PCM Flashcards
AIA B101 requires which insurance?
- General liability
- Professional liability
- Workers compensation
- Automobile
5.employers liability
Standard of care
Expected quality of service by area. Decides if arch is at fault when made an error or omission
Format types for specs
Master format: by material
Uniformat: by system
Employment practice liability insurance
Insurance to protect from wrongful termination
Intellectual property insurance
Insurance to cover claims based on copyright/ intellectual property infringement
Owner is responsible for
Pre existing site conditions. Geological, hazardous materials, surveying
Paying contractor
Paying owner consultants
Change orders
With or without cause hiring and firing of architect
Aggregate limit
Premium
Deductible
Claim
Aggregate limit: total coverage amount
Premium: monthly/ yearly bill
Deductible: Max paid by you
Claim: demand payment from the insurance company
Tail insurance
Covers the arch projects after retirement
What is the process to file an ethical complaint against an architect?
1 - File the complaint through AlA National (National Ethics Council) within a year of the alleged violation (can be longer if there’s good cause for delay)
2 - Advisory board and chair will be chosen
3 - Pre-hearing, hearing, start, claim, defense, end, judgement*
*Confidential, no counter-claims, can’t fine or enforce behavior, but can admonish/suspend
Who are the most common ethics complainants?
Other architects
Homeowners
Does the architect have a fiduciary duty to the client: a legal obligation to act in the owner’s best financial interest?
No, architects do not serve as an owner’s fiduciary.
Fiduciary duty. The obligation a professional has to act in the best interests of their client Generally, the term is used for professions who protect the financial interest of the people they represent, Certified financial planners (CFPs) can’t recommend a particular investment if they do so because the CFP gets a higher commission from the brokerage if that particular investment is purchased; lawyers or accountants can’t advise their client to move forward with a deal because the lawyer or accountant owns the property to be sold; and a corporate director can’t steer the company to sign a worse deal because the person on the other side of that deal is her brother-in-law. (Of course, if the brother-in-law really has the best corporate travel agency and charges the company the lowest fees, it is probably not a breach of fiduciary duty.)
If you, as a fiduciary, breach your duty, you are liable in court, though as you would imagine, proving a breach is difficult in practice. The concept of fiduciary was set up because professions like attorneys, accountants and physicians are granted a monopoly to practice their craft, and hold power or knowledge asymmetries over their clients. While architects are granted a monopoly to practice by the state and de hold knowledge asymmetries, they are not fiduciaries.
Clients often assume a professional is bound by fiduciary duty, when in fact she is not, For
Retainer
Retainer: Regular services for a fixed fee, more efficient than hourly over the long term… like if a university is regularly updating rooms as small projects (adding A/V equipment, accessibility ramps, upgrading outdated bathrooms) the university might hire an architect on retainer. The architect then can bill the university for the work completed, without having to create a new contract for each door that is replaced.
Are architects agents of the owner?
Architects are NOT agents of the owner (unless the owner would like them to be and a formal agreement is drawn up). That means, the architect can’t, while walking the site, claim to speak for the owner when talking to the contractor!
Who contracts directly under the Architect and who contracts under the Owner?
Architect: MEP, Lighting Consultant, Civil Engineer (utilities, land contouring, and all things related to the improvement to the land with the new building), Landscape Architect/Engineer, Cost Estimator, Code Consultant
Owner: Zoning, Traffic, Site, Geotechnical (underground), Surveyor, Civil Engineer (for duties related to permitting, and documenting the existing condition of the site)
The contractor is responsible for…
“Perfection” in construction
Nothing outside the contract
Paying and coordinating sub-Contractors
Providing Owner with operation manuals
Some design of specific systems (delegated design) for things like curtain wall details, concrete formwork, and steel fabricator shop drawings
The Architect is responsible for…
e project being on time and on budget e instruments of service
e standard of care and protecting the health, safety, and wellness of the public ordination and administration of project team and processes forcement of contract terms (as able) herence to applicable codes
T means and methods of construction, existing site conditions, safety on the job site, anything tside the contract (additional services)
Fair Labor Standards Act
Davis Bacon Act
Fair Labor Standards Act: regulates minimum wage, overtime pay, and child labor Davis Bacon Act: Contractors working on federal construction projects must pay workers no less than the locally prevailing wages.
General liability insurance
Covers the physical property of the firm, usually has a limit to total claims
*Landlords can require
Professional liability insurance
Covers the cost of mistakes made by the Architect, as well as disciplinary, regulatory, and administrative expenses.
*Also called “errors and omissions” insurance
Mechanic’s lien
If the owner owes money to the contractor, or the owner owes money to the architect, and the owner can’t or won’t pay her debts, a court can order the property to be sold to raise to cash to pay the debts. But the property can also be used to make unpaid subcontractors whole. If the contractor owes money to subcontractors, and the contractor skips town, the subs can go after the owner. If the owner can’t pay, a “lien” is put on the project and a court can force the owner to sell to square up with the subs. This is one of the reasons that the owner confirms that the contractor pays their subcontractors throughout the process… the owner doesn’t want to be on the hook later for the contractor’s unpaid bills.
OSHA
Occupational Safety and Health Administration (OSHA): enforces workplace safety regulations for things like construction falls, exposure to dangerous construction solvents, potentially dangerous power tools, and requirements for neon safety vests, glasses, & hardhats on site.
OSHA considers office workplaces, like architects’ offices, to be low-hazard but requires reporting of workplace deaths or multiple simultaneous workplace hospitalizations, even in offices.
Common types of small business taxes
Federal and state income tax
Self-employment tax
Personal property tax
Post-occupancy evaluation
Post-occupancy evaluation: Surveys used to see how well a building is performing, usually administered at least a year after occupancy
*Very important! Employees are the major expense for any business, so knowing how design affects their performance is key.
Contractual liability insurance
Contractual liability insurance: Covers you when something goes wrong and you, by virtue of a contract you signed, are held responsible for it. Contractual liability coverage typically is included in your general liability insurance (the one that covers your business for nonprofessional incidents, like a slip-and-fall or dog bite at the office).
For example, Lauren, an employee of your firm, tours a quarry with a client to select stone for an office building courtyard. In order to tour the quarry, Lauren signed a common release form, the type you sign all the time, indemnifying the quarry should something go wrong. Something did go wrong on the tour and Lauren was injured. Because she signed the release form holding the quarry harmless, your firm, rather than the quarry, is held responsible. And because you have contractual liability insurance as part of your general liability insurance policy, you’re covered for Lauren’s injury. (You’re probably covered… with insurance, it’s always hard to say for sure without knowing the specifics of the incident and the contract.. and even knowing that, the lawyers may need to hash it out because of a difference of interpretation.)
Subrogation
Subrogation: Process of the insurance company assuming agency for an insured party in order to sue another party.
For example, an electrical subcontractor error triggers a fire. The contractor’s insurance company, Amber Insurance, pays the contractor promptly for the damage, which is the type of prompt service the contractor has been paying for over the years in its monthly premiums.
In the policy, the contractor has given permission ahead of time for Amber Insurance to pursue reimbursement from the electrical subcontractor (or the sub’s insurance policy). Amber Insurance can then “stand in his shoes” and chase down reimbursement as his agent, as if he (the contractor) were suing. He also gives up his right to sue the subcontractor afterward to collect MORE damages. The catastrophe happened, the insurance company already paid the contractor to make him whole, and now the insurance company alone retains the right to make themselves whole by filing a claim against the party at fault.
Utilization Rate
Revenue Factor
Utilization Rate (also known as the billable or chargeable rate)=Direct Salary Expense/Base
Salary.
If an employee, Amber, earns $100,000 per year, and 70% of her hours are charged to the client, we say that she has a utilization rate of 70% (which is a healthy, but realistically healthy, rate).
Revenue Factor= Utilization Rate x Direct Salary Expense Ratio
This is your yield on total payroll, which measures productivity, profitability, and efficiency. Think about it: if we halve Amber’s utilization rate to 35%, we’ve reduced our revenue by half. Likewise, if we halve our firm’s Direct Salary Expense Ratio to 1.5, we have also cut revenue by half.
How do you decide how much to charge a client?
Value Pricing - Based on quality
Effort Pricing - Based on time spent (this is the ARE’s assumption in the exams)
% Cost Pricing - Based on percentage of total construction cost
Fixed fee pricing - Fixed cost to client typically derived based on triangulating estimates of the other three models
Risky contract language
Warranty
Guarantee
Indemnify/Indemnification
“Highest” standard of care
As required/as necessary
Hold harmless
*Anything that passes liability to the Architect
AlA Documents: A701; C401; A305; G701; G702; G704
A701 - Instructions to Bidders
C401 - Architect-Consultant Agreement
A305 - Contractor’s Qualification Statement
G701 - Change Order
G702 - Application and Certificate of Payment
G704- Certificate of Substantial Completion
1 - Net Profit
2 - Net Billing
3 - Profit Earnings Ratio
4 - Prospect/Suspect
1 - Net Profit: Profit before tax and distributions to firm owners, but after paying wages and bills
2 - Net Billing: Billing that only covers fees for architect’s labor
3 - Profit Earnings Ratio=Profit/Net Operating Revenue (defines the health of the business). If our firm brings in $100,000 (after paying our consultants, but before we pay our salaries or rent), and our expenses (salaries and rent) are $80,000, then our profit is the $20,000 left over.
