PcM Exam Flashcards
Firm Principal
responsible for staffing and overseeing projects
Project Architect
manages multiple projects and teams; 10+ years of experience; reports to principal; interacts with clients directly
Designer/Architect
I,II,III based on experience; responsible for production work; architect is licensed, designer is not
Associate
provides production work; administrative tasks; recent grad; directly supervised by licensed architect
Utilization Rate
Rate at which an employee uses their time towards billable work
direct labor/total labor
Direct labor
hours directly billed to a project
Indirect Labor
hours that an employee works on something that can’t be billed to a project
Overhead Costs
work not directly billed to a project
Consultants
structural engineer, MEP engineer, Lighting designer, acoustical consultant
C401
Agreement between Consultant and Architect
What is a shared studio firm organization?
principals work individually or collaboratively to bring in projects and oversee them. Staff work freely among principals and across range of projects. Common in small to midsize firms that do a specific type of project
What is a Studio by Discipline firm organization?
ex urban planning or interiors. Allows for each studio to have their own methodologies that work for their specializations
What is a Studio by Project Type firm organization?
ex: healthcare or education. Good for firms trying to specialize in a specific area. Downside is that staff get pigeonholed into one area. Changes in economic market can lead to uneven work distribution.
What buildings are exempt from needing an architect?
Ag buildings and those under a certain size
Named-peril insurance policy
only covers specific losses
All-risk insurance policy
covers all risks except those specifically excluded
Claims-made policy
covers any claim even if it was made prior to start of policy
Occurrence- based policy
only covers errors made during policy holding
Policy limit
max that will be paid out for a claim
Certificate of Insurance (COI)
submitted to client before the project begins; insurance company issues this
Betterment
defense against claims of errors or omissions. Architect isn’t responsible for the full cost. Owner is still responsible for the initial cost, can only sue for the difference.
Wavier of Subrogation(A201)
Extended by the owner and contractor to each other as well as to the architect; agreement that each party’s insurer will not pursue subrogation
Professional Liability Insurance
Errors and Omissions or Malpractice Insurance; covers cost to defend against claims for errors and omissions; limits financial impact if the firm is found liable
Prior Acts Coverage
covers services provided before policy was in place
Tail Coverage
Extends coverage period after architect is no longer practicing
Commercial General Liability Insurance
Covers incidents that occur as a result of non-professional business operations; may also cover property damage by employees; occurance-based
Statue of Limitations & Repose
Limits time period someone can file a claim against you
Limitations = when the error was discovered
Repose = when the error was committed
Worker’s Compensation Insurance
required if you have employees; covers injuries caused by job
Umbrella Coverage
typically excludes professional liability claims; low cost extra insurance; provides coverage in excess of policy limits of firm’s other policies
Employees vs Independent Contractors
Employees have payroll deductions and ICs do not
Biggest differences:
Behavior control
Financial control
Relationship
Equal Employment Opportunity
Federal Law
Applies to employers with 15 or more employees
Fair Labor Standards Act
Applies to employers with over $500k in gross revenue
Establishes min wage
Requires overtime to be paid at 1.5x regular hourly wage
Family Medical Leave Act
allows for 12 weeks unpaid leave for things such as birth or adoption
3 tiers of AIA Code of Ethics
Canons- principles of conduct
Ethical Standards- goals
Rules of Conduct - mandatory
Spearin Gap
owner is responsible if architect follows standard of care and contractor follows contract documents but something still goes wrong
Standard of Care
shall apply the skill which is ordinarily applied by architects pf good standing practice in the same locality
insurance does not cover a higher standard of care
Efficiency based firm type
below market rate; quick turn around times, low complexity, repetition, standard solutions, wide staffing chart
Expertise based firm type
specialization, most complex issues, above-market rate, narrow staffing chart
Experience based firm type
