PCM_Module 2

Question 1

What are usually the two largest expenses as a business?

Answer 1

Office rent and employee payroll

Question 2

What is an issue that can create cash flow issues?

Answer 2

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

Staff is late on filing their timesheets

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

Client puts the project “on hold”

Question 3

Amount in a line of credit that a firm should have handy to cover expenses

Answer 3

a month’s worth of expenses

Question 4

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

Answer 4

balance sheet

Question 5

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

Answer 5

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

Question 6

In order to ensure next month’s expenses are covered, a business owner should ensure the staff is producing enough ________ to produce the necessary revenue

Answer 6

Billable hours

Question 7

What is the reason for using a multiplier for determining a staff’s billable rate?

Answer 7

It ensures you have enough money to pay the staff and cover overhead and produce profit

Question 8

What is the typical fee structure for a project?

Answer 8

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

Question 9

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

Answer 9

a project billed hourly with no maximum

Question 10

what is an example of a “reimbursable”?

Answer 10

Plotting, photocopying or faxes

Long distance phone calls

car travel, billed by the mile, to the project site

travel expenses for the project, including airfare or hotel

courier, shipping and postage

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

Question 11

who is responsible to pay the “reimbursable expenses”?

Answer 11

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

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

Question 12

how do you determine the “gross profit” on a profit & loss statement?

Answer 12

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

Question 13

With a maintained healthy profit margin, what could a financially strong firm take on after a few years of consistent workload?

Answer 13

Hire new staff

Build out a new office

Experiment with a reduced fee on a new type of project

Question 14

A profit loss statement helps to track what?

Answer 14

Utilization rates by employees

overhead rate

break-even rate

net multiplier

profit margin

new revenue per employee

Question 15

how is a balance statement different from a profit & loss statement?

Answer 15

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

the balance statement defines assets, liabilities and capital at a particular point in time

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

Question 16

Assets

Answer 16

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

Question 17

Liabilites

Answer 17

any debt or financial obligations related to the business that need to be paid

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

Question 18

Capital

Answer 18

the financial assets needed to run the company operations

Question 19

cash-on-hand

Answer 19

the total amount of an accessible cash, also referred to as liquidity, this includes things that can be sold quickly like stocks

Question 20

accounts receivable

Answer 20

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

Question 21

accounts payable

Answer 21

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

Question 22

Equity

Answer 22

the ownership interests of a firm, including the percentage of ownership of each principal of the firm

Question 23

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

Answer 23

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

Question 24

why is it important to educate employees on a firm’s values and goals?

Answer 24

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

Question 25

collaborative/clan culture organization

Answer 25

extended family of employees that are hard to replace. strong sense of loyalty and tradition with a strong focus on teamwork, participation and consensus

Question 26

creative culture firm organization

Answer 26

a dynamic, entrepreneurial and creative group, known for taking risks and being innovative individual initiative and freedom are encouraged the environment can be competitive

Question 27

control or hierarchical culture

Answer 27

highly structured and formal feeling management aims for security and predictability

Question 28

market culture

Answer 28

result driven organization focused on job completion. employees are competitive and goal oriented the emphasis on winning unifies the organization success to this type of firm culture is market share penetration

Question 29

professional liability insurance

Answer 29

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

Question 30

general liability insurance

Answer 30

this insurance provides protection againts damamges from an architect's office operations and non-professional activities at a job site owner and the general contractor should carry this type of insurance as well

Question 31

worker's compensation

Answer 31

insurance for employees in case of illness, injury or disability stemming from their employment. this is only required when architects have employees by law, all employers should have this type of protection the contractor includes the cost for this insurance in their overhead costs as part of their bid

Question 32

property (builder's risk) insurance

Answer 32

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

Question 33

loss of use insurance

Answer 33

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

Question 34

product & completed operations insurance

Answer 34

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

Question 35

contractual indemnification

Answer 35

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

Question 36

subrogation

Answer 36

the insurance company has the right to "step into the shoes" of the policy holder to make a claim for damages caused by others and can sue the responsible party on behalf of the owner

Question 37

waiver of subrogation

Answer 37

the A201 general conditions contains a clause for a 'waiver of subrogation' in order to minimize lawsuits and claims against the parties this places the risk of loss on the insurance company but prevents the insurance company from suing parties that might not be at fault waiving subrogation works well if all parties agree to it as everyone is exposed to the same level of risk

Question 38

how can a practice avoid being exposed to claims?

Answer 38

practice conflict dispute resolution techniques to avoid or contain potential disputes

Question 39

risk management strategies

Answer 39

avoid risk, transfer risk, assume risk, control risk

Question 40

what should architect keep aware of to avoid risks?