We divide the 20k in profit by the 100k in net operating revenue to derive a profit earnings ratio of 0.20. That means that for every dollar we take in, 20 cents is available to our firm owners and investors as profit.
4 - Prospect and Suspect: Potential projects with a >51% (prospect) or <%50 (suspect) chance of income generation
What types of damages can be pursued in litigation? Which are called for in AIA B101?
Consequential vs liquidated vs direct damages
Consequential damages - Estimated cost of lost owner profit due to project delays (planned potential profit had my lemonade stand been open in time for the summer rush). The contracts prohibit all parties from recovering consequential damages.
Liquidation damages- per day penalty for a delayed construction project completion, agreed upon at the beginning. AIA A101 allows for liquidated damages. B101 owner cannot deduct or withhold any amount of money from the arch compensation as a penalty or liquidated damages without the arch agreement or a binding dispute resolution process
Direct damages - Actual cost of fixing unacceptable work (maximum allowed is = the Architect’s
fee). The owner may pursue a claim for the cost of repairing the leaky foundation from either the contractor or the architect (or both).
Current Earnings
Current Earnings: profit left over after taxes and expenses are deducted from income
Base vs direct vs indirect salary
Base salary: Total annual compensation (Base Salary in $/year = Hourly rate * 40hrs/week*52
weeks/yr)
Direct salary: Salary derived from billable hours (cost of employee’s time charged to client for, say, code analysis)
Indirect salary: Salary from non-billable hours (cost of employee’s time spent fighting with a jammed copier for 30 minutes)
Balance Sheets
At the scale of an individual, your paycheck tells you how much you are making (your income) and your bank account describes what you’ve saved (your wealth).
Similarly, at the scale of your firm, its profit-loss statement lays out what the firm is making in profit (its income) and the balance sheet describes what the firm owns (its wealth)
The balance sheet includes
Solvency = current assets/current liabilities
Liquidity = immediate assets/current liabilities
Leverage = liabilities/equity
Return on Equity = profit/equity
*remember that
Assets = things your company owns (computers, plotters, office furniture, dollar value of
intellectual property your company has generated, dollar value of your company’s reputation in the community, cash in the bank). Ask yourself, “How much do I have?”… if it has value, it’s an asset.
Liabilities = what your company owes (total owed in business loans, total owed in mortgage
payments for the office building your purchased, total owed on a company car purchased last year, total owed to your employees for the last week’s worth of work because we are in between paydays
Equity = the net worth of the business, were it to be sold today; Tally up all your firm’s assets
and subtract all of your firm’s liabilities… that’s your firm’s equity.
Profit=How much money your firm is making this month or year. This is different than equity, which describes how much money your firm is worth.
If you’re still not sure of the difference between profit and equity, try this analogy: Madison earns $100,000 a year at her job and over her life she’s saved up $200,000 in a bank account.
Think of her profit as $100,000 and her equity as $200,000. These kind of flow vs quantity relationships are all over these six exams (power vs electricity, peak cooling load vs annual cooling load, linear feet of foundation vs total cubic yards of concrete, water runoff rate vs detention pond size).
Profit-loss statements include:
Utilization rate, Overhead rate, Break-even rate, Net multiplier, and Profit-to-earnings ratio
What are each of these metrics?
Utilization rate: If 65% of a firm’s hours are billable to a client for design services, and the remaining 35% accounts for unbillable time and registration fees spent on things like attending AlA conferences, than it’s utilization rate is 65% (which is a typical value for a healthy firm).
For ease of visualizing, let’s assume that our firm pays its architect a generous $100 per hour.
For ease of visualizing, let’s assume that our firm pays its architect a generous $100 per hour.
Overhead rate: If our firm spends $150 on non-billable expenses (like AlA conferences) for every $100 it spends on staff salaries for billable client work, than we say that our overhead rate is 1.5 (also typical)
Break-even rate: In the example above, for every $100 we pay in direct (billable time) salary, we need to charge the client $250 to cover both the $100 staff salary and the $150 overhead. We then derive a break even rate of 2.5. That means that for every salary dollar we pay for our architect’s billable time, we have to charge 2.5 dollars just to break-even (this is still before we add more to the client bill to account for profit). Break-even rate always equals Overhead rate +
1.0.
Net multiplier: If we charge the client $300 for the $100 we paid our architect, our net multiplier is 3.0 (also typical for a firm). This allows for us to pay our architect $100 for the work, to pay the $150 for overhead (things like AlA conference attendance), and leaves us with $50 left over for profit.
Profit-to-earnings ratio: Our profit is $50 for every $300 we charge the client. 50/300=17% (this is the low end of typical… generally, the higher this number is, the better off our firm is)
AIA A201 General Conditions
Outlines the site and project specific conditions that modify the project from the typical. See a sample here.
Cash basis accounting vs accrual basis accounting
Cash basis accounting - You have $1,000 in the bank. In cash-basis, it makes no difference that tomorrow you will receive a large check from a client, nor that the next day you will pay your structural engineer with another large check. Account only for the $1,000.
Accrual basis accounting -You have $1,000 in the bank, but now you account for the $100,000 check you will receive tomorrow from your client, as well as the $10,000 check you will pay your engineer the day after. From an accrual basis point-of-view, there are separate lines for the money you have, the money you’re about to get, and the money you’re about to pay out, but you have a total of $1,000+$100,000-$10,000=$91,000 accounted for on the spreadsheet.
For obvious reasons, the accrual basis accounting method allows you to make intelligent decisions in guiding your business in a way that cash basis doesn’t. If you’re weighing whether to hire a new intern for the summer, and need to start the interview process, it’s better to think about the $91,000 that you’ll almost certainly have in the bank the day after tomorrow, than to make that hiring decision based on the $1,000 you have in the bank today.
Cash basis is what you will use to calculate your taxes. If today is December 31, you pay taxes on the profit that you made this calendar year… that $100,000 that will be deposited tomorrow from your client and the $10,000 you’ll pay the day after to your engineer: those go into figuring out next year’s tax liabilities and don’t show up on this year’s “cash basis” books.
Net revenue per employee
Net revenue per employee: If we charged our clients $300,000 this year and we had three total employees, our net revenue per employee would be $100,000 (a good goal for a healthy firm).
The higher this number is, the healthier the firm is because a high number means that it is bringing in a lot of money from clients but has few employees to pay.
Aged accounts receivable
Aged accounts receivable: How many days, on average, between when our firm sends a bill to its client and when we receive the payment from that same client. If it’s more than 90 days, you’re waiting too long to get paid.
Surety bond, bid bond, and performance bond
Surety bond: A type of insurance policy that the owner requires the contractor to purchase to be eligible to bid for, or work on, the project. It pays the owner to complete the project if the contractor walks off the job. Surety bonds come in two common flavors, bid bonds and performance bonds.
Bid bond: Contractor A wins the project by bidding $500,000, which is far lower than any of the others. Contractor B submitted the next-lowest bid, but his bid was much higher at $800,000. As Contractor A learns more about the project in preparation to build it, she discovers that she missed a passage in the specs stipulating that the ice cream factory must remain open, making product, during the entirety of the factory renovation. No wonder the next-lowest bid was so much higher! Realizing that she is contractually bound to conduct the renovation for only $500,000 while still maintaining a clean enough environment for food, she’s sure this project will bankrupt her construction company. She thusly walks away from the project, leaving the owner-who just completed an onerous, expensive, and time-consuming bidding process-to find a new contractor. In this case, the bid bond that the owner required all the bidders to purchase will pay the owner the difference: the extra $300,000 needed to hire Contractor B at $800,000. The owner is made whole because he gets his building, as laid out in the bidding documents, for $500,00 out-of-pocket plus the $300,000 that the bid bond insurance policy pays out.
Performance bond: Contractor B, who was required by the owner to purchase a performance bond when he signed the contract, is 90% through the ice cream factory renovation when the construction company owner dies. His children engage in a bitter struggle with one another to take control of the company that dad left behind. This leaves Contractor B unable to complete the project in a reasonable time frame; brothers take sisters to court to hash out succession plans in the construction business while the cranes on site languish. The performance bond, insurance required by the owner before the contract was signed, and purchased by the builder, then pays the owner $80,000 to complete the final 10% of the project, ensuring that the owner gets the ice cream factory renovation that he was promised, for the price that he was promised.
1 - Assets
2 - Liabilities
3 - Balance
4 - Equity
1 - Assets: Everything owned by a business that is cash or easily converted to cash
2 - Liabilities: Everything owed by a business
3 - Balance= Assets-Liabilities
4 - Equity: Same as balance (also known as net worth)
Contractor License Bond
A surety bond (insurance) that protects against contractor breaking construction laws
How long does a Contractor’s warranty last?
