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ARE 5.0 > Practice Management > Flashcards

Practice Management Flashcards

1
Q

A small architectural practice, which a partnership between three architects, is required to pay taxes as a business. Which of the following taxes is this firm most likely to pay?

A

Self-employment tax, federal and state income tax, and personal property tax on furniture used by the business are some of the types of taxes.

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2
Q

AIA A101

A

A101 – Standard Form of Agreement Between Owner and Contractor where the basis of payment is a Stipulated Sum

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3
Q

What are three levels of participants in an architecture firm that is a corporation?

A

stakeholders, directors, and officers

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4
Q

Name some advantages and disadvantages in design bid build

A

Linear and simple process from inception to completion of the project
Coordination between client,architect and contractor is relatively straightforward

The design must be completely finished before construction can start
Contractors not selected through the negotiation process (such as in a public bid where the lowest bidder is awarded the contract) may have adversarial relationships with the Architect and/or Owner
Chances of of the contractor underestimating to give competitive bid are high
The bid documents need to be well drawn and detailed well for accurate bids

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5
Q

What is an architect’s primary duty?

A

Protect the public’s health, safety, and welfare

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6
Q

AIA A201

A

A201 – General Conditions of the Contract for Construction

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7
Q

AIA A701

A

A701 – Instructions to Bidders

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8
Q

AIA B101

A

B101 – Standard Form of Agreement Between Owner and Architect

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9
Q

AIA C401

A

C401 – Standard Form of Agreement Between Architect and Consultant

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10
Q

AIA A305

A

A305 – Contractor’s Qualification Statement

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11
Q

AIA G701

A

G701 – Change Order

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12
Q

AIA G702

A

G702 – Application and Certificate for Payment

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13
Q

AIA G703

A

G703 – Continuation Sheet

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14
Q

AIA G704

A

G704 – Certificate of Substantial Completion

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15
Q

Legal concept of agency

A

The architect is the agent working on behalf of the client and the contractor is referred to as the third party. As the agent, the architect creates a legal relationship between the principal (Owner) and third party (contractor)

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16
Q

Why can IPD be good for complex projects?

A

Uses BIM that enables multiple aspects to be designed congruently
The risk and responsibility is shared with a varied team
Management can happen in one location enabling fast turnaround
Revisions are minimal

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17
Q

Sole proprietorship pros and cons

A

Ease of setup

Owner personally liable for debts and losses

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18
Q

General partnership pros and cons

A

Income is shared , reported on personal taxes
Partners personally responsible for debts and liabilities
All partners responsible for actions of others

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19
Q

S corporation

A

Allocated profit and loss in proportion to holdings, shareholders report profit and loss on personal taxes
No tax on corporate income
Liability limited to investment

Limited to small businesses—domestic companies w fewer than 100 employees

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20
Q

LLC

A

Made up of members and managers
LLC not a separate entity- profit and loss to individuals reported on personal tax forms
Members are self employed must pay self employment tax for social security and Medicare
Easier to set up than corporation

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21
Q

Standard of care

A

Level of skill and diligence that a reasonably prudent architect would exercise in same community at same time in same circumstances

Suggesting or guaranteeing a higher standard of care can increase liability or make work uninsurable

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22
Q

National Labor Relations Act

A

Allows private sector employees to organize in trade unions

Applies to all employers

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23
Q

Equal Pay Act

A

Equal pay for employees with same duties, responsibilities and experience

Applies to all employers

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24
Q

Employee Eligibility Verification

A

Employees must verify workers right to work in US by maintaining I-9 form for three years plus one year after termination

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25
Q

FLSA

A

Wages and Fair Labor Standards Act

Establishes minimum wage, overtime, pay, record keeping, child labor standards for public and private employment

Applies to all employers

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26
Q

OSHA

A

Occupation Safety and Health Act

Applies to all employers

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27
Q

HIPAA

A

Health Insurance Portability and Accountability Act

Protects privacy of individually identifiable health information

Applies to all employers

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28
Q

ERISA

A

Employee Retirement Income Security Act

Sets minimum standards for pension plans in private sector

Applies to all employers who have a pension plan program

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29
Q

COBRA

A

Consolidated Omnibus Budget Reconciliation Act

Allows for continuation of group medical coverage

Applies to employers of 20 or more

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30
Q

Civil Rights Act

A

Applies to employers of 15 or more

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31
Q

ADEA

A

Age Discrimination in Employment Act

Prohibits age discrimination for persons 40 and over

Applies to employers of 15 or more

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32
Q

FMLA

A

Family and Medical Leave Act

Require employers to give up to 12 weeks for child spousal or parental care

Applies to employers of 50 or more

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33
Q

General obligation bond

A

When a state or local government wants to finance the acquisition or construction of public facilities, they issue a general obligation bond. Shareholders (the investors in the bond) are guaranteed to be repaid using future tax revenues.

