PcM Flashcards
Common compensation options for fee calculation
Lump sum fixed fees Hourly w/ no upset Hourly-not-to-exceed Cost Plus fixed fees Unit Cost % of actual construction cost Reimbursable & Non-reimbursable direct costs
“cash method” accounting
recognizes revenue when cash is collected and expenses are paid
“accrual-based” accounting
revenue is recognized when earned and expenses are incurred
Two types of project budgeting planning
Top-Down & Bottom-Up
Top-Down project budget characteristics
- based on historical project data and similar project scopes
- formula driven
- typically based on % of construction cost
Bottom-Up project budget characteristics
-based on the project work plan (task-level resource planning)
Elements of project budget
gross fee consultant fee net service revenue project contingency non-reimbursable direct expense budget project labor budget current % complete by phase of service budgeted resource forecast by phase of service
4 types of schedules
Critical path method schedule (CPM)
Milestone charts
Bar charts (Gantt chart)
wall schedule
When to use milestone schedule
short duration projects with few tasks, under $35,000
When to use bar chart schedule (gannt schedule)
most common in A&E professions
visualize overlapping tasks on a timeline to break down phases to tasks
When to use wall schedule
great tool for medium to large-scale design projects - best means to produce project work plan to integrate tasks for architects, consultants, clients, & contractors involved
NSR
net-service revenue:
Net fee determined by subtracting consultant fees from the gross fee for a project
planned cost definition
labor hours and dollar amounts that are planned at project initiation
JTD
Job-to-date
labor hours and dollar amounts spent as of current date
ETC
Estimate-to-complete
Labor hours and dollar amounts estimated from current date to project completion
EAC
Estimate-at-completion
JTD + ETC labor hours and dollar amounts estimated at project completion
Planned estimate at completion definition
over/under calculation indicating labor hours and dollar amounts at project completion relative to planned estimates
percent complete definition
current work in plan for the project, phase, or task, expressed as a subjective percent complete and not based on the percentage of labor hours or dollar amounts spent
Types of multipliers
Break-even Overhead Effective multiplier Target Planned multiplier EAC multiplier
Break-even multiplier
(direct labor+overhead) / direct labor
Overhead multiplier
overhead/direct labor
Effective multiplier
current, subjective percent complete/direct labor
Target multiplier
firm-wide standard target multiplier, incl. profit target
Planned multiplier
Net-service revenue/planned cost
EAC multiplier
total NSR/EAC labor dollars
Billed/invoiced amounts definition
amounts billed to clients based on contract compensation amounts and percent complete
Earned revenue amounts definition
revenue recognized in the accrual accounting system based on (subjective percent complete) x (NSR)
BNE
billed-not-earned
amounts billed to the client but not recognized as earned revenue in the accrual accounting system
ENB
earned-not-billed
amounts recognized as earned revenue in the accrual accounting system but not billed to the client
planned labor definition
raw labor costs determined from bottom-up work plan
JTD labor
job-to-date labor
Raw labor costs expended on the project from the start date to current date
ETC labor
estimate-to-complete labor
Raw labor costs estimated to be expended on the project from the current date to project completion
EAC labor
estimate-at completion labor
sum of JTD labor and ETC labor
RPC
reported percent complete
types of studio organization
- Shared studio/team-based (move freely)
- organized by discipline (urban design vs interior)
- project type
- organized by principal
S.M.A.R.T.