Contractor’s warranty typically extends one year, but can contract for longer*
*Or until statute of limitations/repose runs out (for work that doesn’t conform to the contract)
Net Operating Revenue
Net Operating Revenue: All the money we’ve taken in from clients, minus what we’ve paid out to consultants (engineers) and what we’ve paid out for reimbursables (our cost for travel to the site, which was charged to the client, but now we have to pay for that travel from the money we collected)
Net Operating Revenue is the money (net revenue) we have left over to
1, pay our architects to draw (direct expenses),
2, pay our utilities (indirect expenses)
3, pay our partners (profit)
Who pays for the bid bond
Like an insurance policy that pays the owner the difference between the winning bid and the next lowest if the winning bidder walks away before signing the contract, the owner requires the bidders to purchase their own bid bonds (if she chooses to require bid bonds at all). When the contractor bids, he is bound to build what’s laid out in the bidding documents for the winning bid price. If a contractor has a history that includes walking out, it will be difficult for him to even obtain a bid bond because no insurer will want to cover a high risk “runaway bride.”
1 - Chargeable Rate
2 - Billable Revenue
3 - Direct Salary Expense Multiplier
1 - Chargeable Rate= what the client pays the firm for an hour of your time
2 -Billable Revenue= payment from the client for billable hours
3 - Direct Salary Expense Multiplier=
A number that typically falls between 3.0 and 4.0.
A number that typically falls between 3.0 and 4.0.
If you earn $100,000 for a 50 week year (assuming two weeks paid vacation to simplify the numbers), that works out to $50 per hour. If your firm uses a direct salary expense multiplier of 4.0, they will charge the client $200 for each hour you’ve devoted to the project to cover your salary, benefits, overhead and profit.
What building typology carries the most risk?
Condo projects and single family residential projects
Why?
The condo board is an organized entity with high expectations, a bored lawyer living somewhere in the building, and a propensity to sue architects for the noisy floor assembly above, harsh afternoon sun, or wilting landscaping. Be sure to tell your professional liability insurance company before taking on such a job.
Schedule Performance Index
Schedule Performance Index= Earned Value/Planned Value
This metric returns information about project schedule and efficiency
Your target, therefore, is a Schedule Performance Index equal to 1.0, where the earned value = the planned value. Planning correctly, keeping track of this in real time, and adjusting staff responsibilities as needed to stay at 1.0, is tedious but necessary.
Municipal bonds vs revenue bonds vs corporate bonds
Municipal bonds are loans, made by investors, to a government.
Revenue bonds are municipal bonds issued to finance facilities for revenue-producing public enterprises (Also known as rate-supported bonds). For example, a government issues a bond for something that makes money on its own, like a stadium or toll bridge.
Corporate bonds: Private companies also issue bonds to borrow money for building projects (or to finance ongoing operations, hire employees, pay down debt, or support R&D).
The value of a bond is based on the credit-worthiness of the issuer, the length of the bond, and the interest rate of the bond relative to the going bank interest rate at the time.
Tort Claim
Claim made due to injury
Expertise vs experience vs efficiency firm structures
Expertise: exceptional talent or deep knowledge. i.e. Pritzker Prize winners.
Experience: Special programmatic areas, routine but complex, challenge to match task to experience level. i.e. data centers.
Efficiency: Inexpensive, repeatable, routine, lots of junior staff. I suspect most of the work done by these “efficiency” firms will be outsourced abroad over the next decades because if you plan to win projects based on your low fees, it will be difficult to compete with overseas labor costs.
Strategic alliance
The temporary sharing of technology, resources, and risk to get and build a project. This uses a teaming agreement to lay out credit, copyrights, non-competition clauses, roles, etc..
For instance, an architect and engineer work well together and wish to formalize their relationship with a proper agreement. They decide to join forces to pursue projects, and with input from their respective insurance companies and lawyers, they establish a repeatable contract so that they don’t have to involve the insurance companies and lawyers each time they respond to an RFP. Each entity feels that they are more likely to be awarded the project by teaming with the other; each feels that they enjoy a competitive advantage by avoiding the costly legal hurdles associated with negotiating a new architect-consultant contract for each RFP; and each delights in making great buildings with a trusted partner who cares about the quality of the drawings as much as the other one does.
Unlike a joint venture, two companies didn’t establish a new, third, company. And unlike a partnership, the two companies haven’t merged into a single company. They went into the strategic alliance as two companies and came out of it as two companies.
Had they entered a partnership, the two firms would have permanently become one single firm.
Had they created a joint venture, the two firms would have each taken ownership of a new third firm.
Overlay district vs planned unit development
Overlay district: additional zoning requirements for a defined area of town, regardless of the underlying base zoning classification. For instance, for fear of mudslides, the buildings along a bluff, whether zoned for residential, commercial, or industrial, are required to obtain a geotechnical soil report before permission to build is granted. Overlay districts might utilize additional zoning rules to establish historic districts in older parts of the city, protect wildlife in eco-corridors, or promote density along a light rail transit line.
Planned unit development (PUD): Change in the zoning/code for a specific plot in exchange for other good building practices or public amenities (the city council must approve the PUD). This often grants the developer more zoning flexibility in large scale, mixed-use land development.
For example, a developer interested in purchasing 175 acres currently zoned only for single-family detached homes hires your firm to design a walkable neighborhood replete with shops. schools, street trees, parks, and sidewalks. You then present the proposal to city council to allow the shops in what is currently residential-only zoning. If approved, the municipal government will allow the shops in exchange for the street trees, parks, and sidewalks. They sign off on your plan and will draw up a contract ensuring that you abide by the spirit of it, in exchange for the new zoning flexibility.
What rules do you, as an employer, need to follow? Name everything you can before you flip the card (you’ll be surprised by how many rules you missed).
0-15 employees: FLSA, 1-9, HIPAA, ERISA, Equal Pay Act, OSHA, Worker’s Compensation,
Minimum Wage
16-50: add COBRA, ADEA, ADA, Civil Rights (*20+)
50+: add FMLA, Obamacare, EEO Reporting, Affirmative Action
FLSA=Fair Labor Standards Act. Minimum wage, overtime pay, child labor laws.
1-9=Employment eligibility verification. Are your employees legally permitted to work in the US?
HIPAA=Health Insurance Portability and Accountability Act. Protects privacy of employee health information. You can’t tell one employee that another employee is suffering from gout.
ERISA=Employee Retirement Income Security Act. Sets minimum standards for retirement and health plans. For instance, the person who manages the retirement plan must act as a fiduciary (puts the best interest of the plan above their own self-interest).
Equal Pay Act=Prohibits wage discrimination by gender
OSHA=Occupational Safety and Health Administration. Protects employees from workplace injury
Workers compensation=Gives those injured at work wage replacement and medical treatment
COBRA=You lost your job that came with health insurance? You divorced your spouse or your spouse died and you were covered on her health insurance plan? COBRA allows you to temporarily pay out-of-pocket to stay with your old health insurance until you can find a new plan.
ADEA=Age Discrimination in Employment Act. Prohibits age discrimination against those 40 and older. You may discriminate against someone for being too young! Why? Young people don’t vote so congress doesn’t pass laws to protect them.
Civil rights=Civil Rights Act. Protects workers against discrimination on the basis of race, color, religion, gender, and national origin. As of 2020, this also includes sexual orientation. Most people don’t know that you can often legally fire someone for any other reason not included above: if you don’t like the color of an employee’s shoelaces, you may be able to legally fire them for that. And the first amendment protects citizens from government punishment based on speech, but not from employment action. So you can fire someone for saying something offensive or stupid (unless you work for the government). I have found that smart people I work with like to feign legal expertise when it comes to labor law.. and I’ve found them to be wrong almost every time l check with the university lawyer to clarify. Obviously, consult a labor lawyer first.
FMLA=Family Medical Leave Act. Allows employees to take unpaid, job-protected leave for family and medical reasons (birth, adoption, military deployment).
Obamacare=Affordable Care Act (ACA). Large employers must offer affordable health care insurance as an option to those working 30+ hours per week.
EEO Reporting=Equal Employment Opportunity. Employer reports hires by race and gender. For 100+ employees.
Affirmative Action-Employers must recruit and advance qualified minorities, women, veterans, and persons with disabilities.
Mediation vs arbitration vs lawsuit
Laid out in B101, either:
Mediation -> Arbitration (not always cheaper, often ends in 50/50 settlements)
Or
Mediation -> Court System (can be cheaper, fairer, and faster, but is also public)
Owner wants a new architect
The owner can fire architect without cause (for convenience), though has to pay work-to-date, including overhead and profit
The architect can’t transfer the project to another architect because first architect got too busy to finish.
Each party is responsible for sharing concerns as soon as possible
LLC
Limited liability company
- Separates personal assets from company assets; protects personal assets from client lawsuits
- Small to medium sized company
- File with state (for this and any corporation)
Filing as an LLC is a good option for a new architecture firm.