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34
Q

ABI

A

“AIA’s monthly Architecture Billings Index (ABI) is a leading economic indicator for nonresidential construction activity, with a lead time of approximately 9–12 months. The index is derived from AIA’s Work-on-the-Boards survey, which has gathered data on shifts in billings from architectural firm leaders for over 20 years.
An Architecture Billings Index (ABI) score of over 50 represents that architecture firms, on average, reported to have increased work activity as compared to the previous month.
Each of the below economic phases will likely have ABI scores in following ranges:

Contraction:40-45
Late contraction: 45-50
Late expansion: 50-55
Early phase recovery: 55-65

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35
Q

Mechanic’s lien

A

a claim on property by anyone who has furnished material or labor for the construction of a building on that property.

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36
Q

accounts payable

A

amounts owed to the suppliers of goods or services that have not yet been payed

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37
Q

How often are AIA documents released?

A

Every ten years on the 7

38
Q

accounts receivable

A

money that others owe to the business

39
Q

assets

A

any type of tangible or intangible resource that can be measured in monetary terms

40
Q

chart of accounts

A

a list of the various accounts a business uses to keep track of money, along with corresponding account numbers

41
Q

current assets

A

resources of a business that are converted into cash within one year

42
Q

direct labor

A

all labor of technical staff, principals and support staff that is directly chargeable to projects

43
Q

direct personnel expense

A

expense of salaries plus cost of mandatory and discretionary expenses and benefits

44
Q

discretionary distribution

A

voluntary distribution of profits to owners and non owners

45
Q

fixed assets

A

resources that the firm uses and retains for a long period of time such as equipment and property

46
Q

gross revenue

A

all revenue generated by a business during a stated period of time

47
Q

indirect labor

A

all labor not charged to a specific project or revenue producing account

48
Q

liabilities

A

claims by people outside the business and claims by the owners of the business against the total assets of the business

49
Q

net operating revenue

A

the money that remains from billing after deducting fees and expenses

50
Q

cash accounting versus accrual accounting

A

acrual: revenue and expenses recognized at the time they are earned or incurred
cash: revenue and expenses recognized at time the business receives money or pays a bill

businesses above a certain size are required by IRS to use accrual accounting

51
Q

balance sheet

A

summary of all assets and liabilities

total assets must equal total liabilities plus net worth where net worth equals total assets minus total liabilities

52
Q

profit and loss statements

A

lists all income and expenses of a business for a certain period of time

53
Q

cash flow statement

A

shows actual inflows and outflows of cash or cash equivalents

54
Q

project progress report

A

show hours and labor costs for each phase of a project as well as direct costs such as consultants, overhead allocations and reimbursable expenses

55
Q

office earnings report

A

summarizes each of the firm’s projects in terms of revenue, expenses incurred, unbilled services, percentage of completion and profit to date

56
Q

aged accounts receivable report

A

status of all invoices for all projects and time from invoice date to payment date

57
Q

time analysis report

A

lists each employee with hours spent on direct and indirect labor and PTO

58
Q

chargeable ratio / utilization rate

A

time spent on direct labor divided by total time (direct plus indirect and PTO)

overall should be 65%, technical staff 75-85%

59
Q

current ratio

A

total current assets divided by total current liabilities

60
Q

net profit before tax

A

total annual revenue minus expenses

61
Q

overhead ratio

A

total office overhead or indirect expenses divided by total direct labor
should be 1.3-1.5

62
Q

quick ratio

A

total cash assets plus accounts receivable plus revenue earned but not billed, divided by total current liabilities

63
Q

revenue per technical staff

A

total net revenue divided by technical staff (or those providing direct labor)

64
Q

revenue per total staff

A

total net revenue divided by all staff (including principals, part time employees)

