money to operate the business on a day
to day basis, including payroll and paying
bills
Intangible Resources
Reputation of the firm and talents of the staff
Which project delivery method is suitable for fast track?
Design-Bid-Build, Design/Build,
CM@R, and
Integrated Project Delivery IPD,
are all candidates for fast tracking a project
Determination depends on the needs of the Owner and strength of project team
IPD
Integrated Project Delivery
IPD is a new approach to project delivery where the entire project team works together on the project to increase the coordination and collaboration
The contractual relationships in an IPD method are shared among the Owner, Architect, Consultants, and Contractor who jointly share in the success or failure of the project
What is the benefit of Integrated Project Delivery?
Allows for a higher level of communication and coordination, and it works well on complex projects or projects trying to achieve a high standard, such as deep sustainability or energy targets
What are the 5 Basic Scope of Services according to the B101?
Schematic Design Design Development Construction Documents Bidding or Negotiation Contract Administration
Is reviewing the Owner’s Program an additional service when utilizing the B101?
No
It’s part of Basic Scope of Services under Schematic Design of the B101
The Architect shall prepare a preliminary evaluation of the Owner’s program, schedule, budget
Is the Architect required to provide an Estimate of the Cost of the Work as part of B101?
Yes
The Architect must provide the Owner with an Estimate of the Cost of Work at the end of each of the design phases
What are the Owner benefits of Design- Bid- Build project delivery?
The benefits of the traditional design/bid/build delivery process are that the Owner participates in the design of the project and construction costs are prepared from relatively complete documents.
In the Design-Build approach to project delivery, how many contracts are there for the owner?
Single Entity
The Owner contracts with a single entity – a designer-builder – for both design and construction
In which project delivery method, is the contractor selected at the start?
Design-Build
What are 5 ways to calculate invoices?
Percent Complete Hourly Regular Fee Schedule Milestones Work when paid
In Construction Manager at Risk, the construction manager typically has substantial expertise in these 4 areas..
- Construction technology
- Constructability issues
- Construction scheduling
- Construction costs
In Design- Bid- Build project delivery, who are the 2 contracts between?
- Owner – Architect
2. Owner – Contractor
In Design- Bid - Build project delivery, contractor selection is based on what?
Final contractor selection based on lowest responsible bid or total contract price
What is the Construction Management at Risk (CM@R) approach?
Involves a construction manager who takes on the risk of building a project, guaranteeing the Owner it will be completed on an agreed to schedule and set budget
Under Construction Management at Risk (CM@R), who hires the Architect?
The Architect is hired by the Owner under a separate contract
Under Construction Management at Risk (CM@R), the construction manager may offer these 5 services to reduce their risk
- Pre-Construction Services during the design phase
- Project Scheduling
- Value Engineering
- Timely purchasing of critical materials or materials with long lead times
- Coordination of subcontractors
What does GMP stand for?
Guaranteed maximum price
In Construction Management at Risk (CM@R) project
delivery, who are the 2 contracts between?
- Owner – Architect
2. Owner – CM@R
What are some benefits for Construction Management at Risk (CM@R) approach?
- Overlapping phases: design and build occur at the same time (fast track)
- Construction manager hired early, during the design phase, to provide advice
- Pre-construction services offered by the constructor (such as constructability review and bid management)
- Specific contractual arrangement determines the roles of players
- Clear quality controls from the use of prescriptive specifications in the contract
What does an Internal Analysis include that will help grow your firm and expand your skills?
- Resources: tangible (product or service), intangible (reputation)
- Capabilities: qualifications of staff, ability to meet demands of a project
- Core Competencies: major valuecreating skills and capabilities of the firm
What are some resources that a firm may utilize in carrying out the delivery of a project?
- Human resources: staff, administrators, principals
- Financial resources: money to operate the business on a day to day basis, including payroll
- Intangible resources: reputation of the firm, talents of staff
- Organizational: the makeup of the firm and how it is organized and how the different divisions relate to each other
- Physical assets: office space, equipment, and property
What are some questions to be considered during an
Internal Analysis ?
- What are the firm’s strengths?
- What are the firm’s weaknesses?
- How do these strengths and weaknesses compare to other similar firms?
What are some considerations when taking on new work?
- Does the firm have experience in project type?
- Does firm have the resources (people and financial) to complete the project?
- Does the firm have adequate staff available to work on project?
What does Project Delivery refer to?
The method for assigning responsibility to an organization or an individual for providing design and construction
services
What does Project Management refer to?
The means for coordinating the process of design and construction (including: planning, staffing, organizing, budgeting, scheduling, and monitoring)
What are the key factors affecting project delivery choice?
- Construction Cost
- Schedule
- Building Quality
- Project Scope
- Project Scope
- Client Capabilities
Who are the key players in project deliveries?
- Owner
- Architect
- Contractor
Which two AIA documents, when used together, essentially represent the B101?
B102 Owner and Architect Agreement without Predefined Scope of Architect’s Services
B201 Standard Form of Architect’s Services: Design and Construction Contract Administration