S-Corporation
C-Corporation
B-Corporation
S-Corporation: Small or large company without public stocks (“closely held”) - singly taxed.
Personal property protected from client lawsuits. Good option for an architecture firm.
C-Corporation: Large company with public stocks - double taxed
B-Corporation: Company with goals beyond profit-seeking: environmental or social mission, as well as making money.
Common project delivery methods
Design-Bid-Build: Unless told otherwise, assume that the ARE is asking you based on this “vanilla” option.
Design-Build: A single contract between the owner and a design-build firm employing architects and contractors (or joint-venture entity owned by architect and contractor)
IPD: Integrated project delivery. Catch-all category for one-off teamwork-focused contracts where owner, contractor, and architect share the financial risks and rewards of a completed building.
Construction Manager: A powerful entity, hired by the owner and answering directly to her, who may serve as a consultant in an advisory role, a legal representative of the owner who hires the architect and contractor, or a one-stop-shop for both advising the owner and then constructing the building.
It may seem like the project delivery options are both prescribed and limited in choices.. because they kind of are prescribed and limited… If that feels strange to you, read on (but you have my permission to move onto the next card if the selection of contracts available feels
“normal” to you.)
Add alternate vs unit pricing vs allowance
Add alternate: The owner may want an outdoor pool as part of his hotel project, so he’s curious about the extra cost. Once he’s defined the extra cost, he’ll put that in his spreadsheet to confirm that the pool will pay for itself in extra nights booked. You will design a hotel and add a pool to the drawings; in the bidding documents, you’ll make clear that the pool is an add alternate and that bidders will offer two cost numbers: one for a pool-less hotel option, and a second that includes the add alternate pool.
Unit pricing: The owner will be building a hotel, but has not yet decided on its size. He needs a solid price for the hotel (without the rooms… just the lobby, restaurant, laundry facilities, etc.) plus a unit price for each hotel room. That way, the owner can analyze market data and effectively study feasibility against the cost of building to a certain number of rooms. After the schematic design phase, you, as the architect, can give him a cost estimate of $4.2 million for the base hotel with 40 rooms, plus a unit price of $290,000 additional for each hotel room. Now he can talk to his investors and market research people to decide the optimal size for his hotel armed with specific knowledge about the unit price of each extra room. Unit pricing works best for repetitive elements in a project (street lights, an array of barns for aging whiskey) where the owner wants to buy time before committing (to gather financing for extra landscaping that isn’t yet in the budget, to determine if the public’s interest in consuming bourbon is permanent or just a passing fad). It also works for elements that are easily quantifiable (earth excavation, linear feet of site-cast concrete retaining wall), also when the owner wants to buy time before committing to an amount of something. Unit pricing does not work well with complex elements of projects (for instance, if an owner would like to buy time before committing to a building form).
Allowance: Options for TV model availability change rapidly with advancing technology, so you don’t yet select a specific television model for the hotel rooms, knowing that the hotel won’t be completed for another 2.5 years. You’d rather wait and pick out a TV model then. But leaving the televisions out of the drawings invites the contractor to fleece the owner in a future change order for all those TV wall mounts. You need to get the mounts into the contract up front, while the owner has negotiating leverage, so you ask for an allowance for TV mounts. The contractors* bids then come back to the owner with the TV mounts accounted for, even though model numbers aren’t in your specifications. The winning bid includes an allowance for $40,000 for all TV wall mounts, provided the television weighs less than 55 pounds and there is no special wiring required. Now, with the allowance already in the contract, as long as a “normal” TV is selected by the owner, the contractor can’t jack up the price later when the owner is desperate to complete the campus-adjacent hotel before college football season begins. The allowance must always include all costs: parts, labor, taxes, delivery to the site, etc., so the owner won’t be surprised by a bill for taxes, labor, and delivery charges during construction, and the owner can properly evaluate ali the contractors’ bids on equal footing. If one contractor’s bid included the cost of the mounts but didn’t include taxes, labor, or shipping-but the other bids did include those elements- it would be difficult to compare different bids as “apples-to-apples.” Just for the TV mounts the difference between the bids that are all-inclusive and the bids that are for parts-only could eusily be tens of thousands of dollars!
Contractor’s “Cost of Work” includes…
Materials
Labor
Profit
Overhead
Rules for unpaid interns
1 - Similar experience to education
2 - Must benefit intern
3 - Intern doesn’t replace anyone and is monitored closely
4 - No advantage or some disadvantage to firm
5 - No guarantee of job afterwards
6 - Intern and firm are explicit that there is no salary
Note that while there is no AlA ethics rule against firms engaging unpaid interns, NCARB does maintain a stance against unpaid interns.
Basic services
Basic services in the standard AlA contract include
Instruments of Design
SD, DD, Bid, CD, and CA, cost estimation, and coordination Budget and schedule management
Codes and utilities
Mechanical, electrical, plumbing (MEP) engineering and structural engineering
Everything else (programming, acoustical consultant, marketing materials, etc.) is considered a supplemental service or an additional service… with an additional up-charge fee.
Construction Manager-as-Agent
The owner contracts with the Construction Manager who acts as his agent and contracts with the Architect, and Contractor.
*This option is less risky for the Owner than the CM as Advisor route, gives more authority to the CM, and greater completion speed with a greater cost.
Types of project delivery contract structures
1 - Design-Bid-Build
2 - Design-Build
3 - Integrated Project Delivery
4 - Construction Manager as Agent
5 - Construction Manager as Advisor
6 - Construction Manager as Constructor
7 - Bridged Design-Build
How do you choose whom to staff to a project?
1 - Utilization rate (low rate means they have time to give to the project; high rate means they are already busy with another billable project)
2 - Experience/expertise/role
3 - Does the Architect have a license in the state?
Negotiated select team
Owner hires the contractor she likes from the beginning of the project, before drawings are completed (or even started). This project style is a subset of Design-Bid-Build.
*This option allows fabrication to start early on complex parts of a project (i.e. special curtain walls) by including the contractor from the beginning. It also ensures a quality project: the contractor was selected because of her craftsmanship, integrity, professionalism, etc., not because she had the lowest price.
Offers greater speed and quality than basic Design-Bid-Build but is obviously more expensive because there’s no bidding.
Base design-bid-build contracts
AIA B101 - Owner-Architect Contract
AIA A101 - Owner-Contractor Contract
Phasing
Phasing: construction can be planned as a series of stages, rather than as one continuous effort.
Helps with complex systems: Especially common if the owner needs to stay open during construction. (*We’ll move our operations to the west side of the building while you work on the east side.”)
Helps with uncertain funding: to make sure that a portion of the project is occupiable, even if funding dries up before the whole thing is completed. (“Start with Building A, and if our IPO turns out to be a boon for the company, we’ll complete the already-designed corporate campus with construction of Buildings B and C.”)
Pros: lower initial investment so less initial risk; income can be generated by the portion of the restaurant that is open during construction
Cons: the total project will take longer to complete; more expensive to bring cranes to the site twice, route construction deliveries out of sight of diners, etc.; must maintain security, cleanliness, and worksite safety to meet both the needs of the construction site and the restaurant
operation.
Who owns the drawings for a project?
The architect owns the instruments of service - at all phases; The architect grants the owner and contractor a
“limited license” to build the project. Unless the architect agrees (and typically is paid for it), the owner can’t simply re-use the drawings for her next new Pilates studio.*
*The architect can sell the rights, if the new architect indemnifies the old. The owner can also get the right to use the drawings if the architect is terminated for cause.
Types of bids
Competitive: Lowest immediate cost
Negotiated: Owner selects a (single) trusted contractor and they negotiate a price to build the museum. Greater speed and quality, but obviously more expensive because the owner has given up the option to benefit from competitive pricing.
Invited: Competitive bid with specifically qualified contractors
Proposed: The owner negotiates for best quality out of the lowest four bids
AlA agreement types by letter prefix
A series: Owner-Contractor; Contractor-Subcontractor;
Sureties
B series: Owner-Architect
C series: Architect-Consultant; IPD
D series: Miscellaneous
E series: Specialty Projects, Services, and Processes
G series: Project Management and Administration
When is a project late: After the substantial completion date or after the final completion date?
Substantial: Ready for move-in, sets the deadline for a late project, start of the warrantee period Final: Punch list is fully complete
Name common causes for construction delays? Who is at fault for each?
Unexpectedly bad weather (normal weather days are built into the schedule, no one at fault if that number is exceeded)
Change orders caused by the owner or architect (who are at fault)
Contractor behind schedule because they are building too slow (the owner can require overtime at contractor’s expense to catch up)
What kinds of employee hours apply toward utilization rate?