acronym used to set and measure performance goals for performance appraisal S - Specific M - Measurable A- Attainable R - Relevant T - Time-bound
“practice” vs “title” acts
Practice: describe and regulate practice as well as the use of the title “architect”
Title: individual has to meet certain qualifications to use a specific title
eminence clause definition
grandfathering provisions when adopting licensing laws - allow active professionals educated and trained under an earlier and less rigorous framework to continue to practice
consistent elements among architectural licensing laws
- establish a board and rules
- define the practice of architecture
- set req. for licensure and entry into profession
- include exemptions for certain structures not req. an architect
- define professional conduct and misconduct
- establish sanctions and parameter for the application of these when statute is violated
how many registration boards constitute NCARB
54
What are the five “collateral” architectural organizations
NCARB
AIA
AIAS
ACSA (Association of Collegiate Schools of Arch)
NAAB (National Architectural Accrediting Board)
What is the most common adopted definition of the practice of architecture
NCARB Legislative Guidelines and Model Law, Model Regulations
NCARB Legislative Guidelines and Model Law, Model Regulations definition
Model Law—Provides a broad framework of the various authorities an architectural licensing board should be granted by its jurisdictional legislature through statutory language.
Model Regulations—Offers detailed language outlining rules for implementation of the authority and responsibilities granted to the board.
“responsible control” definition
The use of a stamp on a set of documents (both drawings and specifications) with an architect that has been involved with the preparation of the drawings
“Plan stamping” definition
inappropriate use of a stamp by an individual not in responsible control
“comity” or “endorsement”
accepting as a courtesy the qualifications for licensure from another state
Steps of a complaint
- dismissal
- Investigation
- referral to the state attorney general’s office
- deferral
- disciplinary action
what are the two kinds of violations considered by licensing boards
- violation by untrained and unlicensed individuals
- violation by trained individuals
“admitted” or “licensed”
admitted carrier is an insurance company licensed and authorized to do business in a specific state.
non-admitted carriers are not subjected to such scrutiny nor included in coverage by the state guarantee fund
“Claim”
is a demand for money, services, or property based upon a right in contract or by operation of law
“claims-made policies”
the date that the claim is finally made is the triggering event for coverage (NOT the date that the incident occurs)
“deductible”
provision requiring the insured to pay a specified portion of the loss on each claim. Increasing the deductible lowers the premium cost
“endorsements and exclusions”
an ENDORSEMENT is a written amendment or rider affecting the declarations, insuring agreements, exclusions, or conditions of an insurance policy.
an EXCLUSION specifically eliminates coverage for a certain hazard from an insurance policy
“hold harmless”
AKA “indemnify”
contract provision whereby one party assumes another’s legal liability
AIA document A201-2007, GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION
“indemnification”
a hold-harmless provision, an agreement by one party to pay a certain specified losses or damages incurred by another party
“prior acts”
insurance provision to consider when changing carriers or buying coverage for the first time.
Firms can buy coverage for professional acts and services that took place before the became insured or when they were insured by another carrier.
“surplus lines”
insurers that are not licensed in a particular state but are non-admitted or excess and surplus lines insurers. Policies are written by surplus lines insurers because licensed or admitted carriers will not provide the needed coverage
“tail insurance”
addresses the question of protection upon retirement or withdrawal from practice.
Policy covers retired individuals for prior acts if claims are made in the future
another name for professional liability insurance
error and omissions, or E&O, insurance
antitrust law
general purpose is to foster economic competition
AIA Code of Ethics - three tiers
Canons, Ethical Standards, and Rules of Conduct
What are Canons
broad principles of conduct from AIA Code of Ethics
What are Ethical Standards
specific goals toward which members should aspire in professional performance - AIA Code of Ethics
What are Rules of Conduct
mandatory rules in AIA Code of Ethics - violation is grounds for disciplinary action
What are the six Canons of the AIA Code of Ethics
Canon I: General Obligations Canon II: Obligations to the Public Canon III: Obligations to the Client Canon IV: Obligations to the Profession Canon V: Obligations to Colleagues Canon VI: Obligations to the Environment
Canon I
General Obligations:
Members should maintain and advance their knowledge of the art and science of architecture, contribute to growth, consider social and environmental impact, and exercise learned and uncompromised professional judgment
Canon II:
Obligations to the Public:
Embrace the spirit and letter of the law governing their professional affairs and should promote and serve the public interest in their personal and professional activities
Canon III:
Obligations to the Client:
Members should serve their clients competently and in a professional manner, should exercise unprejudiced and unbiased judgment when performing professional services
Canon IV:
Obligations to the Profession:
Uphold integrity and dignity of the profession
Canon V:
Obligations to Colleagues:
Respect the rights and acknowledge the professional aspirations and contributions of their colleagues
Canon VI:
Obligations to the Environment:
promote sustainable design and development principles in their professional activities
What AIA documents define copyright protections?