Provide value for complex projects, medium complexity, market-rate, various project types, balanced staff chart
Parts of Business Plan
Purpose: Firm goals and qualifications, core competencies, and executive summary
Finance: how financially they can meet their goals
Operations: coordinate with Finance, how will you meet goals, explains staffing organization
Marketing
Profit Loss Statement
firm’s financial health over a period of time
revenue, indirect expenses, and direct labor
Revenue - Expenses = Profit
Balance Sheet
Represents a firm’s finacial health at a specific moment
Starts with current assets
Liabilities : short term and long term
Assets - Liabilities = Equity
Key Components of Profit Loss Statement
Utilization Rate
Net Multiplier
Overhead Rate
Break-even Rate
Profit-to-Earnings Per Employee
Aged Accounts Recievable
Net Revenue Per Employee
Net Multiplier
Amount of revenue that must be generated for every dollar of direct labor to earn profit
Net Multiplier = Net Operating Revenue / Direct Labor
Other formulas:
BER/inverse profit
Billing rate/hourly rate
Overhead Rate
Ratio of overhead costs to direct labor costs, used for profit planning and determining billing rates
Overhead Rate = Total Indirect Expenses / Direct Labor
Target: 1.3-1.5
Break-Even Rate
Adds direct labor costs to overhead rate; Charging less than break even rate will result in financial losses
Break-Even Rate = Overhead Rate + 1.0
Target: 2.3-2.5
Profit = Net Multiplier - Break- Even Rate
Profit-to-Earnings Ratio
How much NOR is retained as profit; expresses firm’s profit margin
Low ratio indicates: overhead is too high or fees are too low
Profit-to-Earnings Ratio = Net Profit / NOR
Target: 20% or higher
Net Revenue Per Employee
Determines the firm’s targeted net profit in the next annual budget. Confirms profit given firm size
Net Revenue Per Employee = NOR/# of full time employees
Aged Accounts Recieveable
Average time for clients to pay invoices. Accounts receivable = invoices submitted but not yet paid
Aged accounts Receivable = Average Annual Accounts/ [NOR/365]
Current Ratio
ability to pay debt
Current Ratio = total assets/ total liability
Target: Greater than 1.5
Quick Ratio
does not include furniture and equipement as assets due to not have liquidity
Quick Ratio = cash+accounts rec.+ WIP /Liabilities
Target: Greater than 1.0
Debt-to-Equity Ratio
=total liabilities/ total equity
Target: less than 35%
Return on Equity
=net profit/total equity
Target: Greater than 20%
Profit Plan
Develops projections for each section of annual budget. Used to establish billable rates
Billable Rates
=Hourly Rate * Net Multiplier
Total billings = Billing Rate * Utilization Rate * 200 working hours
Other formula:
Revenue/DL
Annual Budget
Expanded PL Statement, Projected Profit vs Actual Profit
Fee Structures: Percentage of Construction Costs
Cost of the work * predetermined percentage
Benefit: changes in scope are built into the fee
Fee Structures: Hourly
Lowest Risk
Hours worked * billing rate of each employee working
Appropriate when scope of work is not clear
Fee Structures: Cost-Per-Unit
ex: cost per sf
accounts for changes to project fee
Fee Structures: Stipulated Sum
one total design cost
minimal flexibility for scope changes
consider for the following: determined scope, experienced client, experienced with project type
high risk for potential financial loss
Three methods to determining a fee at Proposal
Top-down, Bottom-Up, and Staff Analysis
Top-down
idea of what the fee should be
fee estimate + contingency - consultation fee = Net Fee
Break into phases, determine amount of work is reasonable for scope
Bottom-Up
determines scope, breaks into phases, determines effort for each phase, add to get total fee, add contingency to account for variables
Staff Analysis
determine how many weeks each phase will take, how many staff members will work at each phase, hours * hourly rater = fee
B101 Basic Services
Structural, Mechanical, Electrical
C401
Consultant must communicate through architect, consultant insurance coverage (coordinated with B101), Standard of Care (match B101), scope of services (match B101)
What are the two categories of claims?
Breach of Contract and Negligence
Breach of Contract
Architect does not meet contractual obligations to owner
Negligence
Must meet four steps:
- Architect owes a duty to someone
- Duty was breached
- Breach causes something to happen
- Damage occurs as a result of the breach
RFP
Request from a client for proposal to complete a scope of work
RFQ
Request for the design team’s qualifications to provide the scope of work
RFS
Request for ongoing services between owner and architect
What sections of an RFP response can NOT be standardized?