Utilization rate includes only billable labor (time spent on the project and billed to the owner):
- Red-lining
- Drawing
- Design meetings
- Site visits
- Coordination/CA
Excludes all firm management and marketing labor
Public project process and Qualities of winning bids
RFP -> Kickoff -> Contractor questions and answers ->
Sealed bids →> All bids are opened at once -> Choice is made
1 - Lowest responsive bid (bidder followed the bidding rules and accounted for everything in the drawings/specs when bidding a price)
2 - Lowest responsible bid (bidder has the financial and technical wherewithal to build the project to a minimum quality, on time
Lifecycle Cost Analysis Includes and excludes…
And differs from Life Cycle Assessment because…
Life-Cycle Cost Analysis (LCCA): The evaluation of the cost of, for instance, boiler systems in a building from installation to replacement.
Includes the cost to install, plus the predicted costs: fuel to run, cost to maintain, salvage value after the useful life has concluded, and considers how long one system is expected to last as compared to another. Boiler A costs less to install but more to operate; Boiler B costs more to install but less to operate. LCCA attempts to identify which boiler choice offers a better value, accounting for inflation.
Useful for a fuller accounting of value beyond simple installation cost comparisons
LCCA excludes sunk costs (like if the two boilers cost the same in design fees and pipe installation, those will not come into play)
*Not to be confused with Life-Cycle Assessment (LCA), which also compares building design options-but whereas
LCCA serves as an accounting tool, LCA serves as a sustainability tool. LCA measures the cradle-to-grave environmental benefits and liabilities from raw material extraction through production, transportation, use, and disposal of a good. In Life-Cycle Assessment two roofing membranes may be compared for everything from the water and petroleum used in their manufacturing, to the thermal building loads and heat-island-effect associated with their use, to their usable life and recyclability upon replacement.
What is quality management in architecture?
Quality Management (QM): Intentional and formal process of developing and revising the instruments of service and internal firm systems. For instance, establishing how many cycles of redlining and revising drawings each project will have, or how many times per month the project architect will check in with the client by phone during design. (Also called Quality Control (QC).)
Stipulated lump sum
Fixed fee + expenses
Percentage of construction cost
Hourly to a maximum + expenses
Hourly-open-ended (no established maximum) + expenses
Fee per unit/sf + expenses
These are the most common ways that architects will be paid. Which flavor used is usually determined by what the owner wants.
Stipulated lump sum: fixed price for owner and fixed fee for architect. Don’t use if scope, responsibilities, or task assignments aren’t clearly defined. If architect works too many hours, she loses money on the job; if she works too few, she makes more profit and owner is fleeced. Everyone must trust one another.
Fixed fee + expenses: with or without a cap limit on expenses
Percentage of construction cost: If labor or materials were donated to build the project, their value should be included in calculating construction cost
Hourly to a maximum + expenses: just what it sounds like
Hourly-open-ended (no established maximum) + expenses: just what it sounds like
Fee per unit (or fee per square foot) + expenses: typically only used in residential design
*Public sector projects will almost always be stipulated lump sum or percentage of construction cost
*Private sector will use any of these
*Some of these terms are also used to describe options for how the owner pays the contractor
Examples of Supplementary Services
These go beyond the standard owner-architect contract, so you’ll charge an additional design fee. They can be enumerated and a fee may be estimated BEFORE design and are therefore we call these SUPPLEMENTAL services.
Offering more than one design option
Certified designs (LEED, etc.)
Fast-track
BIM coordination
Interior design, or furniture, fixtures & equipment (FFE)
Post occupancy evaluations
Existing facilities survey
A/ or security design
More than anything, the list above (and more similar items listed in the contract) let the owner know what the architect will not be doing under a standard agreement without compensatory extra fees. That way, when an owner asks later for LEED or a post-occupancy survey, all parties will understand that this is an extra topping on the pizza, and as such, requires an extra fee.
Design-Bid-Build
Owner contracts with the Architect to draw, and then the Contractor who bids a fixed price based on those drawings.
*This project type is linear and clearly defined, with the lowest immediate cost, a longer schedule, and a higher chance of large change orders. Due to the change order risk, the drawings need to more complete earlier in the process.
*This was, for a long time, the most common type of contract and serves as the default option assumed in the ARE unless otherwise specified
Bridged Design-Build
Owner contracts with a design architect (“bridging consultant”) to design the project through SD, then a
“production architect-contractor team” bids to develop the documents and build the project. This contract retains some of the (good for the owner) adversarial relationship between the architect and contractor because the bridging consultant (design architect) works for the owner and has her best interest in mind; and it retains some of the (good for the owner) speed and expediency associated with design-build projects because the production architect and contractor work for a single entity and ostensibly trust one another without the blame-shifting (*It was the architects fault!”) or cover-your-ass culture (“We can fix this design flaw ourselves, but send an RFI and wait for an answer anyway”) associated with design-bid-build. The bridging consultant (design architect) continues to review the production architect’s drawings after the hand-off, on behalf of the owner, to ensure that the design architect’s intent was followed through to detailing and technical specs.
*This type of project increases quality, lowers risk, and offers greater speed than design-bid-build (but less speed than design-build). Not good if the owner needs to have the architect “on her side” throughout the whole process.
Integrated Project Delivery
Integrated Project Delivery (IPD): Owner, Architect, and Contractor each take ownership in a fourth business as an integrated team, pooling resources and sharing risks and benefits. For instance, a hospital system teams with a builder and you, the architect, to design and construct a new hospital building adjacent to a new parking garage.
All three parties give up the right to sue one another and adopt a “what’s good for the project” mentality. If the hospital is completed on time, this fourth company that you have partial ownership in earns a bonus. If it finishes under budget… another bonus. If nurses’ surveys show a minimum level of satisfaction.. another bonus. If energy use after the first year is below a target level… yet another bonus rolls in one year after substantial completion. The fourth company will own and run the parking garage and earn recurring revenue as receipts for parking garage fees roll in over time. If the garage does poorly because the team didn’t anticipate the widespread use of ridesharing technologies like Uber, the team will lose money on that segment of the project. In this way. you take on more of the project’s risk, and earn more of the upside benefit, than you would in a legacy contract structure. IPD is not simply an evolution of a new type AlA agreement, but serves as a difference in kind of contract.
The goal is not only to act collaboratively and share ownership, but also to reduce waste. A federal government analysis demonstrated that, since 1964, all non-farm industries increased productivity by at least 200%-except one. The US construction industry over that same time window was the lone loser, actually decreasing productivity over time! A third goal of the IPD contract is to reduce inefficiencies. By opening up communication and incentivizing collaboration, less time will ostensibly be spent hunkering down, and more time can be spent huddling up.
*This type of project is usually used for large and complex projects and works especially well with BIM. IPD is, above all else, flexible. Each project sets its own system of rewards and penalties, its own financial structure, and its own teams (in the example above, perhaps a health insurance company, a health care charity, and the MEP engineer are also stakeholders in the new hospital-building company).
Construction Manager as Constructor
Owner contracts with Architect and CM (who also acts as the builder) at the same time.
*This type of project is the least risky for the Owner, most risky for the CM, and has higher speed and cost. The final price (GMP) is known by the end of SD. Because of the speed and increased authority of the CM, the Architect must maintain a stricter process of quality control.
Construction Manager as Advisor
Owner contracts with Architect, Contractor, and CM.
*This type of project brings the CM on early as a consultant for the Owner, typically a CM with expertise in a specific market (like performing arts centers). This allows for greater speed.
Design-Build
Design-Build: Owner contracts with an Architect-Contractor team.
*This project type lowers risk and cost to owner, while increasing speed, but has the potential for lower quality, as the Owner has no agent. For instance, the light fixtures that were specified are no longer available from the manufacturer. The builder wants to replace the light fixtures with those of comparable material expense, but (slightly) inferior ones that require less labor to install because the replacement fixtures don’t hide the low voltage transformers in the basement the way that the original ones had. The owner may not have the wherewithal to recognize the new fixtures as inferior. If the architect and contractor are a team hired together by the owner, there is less incentive for the architect to call out the contractor’s replacement fixture as inferior.
What are the instruments of service?
Instruments of service include pretty much everything the architect created for the project, including the final CD set and specifications… but also the site analysis, notes, study models, environmental review documents, cost estimates, sketches, early versions of the design that were abandoned… all the creative work, tangible and intangible.
An architecture billings index (ABI) of 48 in “inquiries” means
An ABI of 48 means that, in aggregate, the financial future outlook for architects ticked down last month by some very small amount. The architecture billings index (ABI) is a running monthly number: an economic indicator for construction activity. A number more than 50 means the financial outlook improved over last month; a number below 50 means the financial outlook declined relative to last month. There are separate ABl numbers for billings, new design contracts, and inquiries… for residential, industrial, public, and commercial sectors… and for the Midwest, Northeast, South and West regions of the US.
The ABI has successfully predicted the last two recessions
11 months before each one started.
If the owner-architect contract stipulates that the architect’s fee will be 7% of construction costs, and the project is abandoned after CDs (and therefore has a construction cost of $0), is the architect entitled to payment?
The architect is paid, even if the project isn’t constructed, because the contract is based on the “Owner’s budget for the Cost of the Work,” not the “Cost of the Work.”