A201-2007 (article 1)
B101-2007
Four ways to think about Ethics:
Virtue
Social Contract
Deontology
Consequentialism
Virtue ethics
“Character-based ethics”
Modern, personal, virtues like honesty, respect, tolerance, and trust underpin the effective operation of commercial society
Social Contract ethics
“Contract-based ethics”
a set of rules governing behavior, which rational people accept on the condition that others accept it as well
Deontology ethics
“Duty-based” ethics
one’s own actions must be ethical regardless of consequences - the ends do not justify the means
good intentions and act accordingly, regardless of result (good for the sake of good)
Consequentialism ethics
“result-based” ethics
determine the goodness of an action based on the consequences it produces.
The ends justify the means
“Utilitarianism”- theory that values whatever brings the greatest happiness to the greatest number
four characteristics (values) all licensed professionals share (professional ethics)
i. technical knowledge
ii. collegial organizations
iii. ethical public value
iv. client service
Two types of claims against architects
“negligence” and “breach of contract”
Four components that must be proven in order to prevail when asserting negligence claim:
- DUTY: architect must owe a legal duty to person making the claim
- BREACH: architect fails to perform the duty or does something that should not have been done
- CAUSE: the architects breach of duty is the proximate cause of harm to the person making the claim
- DAMAGE: actual harm or damage must have resulted from breach
Standard of Care definition
what a reasonably prudent architect would do in the same general locale, in same time frame, given same or similar facts and circumstances
Breach of contract claims definition
allegation that a specific duty or duties pursuant to a contract between two parties and one of those parties either failed to perform duty or did not perform properly
“ABSOLUTELY ESSENTIAL TERMS” in architectural contracts
written summary including:
- project scope
- project time frame
- project fees
What does a limitation of liability clause do?
Limits claims by owner against architect to a certain amount (set $$ amount or the balance of remaining insurance policy)
What is a mutual waiver of consequential damages?
Consequential damages are those that are NOT direct damages, but only arise as a consequence of some act or omission
Example: architect fails to design stair to code. Stairs having to be replaced is a direct damage, but the delay in facility opening is a consequential damage.
If waiver is present in contract, then owner cannot collect damages from the delay of opening.
What are indemnification provisions?
contractual requirements inserted by owners that cause the architect reimburse the owner for damages caused by the architects act and/or omissions - typically not insurable by professional malpractice insurance
When are architects liable for consultants work?
When architects enters into a contract with owner for ALL design services of the project (architects hires consultant)
OR
when owner hires consultant but architects signs a Certificate for Payment or Certificate of Substantial Completion for consultant work
describe this contractual relationship:
Alternative Project Relationship: Contractor-Led Design Build
owner contracts with one entity (the contractor) to provide all design and construction services for project. Architect typically subcontracts directly with contractor.
This agreement typically removes the layer of checks and balances the architects provides the owner in a conventional project arrangement.
describe this contractual relationship:
Alternative Project Relationship: Joint Venture
parties in a joint venture are jointly and separately responsible for for actions of the joint venture.
Example: if an injury occurs because of negligence of either party in joint venture, then the joint venture can be sued collectively, or parties can be sued individually.
What are third party actions?