Scope of work, schedule, and fee proposal
Design-Bid-Build
Owner and architect contract with each other
Design goals, schedule, and budget are coordinated amongst the design team
Construction cost is determined at bidding
Owner contracts with the lowest qualified bidder
Primary driver: Cost
Secondary Driver: Risk
Negotiated Select Team
A variation of Design-bid-Build
GC selected at the end of schematic design
GC and owner negotiate contract during design
Final construction cost determined after CDs
Primary driver: Quality
Secondary Driver: Cost
Multiple Prime Contractors
Variation of Design-bid-build
Architect prepares separate packages
Owner has separate contracts with multiple contractors
Fast-Track
Design phases overlap with construction, ex: getting permit for foundation before finishing CDs
Not really a delivery method but a process that can be applied to any delivery method
Construction Management
Good for an owner if they want an idea about constuction costs at the beginning of a project
CM hired at the beginning
Owner, architect, and CM collaborate on goals, cost, and schedule
Design- Build
single entity designs and builds project
defines roles and responsibilities clearly and early
Fixed fee for both design and construction
Fast track can be appropriate
Primary driver: risk
Secondary driver: cost
Construction cost determined before design
Bridged Design-Build
design architect creates design concept
design-build team executes design
not ideal for complex projects
Primary driver: risk
Secondary driver: quality
Construction cost given after design
Integrated Project Delivery
Owner, contractor, and architect work together as one firm
Entity established by a multi-party agreement
No bidding because entire team is selected at the beginning of the project
C401
Architect/consultant agreement
A101
Owner/contractor agreement, used in conjunction to A201
Stages of Evidence-based design
- Question
- Research
- Hypothesis
- Design Phase
- Construction Phase
- Analyze Phase
- Share Results
- Refine Questions
Sole Proprietorship
Simplest form
Does not require formal legal steps to form
Taxes reported on proprietor’s personal tax return
High legal risk- no separation of business and proprietor
Partnership
Two or more partners
taxes reported on partner’s personal tax return
Partnership agreement
General Partnership
Partners are liable for each other’s actions
Limited Liability Partnership
Formal business entity
Liability protection
Partners are not liable for each other’s actions
Corportation
Limited liability for shareholders, directors, and officers
Shareholders own stock
Directors make firm-wide policy decisions
Officers operate the corporation
C-Corporation
can be publicly traded
Shareholder tend to be external
Taxed twice, at corporate level and on profit passed to shareholders
Uncommon for architecture firms
S-Corporation
Shareholder are often firm employees
Shareholder agreement can prevent stock transfers to external shareholders
Taxes are passed through to shareholders
Limited Liability Corporation (LLC)
Provides liability protection and simplified tax structure
Members own the corporation
Managers make policy decisions and operate the corporation
Members are not personally liable for claims against LLC
Less corporate formality than other types of corporations
Operating Agreement
Indeminity
bringing in a third party to become liable to reimburse the defendant for all of the plaintiff’s damages
obligation arises out of contractual obligation
Builder’s Risk Insurance
purchased by owner or contractor but both are listed as insured parties either way
Policy covers the actual construction work being performed at the site
no-fault property damages
Horizontal Organization
Think assembly line, project passes through different departments on its way to completion
Advantage: each department gains high level of expertise for their phase of design
Disadvantage: design decisions can get lost
Vertical Organization
Same group of people work on one project in it’s entirety
Matrix Organization
Mix of both vertical and horizontal
Cost plus fixed fee
Contractor selected at completion of CDs but scope is unpredictable
Contractor is paid labor and materials plus overhead plus fixed profit
Primary driver: scope
CM-Adviser
Primary driver: risk
Secondary driver: quality
Acts as constructability and cost management consultant during design and construction. Can be used under any delivery method.
CM-Agent
Primary driver: risk
Secondary driver: time
Construction cost determined at completion
Early consulting and may act on behalf of the owner in assembling and coordinating the construction trades. Provides services for a fixed fee.
CM-Constructor
Primary driver: Time
Secondary driver: Risk + Cost
Construction cost determined after design
Agent which then turns into contractor at predetermined time, usually a guaranteed max price which puts the contractor at risk since estimating is done at design and must follow throughout construction