From the contract: “The Architect shall be entitled to compensation in accordance with this Agreement for all services performed whether or not the Construction Phase is commenced.”
You own a firm and provide life insurance to your staff as a benefit of employment. Is that benefit taxable?
The premiums (monthly cost) of the first $50,000 of life insurance is not-taxable, but after that, the rest is subject to tax. The employee will then pay some tax on large life insurance plans. Wages, salaries, and bonuses are considered taxable income. Many benefits, like child care and contributions employees make to health insurance plans may not be subject to taxes.
What do you do if an exam question asks you which firm employee to assign to a project?
- Look for a staff member who has experience in the building program type. For instance, if the assignment is to design a school, look for an employee who has experience in education projects. Now you’ve perhaps narrowed it down to three employees out of the original twelve.
- Then, from those three, find the ones with the lowest utilization rates. A 90% utilization rate means that 90% of that employee’s time is billable to a client, so best not to assign it to that busy team member and find one with more availability. When you look at the other two, you may find one education-experienced person with 30% utilization rate and one with a 50% rate. That means they each have time available to dedicate to a new project.
- From the final two, pick the one that makes the most sense for the task. One maybe a lower-level intern with 1 year experience and a commensurate low hourly wage and the other may be a senior project manager with decades of experience and a high hourly rate. If the task is updating the drawings to reflect redlines, the rookie is your best pick. If the task is making the redline edits for a complex school design, better pick the veteran.
The building structure fails. Why doesn’t the owner sue the structural engineer?
The owner doesn’t have a contract with the structural engineer. The owner has a contract with the architect and the architect, in turn, has a contract with the structural engineer. There is a “chain of command” for liability, accountability, and communication. In this case, the owner sues the architect for damages and the architect then sues the structural engineer to recover those damages.
Do business as a sole proprietor or as a limited liability corporation?
For someone with the liability exposure of an architect, an LLC or S-Corporation is almost certainly the best option for operating a business. If the building you design burns, and people are hurt, the aggrieved will find it difficult to take your family’s house in a settlement. If doing business as a sole proprietor or partnership, it is much easier for the winner in a case to take your personal house- and the money you’ve put away for your child’s college expenses.
What is “responsible control”
As the licensed architect, you can stamp the work if you achieved responsible control; and you have achieved
“responsible control” over a drawing set (including specs, reports, etc.) if you possess a knowledge of, or maintain supervision over, that set consistent with the standard of care. In other words, you can stamp plans that you didn’t create, but you can’t stamp plans you know little about.
How much do you have to know about the set before you can ethically stamp them? Enough to be consistent with what other architects in your area are doing for similar projects (that’s the “standard of care” part).
Can you, as the architect, stamp the work of consultants?
You may stamp the work of a licensed consultant, if you have, “reviewed it, coordinated its preparation, or intend to be responsible for its adequacy.”
Is it unethical for an architect to offer free services?
It is not unethical for an architect to offer free services.
The AlA used to be in the business of establishing fees, outlawing discounts, and regulating when an architect could submit a bid to undercut the fee established by another firm. They took this role to protect the profession from a “race to the bottom,” whereby architects would undercut one another on price ad infinitum-but those protectionist policies ran afoul of antitrust laws. The federal government deemed that practice to be too much like a cartel, and contrary to the free-market tradition of competitive bidding.
How many times does an architect need to goof before they are disciplined by the profession.
As you might imagine, there is no hard minimum number of lapses, beyond which the architect is disciplined by the profession. Instead, trouble arises after failing to
“demonstrate a consistent pattern of reasonable care and competence,” and like so much else in an architects liability portfolio, that bar to clear is established by “standard of care” norms: other architects practicing in the same locality at the same time.
Can you fire an employee because you don’t like the color of their shoelaces?
Yes, surprisingly, you can legally dismiss an employee for nearly any reason, provided it is not the employee’s race, gender, national origin, disability, religion, or genetic information. In 2020 the supreme court ruled that sexual orientation is also protected, and some states offer other additional protections to employees. You cannot fire someone for their age, but that rule only applies if they are over the age of 40, so you can fire a young person because of their age. Why? Because those under 40 are less likely to vote, so congress doesn’t pass laws to protect them.
Harassment is both illegal and subject to discipline within the profession, and includes (but is not limited to) offensive slurs, offensive jokes, unwanted physical contact, insults, petty slights, and interference with work performance.
Isolated incidents, unless extremely serious violations, do not rise to the level of AlA discipline-it’s a pattern that the profession is looking for when meting out punishment.
Can an architect contribute to a campaign of a local politician in the hope of winning a contract to design a new firehouse, should that politician become elected?
This one is a tough call, but an architect can probably contribute to a campaign in the hopes of winning a contract later. Architects are prohibited from offering payments or gifts to public officials with the intent of influencing the official’s judgement related to a juicy building project. But that rule does not apply when making legal campaign contributions!
Is an architect who is working with a developer allowed to stand up in a city council meeting and speak in support of the developer’s project?
Architects can make public statements on architectural issues but must disclose that they have an economic interest in the outcome.
Is it ethical for an architect with no knowledge, background, or experience in oil refinery design to take responsibility for the architecture of an oil refinery?
An architect may provide professional services in an area beyond their technical qualifications, provided they engage relevant consultants to guide them (or seek the appropriate education/training on their own).
The Code of Ethics states, “Professional Recognition:
Members should build their professional reputation on the merits of their own service and performance and should recognize and give credit to others for the professional work they have performed.”
Ha! Insert your own example of this ethics code being broken here
Please do better at sharing credit than your predecessors have.
You leave your firm. Are you entitled to take up to three drawings or reports with you?
Of course you may not take drawings with you when you leave your firm without permission. Those drawings belong to the firm, even if you were the one who created them through your hard work. That’s what they paid you for.
If however you served the firm as an independent contractor (IRS form 1099 instead of W-2 at the end of the year, and you didn’t sign a form handing over rights to your work, you may have ownership of the work, just as an architect hired by an owner has rights to their work. Check with a lawyer.
But there’s a twist! While it is unethical to take work when you leave without permission, the ethics code stipulates that the employer may not unreasonably withhold permission from a departing employee requesting to take copies of non-confidential work.
Your boss is slow to approve your work experience hours through NCARB. Is that ethical?
No, it is not ethical to foot-drag on experience reporting.
Rule 5.201 stipulates that, “Members who have agreed to work with individuals engaged in an architectural internship program or an experience requirement for licensure shall reasonably assist in proper and timely documentation in accordance with that program.”
Your boss, who is not licensed, and did not have to be because the firm historically has limited its work to single-family residential projects, has asked you to get licensed because they wish to expand to commercial work. Is it legal/ethical/safe for you to stamp drawings for your unlicensed boss?
First, stamping a drawing based on your judgement is kind of like your right as a licensed professional, so you can legally stamp a drawing if you had responsible control over it. This deference is what licensure earns you and it is what you are working toward with all of the studying you are currently engaged in. It may not be legal in certain states because of laws that, for instance, require that a firm owner or equity partner be licensed. So it is often, but not always legal to stamp drawings for your boss if you choose to.
The second question is ethics, and to that, I can find nothing from the AlA Code of Ethics or online sources that prohibits an employee without firm ownership from stamping a drawing set. Of course, one may have personal qualms with the ethics of asking someone to accept the risk and liability of using their seal without offering them the upside of firm equity in return.
The final concern is liability, and on this count you almost certainly should not stamp the drawings for your boss without consulting an attorney of your own. While the firm’s errors and omissions policy may (or may not) cover you through litigation, you’d need to confirm in writing that it covers you if you leave the firm before the ten year statute of limitations runs out-otherwise you’d be personally on the hook for being sued after the parapet leak is discovered, even though you were laid off three years ago! In this case, you may need to purchase liability insurance on your own when you leave the firm to protect yourself!
What is “payroll burden?”
Payroll burden (also called labor burden) is the cost to the firm for employing you, not including your salary: costs from employer-provided health insurance; paid time off/paid sick leave; payroll taxes due from the employer such as social security, Medicare, and unemployment tax (termed “FICA taxes”); pensions and matching contributions to a 401k fund.
Payroll burden is typically expressed as an aggregate percentage of salaries, so if your firm has a payroll burden of 10%, it means that for every $100 of salary paid to employees, the firm must account for an additional $10
toward these extras.
LLC vs S-Corporation
Each protects your personal assets, so if the building you design burns down, the victims will have a difficult time winning your children’s college fund when they sue you in court. Sole proprietorships, or just starting a business without filing with the state as a business entity… those paths don’t offer this protection.
Neither LLs or S-corporations are double-taxed the way that C-corporations are. GE, Microsoft, Coca-Cola and other large entities file as C-corporations because once a company gets big enough, it is almost required to become a C-corp. If your C-corporation makes a profit this year, the government first taxes it at the corporate level. Then if it uses that profit to pay dividends to its owners (shareholders), those shareholders are taxed again at the individual level-we say that C-corps are “double-taxed.”