In addition to obligations for damages to the party the architects contracts with, architects can also be held responsible for negligent acts, errors, or omissions that physically injure or damage third parties (i.e. construction workers, passersby, and occupants/users of project)
What would constitute holding an architect to “heightened standard of care”
Problematic words included in the contract that define the architect’s enhanced performance level, including “best” “better” “high” and “higher”
These words should not only be avoided in contracts, but marketing materials and proposals as well
Indemnities types that benefit the architect
- client indemnity to the architect for claims arising from the presence of hazardous materials on site
- client indemnity to the architect for claims from the client’s misuse of the drawings
- mutual indemnities between architect and consultants, making each party legally responsible for their own actions and mistakes and NOT for the mistake of the other
AIA Document B101TM-2007, section 8.4
Proposed indemnities. Read each carefully
Limitation of Liability target
proceeds of available insurance - any LOL should apply to full sums of any and all claims on a project
Customized agreement types for a firm to have on hand:
- full services agreements of the project types most frequently used
- small or limited scope agreement (feasibility studies, programming, planning services)
- Notice to proceed (allows project to get going until final agreement is executed)
- Consultant agreement
- Common exhibits (rate schedules, reimbursable expenses, sample invoices, standard scope of services for each type of consultant hired, consultant standards)
AIA Document C106-2007
Digital Data Licensing Agreement - set limitations for use of any transmitted electronic data
Signed by transmitting and receiving parties
AIA Document E201-2007
Digital Data Protocol Exhibit - sets format requirements and permitted uses for all sorts of other electronic project data, ranging across each project phase
exhibit is attached to contract
AIA Document A202-2008
Building Information Modeling Protocol Exhibit - ownership of BIM is defined, permits uses of the model at each level of design (LOD)
exhibit is attached to contract
AIA Documents that cover BIM (and what they omit)
C106-2007
E201-2007
E202-2008
not stated but important to note: ONLY 2D copies that are generated from the BIM by the architect (PDF and paper form) constitute the legal construction documents
Benefits of BIM
BIM and Standard of Care:
Analysis of model enables architects to identify and eliminate a number of coordination problems during the shop drawing process, before components are fabricated and installed, thereby substantially reducing construction change orders - saving both time and money
Firms not using or underutilizing BIM are in danger of falling below the standard of care
Prerequisites for a legal contract
- Mutual Agreement
- Consideration
- Capacity
- Legal Purpose
- Contractual intent
- Necessity for writing
Prerequisites for a legal contract: Mutual agreement
Until both parties have agreed upon identical terms, there is NO agreement.
Prerequisites for a legal contract: Consideration
Each party must give something of legal value to the other
Prerequisites for a legal contract: Capacity
the legal ability of the parties to enter into a contract
age, mental capabilty,etc.
Prerequisites for a legal contract: Legal purpose
If the underlying purpose of the contract is illegal, or the contract requires the performance of an illegal act, the contract is void
(i.e. an architect agreeing to do work in a jurisdiction they are not licensed in)
Prerequisites for a legal contract: Contractual intent
parties the a contract must have the mutual intent of entering into a binding legal agreement on the terms specified
Prerequisites for a legal contract: Necessity for a writing
Only certain types of contracts are required to be in writing under what is called the Statute of Frauds
This applied to architects under the copyright laws (drawings)
Essential Terms
Essential terms include subject matter of the contract such as
services to be performed
time for performance
price to be paid for services
Absence of “essential terms” in a contract
results in “fail for indefiniteness” - limiting the remedies that an architect might have
Expressed terms
expressed terms of a contract are those that have been specifically agreed upon, whether verbally or in writing
Implied terms
Implied terms in a contract are not specifically mentioned and have to be inferred.
Ex: under professional standard of care, the architect has a duty to comply design to building code requirements
Types of Agreements
Oral agreements
Letter agreements
Formal Written Contracts
Standard AIA Contracts
“B-series” documents in AIA contracts
owner-architect agreements that share many of the same provisions, but each addresses a particular range of circumstances
Special considerations for an agreement for architectural services
The type of client and project type will determine what document or agreement is appropriate.
What agreement is appropriate for small residential projects or individual clients?
AIA Document B105-2007
What agreement is appropriate for small to mid-size projects that are of limited scope and complexity?
Small businesses?
AIA Document B104-2007
What agreement is appropriate for larger and more complex projects? Corporate clients?
AIA Document B101-2007
AIA Document B103-2007
What agreement is appropriate for typical institutional buildings/clients?