Answer 40

changes in government regulations or new building materials, systems, codes, standards and technologies adoption of new rating systems, such as LEED awareness of what other design professionals are doing, how they are rendering their services and what services they are providing

Question 41

indemnification

Answer 41

is insurance terminology for the "hold harmless" clause

Question 42

common claims against architects

Answer 42

negligence - by duty, breach, cause and damage breach of contract vicarious liability alternative project relationships third party actions: architects can be held liable for negligence by parties the architect had no contractual relationship with

Question 43

what are some good forms of documentation that architects take?

Answer 43

daily notebook or site observation reports of electronic devices are not used write in ink, use bound or spiral notebooks, number pages sequentially and add dates photographs and videos status letters and issue letters meeting minutes & memos of phone conversations progress payment logs equipment use records

Question 44

reasons architects should consider the purchase of professional liability insurance:

Answer 44

business survival continuing operations contract requirements social responsibility

Question 45

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

Answer 45

4 years varies from state to state

Question 46

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

Answer 46

10 years varies from state to state

Question 47

methods to limit liability

Answer 47

carry the necessary types and appropriate amounts of insurance select projects carefully by working within the firm's capacity, ability and expertise utilize a written contract (in many states, it is illegal for an architect to work without a contract) efficient in-house organization and communication with project ream, owner and contractor document key decisions and approvals provide contract admin services

Question 48

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

Answer 48

the contractor

Question 49

the architect is not responsible for what during construction?

Answer 49

exhausting on-site visits continuous on-site inspections means, methods, techniques, sequences and safety

Question 50

who can stop the work of a project under construction?

Answer 50

the owner, the contractor (is unpaid) and a local building officials have the authority to stop the work, not the architect

Question 51

what is the architect's role in observation of a project while it is under construction?

Answer 51

to observe the progress and the quality of work in order to determine if it conforms to the drawings and contract documents. if it conforms to the drawings and contract documents. any findings should be reports to the owner

Question 52

an architect cannot negotiate the terms of any settlement without the _________'s permission

Answer 52

insurer's

Question 53

client dispute resolution include what type of practices?

Answer 53

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

Question 54

arbitration

Answer 54

this is the preferred method of dispute resolution the arbitrator is more knowledgeable in the the industry while a judge or jury may not be disputes can be solved quickly, in weeks or months rather than years in litigation

Question 55

arbitration process

Answer 55

one party files a demand for arbitration, the other party can then 1. files the answer in response to the allegations 2.files a counterclaim 3. does nothing and the demand will be considered to have been denied then an arbitrator will be selected and agreed upon by both parties after a hearing is held the arbitrator will render a decision within 30 days

Question 56

mediation

Answer 56

a mediator assists the parties in settling a dispute

Question 57

litigation

Answer 57

involves the court system and is expensive and long process involving attorneys

Question 58

methods that lead to better agreements

Answer 58

establish standard in-house practices get professional help use standard agreement forms

Question 59

construction means and methods

Answer 59

are the responsibility of the contractor

Question 60

customized agreements to have on hand

Answer 60

full service agreements of the types most frequently uses small of limited space agreements notice to proceed consultant agreements common exhibits

Question 61

design professional liens

Answer 61

used if construction has not started yet but a building permit or other government approval has been obtained requirements vary by state

Question 62

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

Answer 62

10 days

Question 63

mechanics liens

Answer 63

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

Question 64

mechanics liens - amount of days notice for preliminary notice

Answer 64

20 days for subcontractors/vendors. the architect and general contractor do not have to send the 20 day notice as they are in direct contact with the owner may vary by state

Question 65

what is a notice of cessation?

Answer 65

a notice that the work has formally stopped. this is filed by the owner the owner want to file this in order to reduce the time in which claimants can file a lien

Question 66

stop notice

Answer 66

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

Question 67

notice of non-responsibility

Answer 67

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

Question 68

how to protect the owner from liens

Answer 68

require the owner to purchase a performance bond and payment bond receive signed lien releases from the subcontractors at the time of payment collect and hold retainage collect contractor's affidavit of release of liens

Question 69

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

Answer 69

scope of services or additional services project schedule owner's responsibilities or coordination responsibilities project insurance and limitations of liability ownership and reuse of documents reimbursable expenses hourly rates

Question 70

what items fall under copyright protection

Answer 70

intangible assets associate with inventions and design such as digital data, and design methodologies, and software

Question 71

owners use of the instruments of service

Answer 71

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

Question 72

common limitations that the architect should consider securing

Answer 72

disclaiming the architect's responsibility for the contractor's means and methods of construction and for job site safety limiting the architect's liability for the accuracy of cost estimates to redesigning at the architect's expense disclaiming liability for results if interpretations and decisions made in good faith disclaiming third party beneficiary status to a third party waiving subrogation for damages caused by property insurance disclaiming responsibility for a decision made by the owner without the architect's approval disclaiming responsibility for hazardous materials