So what’s the difference between an LLC and an S-corporation?
S-corporations take a bit more effort (though not much) to set up and have a few more rules (though not many more).
.. The meaningful difference is that if you have a very profitable year, S-corporations can be taxed at a lower rate than LLCs. I’ll explain. The federal government taxes income at a higher rate than it taxes investments, so someone who makes the same amount of money as you do this year, but makes it by earning bank account interest and stock dividends instead of salary, will pay a meaningfully lower rate than you will as a working person.
Remember that when you read the next paragraph.
If at the end of the year, an LLC has $500,000 left over in profit, the owner will be taxed as if they earned that $500,000 working. This means a higher base rate, plus more in FICA taxes (social security, Medicare). If however the owner had filed as an S-corp, they are required to pay themselves a “reasonable” salary, tied to industry standards, but their profit above that salary can be taxed as if they were an investor in their own company, and their company paid them a dividend for their shares of stock.
So, maybe the first $100,000 is taxed as a reasonable salary for the principal of a small architecture firm, but the next $400,000 in a S-corporation can be defined as a
“distribution,” and taxed the same way that any other investment would be taxed: at a lower rate than salary earnings.
Direct expence
Indirect expense
Reimbursable expense
Profit
Direct expenses: paying the employee who is working on the project for the hours that they dedicate to the project
Indirect expenses: paying the office manager, conference travel expenses, and the employee efforts not tied to a specific project
Reimbursable expenses: paying for the plotter and architect’s travel to the construction site, then charged (with a modest extra percentage) to the client
Profit: Firms typically charge 3x to 4x the direct expenses for the employee’s time to account for indirect expenses and profit
Which of the following is most associated with an architecture firm quality management (QM) strategy?
(select four of the six)
Assess risk
Eliminate waste in processes
Track employee time in smaller increments
Treat your consultants as customers
Utilize check sheets
Utilize scorecards
Eliminate waste in process
Treat your consultants as customers
Utilize check sheets
Utilize scorecards
Which of the following is associated with an architecture firm quality management (QM) strategy? (select four of the six)
Astm9
ISO 9001
Lean systems
Project audits
Six sigma
Separate quality management into its own department
ISO 9001
Lean systems
Project audits
Six sigma
Six Sigma vs ISO 9001 vs Lean Systems
All three are recognized and long-established quality management programs, all three are customer-focused, all three involve a firm’s commitment to continuous improvement, all three take common-sense ideas and make them an intentional part of the organization, and all three are implemented firm-wide.
Six Sigma: Standardizes results and eliminates variation.
Can be third-party certified, but not always.
ISO 9001: involves lengthy (up to three years) third-party certification process for accountability; more appropriate for large firms with multiple offices; and measures teamwork, leadership, purpose, decision making. consistency, and communication with a focus on mutually beneficial relationships. If you’re curious to learn more, see this.
Lean Systems: more of a philosophy than a formal program with certification; all about eliminating waste in the firm’s processes. Do we really need to plot out a third copy of this drawing set? Do we really need a third visit to the site? Do we really need 10 days to turn around an RFI?
Break-even multiplier vs direct salary expense multiplier
You pay an architect $25/hour and charge the client $100/hour for the architects billable time.
The break even multiplier is 2.0, which means that for every $25 you pay the architect on your staff, there is another $25 to cover the architect’s health insurance, retirement, AlA membership, office furniture, and rent for the firm’s office.
The direct salary expense multiplier is 4.0, which is how we came up with the $100/hour we charge the client. The direct salary expense multiplier is similar to the break even multiplier, but the direct salary expense multiplier also includes profit for the firm. Obviously, then, if the break even multiplier is larger than direct salary expense multiplier, our firm loses money on each job it takes.
Spearin Doctrine
Spearin Doctrine: The contractor has the right to expect accurate and proper plans/specifications, and isn’t liable for errors in them. Based on a 100-year-old landmark Supreme Court construction law case, US vs Spearin.
Big projects are expensive and establishing risk-who’s responsible when things go wrong- is a big deal, especially to owners and insurance companies.
Building coverage ratio (BR) vs floor area ratio (FAR)
Building Coverage Ratio (BCR) BCR% = building area (B) x 100 / site area (A)
Floor-Area Ratio (FAR)
FAR% = total floor area (B+C) x100 /
site area (A)
Privity vs indemnity
Privity: A concept where, if we have no legal contract together, you have no legal recourse to file a claim against me.
Indemnity: I’m signing a contract that frees you of liability and puts the blame back on me.
So when you rent a jet ski, the proprietor may ask you to sign a waiver of liability: a form that indemnifies the proprietor of liability if you ram a swimmer with their jet ski. Because in construction the risks are significant and the stakes are high, everyone is looking for indemnity. They want to pass the risk of a claim onto you. Don’t let them do that.
In your own words, what is most important to the contractor? To the owner? To the architect? What parts of the process does each party want to control?
The contractor wants to win the job, period. She knows that bid price will often be the deciding factor determining whether she lands the contract. She may have to pad her revenue with change orders later to make a profit because she under-bid to get the job. She wants clarity in the drawings and a fast turn-around on decisions (RFls, applications for payment, submittal approvals) so that she can stay on-schedule.
The owner wants the lowest bid price and no change orders. He seeks the earliest possible project completion.
He loves negotiating opaque contracts because he wins most negotiations and has more layers
The architecture firm wants to win the job, period. It may underbid to get the contract and then see no path to profitability. The architecture firm has the least risk and is likely least comfortable with (and least insured for) risk. It wants to be in control of most small and medium-sized decisions and for the contractor to build exactly what is drawn.
Profit-loss statement vs balance sheet
Profit-loss statement: flow of money (income). How much came in this month in revenue? How much went out in
expenses.
Balance sheet: snapshot of equity (wealth). How much was in the bank before the month began and again after the month ended?
There are flow vs quantity relationships that parallel the income-wealth relationship all over these exams: peak heating load vs annual heating; flow vs quantity of water; power vs electricity; pounds per linear foot on a beam vs pounds per square foot on a floor.
What is the difference between supplemental services provided by the architect and additional services provided by the architect?
Supplemental services: extras that can be defined by the owner and architect beforehand and easily enumerated and valued in the contract, like hiring a landscape architect or providing multiple preliminary design options.
Additional services: extra requirements on the architect that will arise during construction and not able to be accurately predicted and specifically included in the contract, like two extra required visits to the site, or responding to a new change to the code. The contract will set an hourly rate for the architect’s time and the owner will pay for additional services by-the-hour.
*In both cases, the architect should be paid more than the basic services sum.
What is “joint and several liability”
It is important to note that tort law (I was hurt and I’m suing you for my injury) is totally separate from contract law (you broke an agreement we both signed). The concept of joint and several liability is limited to tort law (ambulance chasers) and has no bearing on contract law.
Contract breach, professional negligence not causing someone to be physically injured: each party pays for its own mistakes, but claims are paid up the “usual” branches in the construction contract tree and the insurance companies settle everything later… contractor pays owner for sub’s breach and gets reimbursed from sub; architect pays owner for consultant’s breach and gets reimbursed from consultant.
What is “all risks insurance?”
All risks: A type of insurance, carried by property owners, to cover anything not explicitly listed as not covered by the policy. For instance, if I have an all risks insurance policy, and the policy says nothing about terrorism damage, and my business is damaged by terrorists… I’m covered!
The opposite of all-risks insurance is “named perils insurance,” in which I’m only covered for the perils specifically enumerated on the insurance policy. So in the example above, if my named perils insurance policy explicitly covers me for only fire, flood, theft, and structural deterioration, and my business is damaged by terrorists…
I’m screwed!
Arch required 5 types of insurance
General
Professional
Automobile
Workers compensation
Employers liability
What is a firm’s current ratio (solvency)?
What is a firm’s quick ratio (liquidity)?
Current ratio: value of current assets as a ratio to current liabilities..To calculate, take everything the firm owns and will likely be cash in the next 12 months (cash in the bank today, plus accounts receivable (invoices to clients who haven’t paid them yet but will soon), plus inventory. plus prepaid expenses, etc.) and divide that number by what the firm owes in the next 12 months (what’s owed on a line of credit, plus the next 12 months’ principal owed on a traditional term loan, etc). A number above 1-a good target for a healthy firm- means that the firm owns more than it owes in the medium-term; a number below 1 means that the firm owes more than it owns in the medium-term.
Current ratio is also called “solvency.”
Quick ratio (very similar to the current ratio, but quick ratio only counts the MOST liquid assets in the numerator): value of all the CASH the firm owns or is about to be paid (cash + accounts receivable) divided by everything the firm owes in the next 12 months. A number above 1-a good target for a healthy firm- means that the firm has more cash than debts; a number below 1 means that the firm has more debts than cash. This is also called “liquidity.”
Employment contract vs non-compete agreement
Employment contract: Architecture firm’s hires must sign an agreement to follow the firm’s rules: What are the salary and benefits and work schedule expectations? Is moonlighting allowed? Is this ongoing employment, or will your work here automatically sunset without a new contract? What are the responsibilities of the job?