AIA Document B101-2007
What agreement is appropriate for performing projects on a pro-bono basis?
AIA Document B106-2010
What agreement is appropriate for sustainable projects?
AIA Document B101-2007SP
What agreement is appropriate for federally funded or federally insured building projects?
AIA Document B108-2010
What agreement is appropriate for developers of single family residential projects?
AIA Document B107-2010
What agreement is appropriate for developers of larger, mixed-use developments?
AIA Document B109-2010
For condos, B509-2010 provides supplementary conditions to B109
What agreement is appropriate for design-build companies?
AIA Document B143-2004
AIA Documents that provide “full” scope of services that includes the traditional “Basic Services” plus “Additional Services” terms
B101-2007
B103-2007
B109-2010
AIA Documents for Feasibility and Design Study
terms and conditions of B102-2007 with scope of services under B203-2007
Design Build case: B142-2004
What is vicarious liability
responsibility for other parties involved in project
- architects for consultants
- firm for employees
Characteristics that identify a delivery method
- Driving factor
- Architects role
- contractors role
establishment of construction cost - number and type of design and construction contracts
Design-Bid-Build
- traditional approach to delivery method
- linear design sequence that results in a set of construction contract documents against which contractors submit fixed price bids
Cost plus fixed fee
a variation of design-bid-build method
-contractor is paid actual labor and material plus overhead for construction and coordination of trades on site, plus a fee that represents a fixed amount of profit that does NOT vary according to the total project cost.
Construction Management
CM Adviser - constructability and cost management consultant to the owner CM Agent (CM-A) - Can act on behalf of the owner CM-Contractor (CM-C) - Dual role as contractor and estimator
GMP
“guaranteed maximum price”
a commitment by the CM-C to build a project for a specified price
Design-Build
single-point responsibility for both design and construction - a single contract
What are the three primary types of delivery methods
Design-bid-build
Construction Management
Design-build
“bridged” design-build
two project teams - design architect and production architect
Phase order of Design-bid-build (traditional)
PD > SD> DD > CD > (constructor contract) > BN > CA
Phase order of design-bid-build (cost plus fixed fee)
PD > SD > (constructor contract) >DD > CD > CA
Phase order of CM-adivser and CM-agent
(constructor contract) PD > SD > DD > CD > BN > CA
Phase order of CM-C
(constructor contract) PD > SD > DD > (GMP) > CD-1/CA-1 > CD-2/CA-2 > CD-3/CA-3
Phase order of design-build (standard)
(constructor contract) > BN > PD > SD > DD > CD > CA
Phase order of design-build (bridging)
PD > SD > DD > BN > (constructor contract) > CD > CA
Three factors to balance when considering delivery method
budget, schedule, quality
Project Alliance Model
delivery model in which the entire project team - designers, contractors, and subcontractors - are bound together in a single contract that holds each jointly responsible for the project
B101-2007 covers what project parameters?
- client (owner)
- designer (architect)
- general description of project
- size of project
- anticipated construction cost
- preliminary schedule
- anticipated compensation
*B101-2007 assumes that as each phase is completed, both parties formally acknowledge the accomplishment before moving to next phase - also assumes a linear process.
What factors have been determined by the end of schematic design?
size, scale, and general scope of project
Types of additional services
programming, space planning, landscape design, furniture selection, etc.