Noncompete agreement: This may be part of the employment contract, or a separate document.
Noncompete clauses establish that you can’t steal our clients and bring them to a new firm for six months or a year after your work at our firm ends.
What questions are forbidden to ask of a candidate in a job interview?
Age, race, ethnicity, color, gender, sexual orientation, gender identity, country of origin, religion, disability*, marital status, how many kids, salary history (in some states).
*an employer can ask “Are you able to perform this job’s duties with or without reasonable accommodation?’… the idea being that ADA requires employers to accommodate disabled workers, so the employer, with this question, is trying to understand the employee’s needs so the employer can make the ADA-required accommodations.
A132 - Owner-contractor agreement when also using a CM as-adviser or a CM as-agent (this one causes people all kinds of confusion because the title of the document includes CM as-adviser but not CM as-agent… it is indeed used in both cases, even if that’s not clearly denoted)
A133 - Owner-CM (constructor) agreement
A195- IPD agreement
C401 - Architect-consultant agreement (you probably already knew that one)
G701 - Change order
G702 - Application for payment
G703 - Continuation sheet (sidecar to the application for payment)
G704 - Certificate of substantial completion
G716 - RFI
An architect and builder resolve to join forces in order to win a job. Now what?
The architect and builder sign a teaming agreement (also called a memorandum of understanding (MOU)) broadly clarifying how fees will be split, what will happen if the builder discovers a major omission in the drawing set, etc.
What is the legal concept of “Betterment?”
Betterment: A small leak in the roof appears just after substantial completion and the owner demands that the contractor replace the entire shingle roof with expensive slate; the legal doctrine of “betterment” arises in the dispute-the contractor believes the owner is using the warranty to get a better roof than he agreed to in the contract, and unjustly enriching himself.
What’s the most important thing that a firm can do to manage risk?
Use standard AlA contracts. They’ve responded over a century to common disputes, and your insurance company is most likely to cover you if you use them.
I, as an architect, hire an interior design firm for a project and they get too busy to finish my job. Can they farm the work out to another subconsultant to meet my deadline?
No, they can’t farm it out (without my written permission). I hired THEM for THEIR TALENTS, not the scrubs they brought in because they took on too much work.
This is required per the AlA C-401 Architect-consultant agreement and applies to any consultant hired with the standard agreement.
How does the consultant, in this case, a water park technical design specialist I hired, know which portions of the project she will be responsible for. Does she go through the project requirements and identify her deliverables, tasks, and responsibilities (and I confirm them when she presents them to me)? Or is it the other way around where 1, as the architect, go through the project and identify her responsibilities (and she confirms them)?
Good question! Per the AlA C401, the consultant works out what she’s going to do for the project and proposes it to the architect for approval (not the other way around).
What is the difference between “direct salary expense multiplier” and “net multiplier?”
There is no difference. They are the same number (though derived in different ways), and the terms can be used interchangeably.
Describe the AIA C 401 Architect-Consultant Agreement
The C401 Architect-Consultant Agreement almost exactly mirrors the B101 Owner-Architect agreement, but obligates the consultant only to the relevant “portion of the project.” For a lighting consultant, the portion of the project is the lighting, for a signage consultant, the portion of the project is signage, and so forth.
The consultant enjoys the “standard of care” that the architect does, the consultant has to buy the same insurance that the architect does, the consultant owns the copyright to her drawings the way the architect does, the consultant has to design something (their portion of the project) that comes in under budget the way the architect does, and the consultants must redesign her portion of the project for free if she goes over budget and the owner doesn’t want to find more money.
Indeed, the architect’s contract with the owner (AIA B101) is stapled to the Architect-Consultant Agreement (AIA C401) as a sidecar document, though the architect has the option of redacting the part that enumerates what the owner pays the architect.
What is evidence-based design?
Evidence-based design is just what you’d think: architecture using the best available science to make design decisions to affect a desired outcome. It’s most common in the design of healthcare facilities, where we have the financial incentive to send patients home sooner, the ethical incentive to help occupants heal, and a client interest owing to a long tradition of evidence-based design in medicine. (Florence Nightingale invented the evidence-based design concept 160 years ago, recognizing the link between healing on the one hand, and fresh air, quiet hospitals, proper lighting, and clean water on the other.) Governments have generally abandoned funding the kind of research needed to properly link design decisions to occupant outcomes, so recently, the healthcare industry seems to be the only one supporting relevant academic study. (Canada’s the exception; their government is doing amazing work in this area.) Architecture, as a profession, should be also stepping up to fill the void… if you are part of a large firm, and would like to know, for instance, the impact of air quality and ventilation rates in preschool childhood development or the best design practices to limit glare on computer screens, consider contacting your local university, your alma matter, or an expert at some other university, and funding a study.
What are “performance standards”
- “The building failed to meet a LEED performance standard,”… as a measure of building achievement or operation
- “This employee failed to meet our firm’s performance standard and will need to be coached or disciplined,”.
.. as a measure of firm quality control - “This steel bolt can be used on the job because it meets the specification’s ASTM performance standard,”
…as a technical measure of a material’s worthiness - “This contract holds the building’s design to achieve a performance standard, which may be seen later in the courts as an (uninsurable) guarantee,”
wording in a contract to be avoided
Which RFPs should you apply to and which ones should you skip? Take a beat in each of these cards to answer to yourself before flipping the card… it’s that seemingly-inefficient process that cements the content in your brain.
So it’s slightly more time-consuming but still more efficient when measuring learning outcomes.
Clients put out requests for proposals (RFPs) that architects respond to. Often the owners choose which architect to hire based on the architects’ responses to these.
Time spent on more proposals means less time spent on each proposal so put the initial euphoria about the job prospect aside and be a rifle-not a shotgun. Don’t chase longshots and stop being an eager golden retriever.
Develop a clear-eyed intentional firm “go/no-go” policy to determine which RFPs to respond to
What is the realistic likelihood of winning the job?
How do you write an RFP response to win and advance to a shortlist interview?
Treat the RFP-response process like a design problem: approach it with intentionality, intensity, organization, efficiency, and iteration.
Develop a reusable template with common information requested in RFPs: one-page firm profile; project management philosophy; current workload; firm quality assurance program; list of responsibilities of key personnel; design philosophies; resumes; past projects & awards; and claims history (clients want to know what you’ve been sued for in the past!)
Actually read the RFP… the full document. Have an eye to long-lead-time items: You may need to find a minority- or woman-owned business as a partner, your project manager may need a certification or government clearance that takes weeks to obtain, you may need to find a consultant that specializes in the design of large saltwater aquariums.
Does the architect need to register her work with the US Copyright Office?
Mostly no (but filing with the copyright office is not the worst idea anyway).
A 1990 federal law automatically protects works of architecture, so an architect needn’t specifically file the work with the copyright office.
Can an unlicensed architect sign the contractor’s pay application (if she works under a licensed architect?)
Yes.
Remember, the architect is not necessarily approving that the wall was constructed properly (even if the drawings show how to construct the wall), or that the wall will not fall over… she is confirming that the wall exists and can therefore be paid for.
Can an unlicensed architect sign the contractor’s pay application (if she works under a licensed architect?)
Yes.
Remember, the architect is not necessarily approving that the wall was constructed properly (even if the drawings show how to construct the wall), or that the wall will not fall over… she is confirming that the wall exists and can therefore be paid for.
NCARB model rules of conduct
Protect the health of the public, follow all laws and codes you know of, meet the “standard of care,” be competent, and don’t exaggerate your qualifications. If someone you work with (colleague, contractor, etc.) breaks the law or violates a safety code, you have to narc on them.
Don’t engage in a conflict of interest, like accept a boat as a gift from a curtain wall supplier… or give a boat to the school board superintendent deciding whether you get to build the school.
Don’t lie or hide the fact that a developer is paying you to speak in favor of his project at the planning commission meeting.
Don’t sign and seal a drawing set if you weren’t supervising its preparation. You are, however, as the architect of record permitted to sign and seal the curtain wall manufacturer’s installation drawings, your lighting consultant’s riser diagram, and the design starchitect’s drawings provided you’ve reviewed them and can reasonably assume that they’re accurate.
Intellectual property insurance
Covers you if a previous arch claims the design was theirs if client fired them then hired you and plans look about the same.
It will pay for lawyers, damages and settlement
Claims made insurance policy
Promises to cover for liability in your old work and projects
Builders risk insurance
Offers property coverage for a building under construction damaged through no fault of the owner or contractor. From fire, weather, theft, vandalism.
What is the difference between the following three types of policies?
Commercial general liability insurance
Commercial liability insurance
General liability insurance
General liability coverage
A: there is no difference between those terms. They all describe the same coverage: your employee is up on a ladder above a finished floor and he drops a hammer denting the floor. The carpenters and floor finishers have to come back to fix it.
Arch needs “commercial liability insurance” or something without the word “general”