Types of changes
Owner scope changes
contractor substitution changes
contractor value analysis changes
changes cause by accepted nonconforming work
Three factors that compensation is based on
Value, Effort, and Risk
Types of project-specific risks
public approval process
specific site conditions
unknown underground conditions
limits of the site (Soil)
- *SCHEDULE
- *COST
Two types of financial reports
Profit-Loss Statement
Balance Sheet
What are two essential components of a financial management system
Annual Budget
Profit Plan
Two types of accounting reports
Cash-basis
Accrual-basis
Cash-basis P-L report
indicates only the income received and the amounts paid out in an accounting period
establishes a firm’s cash-flow management effectiveness and its tax liability
Accrual-basis P-L statement
reflects the invoices sent to clients for monthly revenue earnings in an accounting period
What is Mattox Format
a profit-loss statement that comprises four major components: revenue, direct labor, indirect expenses, and misc expenses
What does “prospect” mean
better than 50% chance of being awarded a project
What does “suspect” mean
Less than 50% chance of being awarded a project
What is an overhead rate comprised of
indirect labor and general/administrative expenses
What is the formula for a break-even rate
equal to the overhead rate plus an assigned unit cost of 1.0 for hourly salaries
for example, the overhead rate is 1.3
so the break-even rate for an employee would be
2.3 x hourly rate = break-even rate
2.3 x ($20) = $46 per hour
Types of fees
Stipulated lump sum fixed fee percentage of construction cost hourly not-to-exceed hourly (open-ended) fee per unit/sf
Balance Sheet
second type of financial report contains: -current assets -current liabilities -long-term liabilities -equity
“balance” means TOTAL LIABILITIES + TOTAL EQUITY = TOTAL ASSETS
What does CGL mean
Commercial General Liability (insurance) - coverage for liability arising out of nonprofessional acts
What is mediation
a process in which a neutral person or persons facilitate communication between the disputants to assist them in reaching a mutually acceptable agreement
What is arbitration
a process whereby the parties voluntarily submit their disputes for resolution by one or more impartial third persons instead of by judicial court process
*preferred option by AIA and AGC
What is litigation
the default resolution - the public court system
Types of agreements
- oral agreements
- letter agreements
- formal written contracts
- standard AIA contracts
Which AIA documents cover “Full Traditional Services”
B101-2007
B103-2007
B109-2010
covers Basic + Additional Services
Which AIA document should be used for feasibility and design studies services
B102-2007
B203-2007
What AIA document should be used for a construction contract
A201-2007
Limitations of Liability
limits any claim against against the architect to an amount not to exceed the architects fee or some other sum, or the amount of available insurance coverage
Consequential damages
indirect costs that result from a breach of contractual undertaking
ex: loss of income, productivity, rent, or profit resulting from construction defect
Intellectual property
US Copyright laws state that documents prepared by the architect are the intellectual property of the architect
Which AIA document should be used as a guide for modifying AIA forms
B503-2007
Types and categories of services
Pre-design services Design-thorugh-construction phase services Post-construction services Sustainable design services BIM Development
What AIA documents help define BIM services
E201 - Digital Data Protocol Exhibit
E202 - BIM Protocol Exhibit
What do AIA document B200 series cover?
they define services offered
basic vs additional services
Compensation is based on what three factors?
VALUE, EFFORT, and RISK
What are project-specific risks?
Schedule and cost
What are basic services described by AIA contract documents?
schematic design design development construction documents bidding and negotiation contract administration
What are common methods of compensation? (5)
stipulated sum (fixed fee) percentage of construction cost hourly hourly not-to-exceed unit cost ($/sf)
What are the 8 types of legal structures a firm can use?
sole proprietorship general partnership Limited Liability Partnership (LLP) Business Corporation Publicly Traded Closely Held Professional Corporation Limited Liability Company (LLC)
What is evidence-based design
a design process that includes research as part of its methodology, with the critical application of knowledge gained through research in a specific design project
What are the 7 key indicators of financial performance?
utilization rate overhead rate break-even rate net multiplier profit-to-earnings ratio net revenue per employee aged accounts receivable
What is a utilization rate? What is a good one?
ratio of billable hours worked vs total hours worked
60-65%
What types of insurance are required by AIA B101-2017?
Automobile Employer Liability General Commercial Liability Professional Liability Workers Comp
What is the title of AIA 201-2017
General Conditions of the Contract for Construction
What are the five Model Rules of Conduct
competence conflict of interest full disclosure compliance with the laws signing and sealing documents
What contract and article defines the ownership of the Instruments of Service?
AIA B101-2017 Article 7