65
Q

DPE

A

direct personnel expense - multiplier for billing rates that includes taxes, benefits, etc along with base salary

66
Q

three ways duty for architect is established

A

by contract, written or oral
by legislative enactment such as building code
conduct - implied duties

67
Q

three conditions for negligence

A

legal duty must be established
must be shown that architect breached that duty
must be shown that breach of duty was cause of damage or injury

68
Q

privity

A

concept by which architects are protected from claims by parties with whom the have no direct contractual relationship

69
Q

copyright

A

architect owns copyright for drawings, specs and graphics unless architect is an employee of the building owner of specifically assigns the copyright to the owner

70
Q

AIA B101 architect’s insurance requirements

A

professional liability
general liability
automobile liability
workers compensation insurance

71
Q

AIA A201 contractor’s insurance requirements

A

workers compensation insurance
damages from bodily injury, sickness or death
bodily injury to people other than employees
damages other than to the work because of destruction of tangible property
damages related to use of motor vehicles
injury or damage occuring after the job is complete and contractor has left the site
contractual liability
personal injury (including slander, libel, false arrest)

72
Q

early expansion

A

The time period when the economy is recovering from the most recent economic downturn

73
Q

statue of repose

A

There is some mistake or flaw that is in repose (asleep) waiting to be discovered after construction has been completed. If it’s not found in time then the architect and contractor cannot be held liable for it.

74
Q

revenue bonds (AKA rate-supported) bonds

A

Revenue bonds are municipal bonds that finance income-producing projects and are secured by a specified revenue source. Typically, revenue bonds can be issued by any government agency or fund that is run in the manner of a business – those entities having both operating revenues and expenses

75
Q

bridging

A

Owner hires architect or engineer (AE) to be adviser/project manager

AE puts together documents, owner puts it out for bid, AE reviews final documents

Advantage of competitive bidding, fixed cost, single source responsibility for construction

76
Q

CMa cost method and pros/cons

A

Helps with understanding the feasibility of the project
Helps with scheduling and following deadlines for the construction
Helps with keeping the construction within budget with the construction manager’s cost estimates

No competitive bidding of overall project

Cost methods:
Fixed price- stipulated sum or lump sum- owner not responsible for any overruns and doesn’t share in savings
Cost plus fee with GMP- owner pays cost plus agreed fee with guaranteed max- client gets cost savings if any

77
Q

general obligation bonds

A

When a state or local government wants to finance the acquisition or construction of public facilities, they issue a general obligation bond. Shareholders (the investors in the bond) are guaranteed to be repaid using future tax revenues.

78
Q

CMc

A

CMc usually bases cost estimates on partially completed drawings usually around DD. Setting the GMP before the design is fully resolved and completed puts the CMc at risk
The owner-CMc agreements would have two pre-construction and construction phases
The project price is set using either cost of work plus fees or cost of work plus fee with or without GMP

79
Q

Restrictive covenant

A

A restrictive covenant is a provision in a deed limiting the use of the property and prohibiting certain uses

80
Q

Deed restriction

A

Deed restrictions are written into a property’s deed and can take the form of conditions, covenants, and restrictions (sometimes called “CCRs”). The property’s past or present owner, developer, builder, neighborhood, or homeowners association usually imposes them.

81
Q

Design build

A

The contractors may hire subcontractors to do parts of the work
The client contracts with one party that does the design and construction
The contractor may have in house design team or may hire a designer or architect

Pros:
single source of responsibility
Fixed price given earlier in the project
Often faster and less expensive

Cons:
Owner has less control esp relative to quality

82
Q

Professional liability insurance typically covers:

A

negligence
property damage caused by the architect’s actions
erroneous specifications and mistakes in drawings

83
Q

Three tiers AIA code of ethics

A

Canons (broad principles of conduct); Ethical standards (more specific goals toward which each should aspire); Rules of conduct (mandatory requirements).

84
Q

Break even rate

A

The break-even rate = overhead rate + assigned unit cost of 1.0 for hourly salaries.

85
Q

CMa arch responsibilities

A

Arch and CM provide joint CA services
CM schedules and coordinates contractor, prepares change orders and directives
Arch must advise and consult with both owner and CM
Arch decisions are final when consistent with contract docs

86
Q

Control estimate

A

Sum of CMc estimate of cost of work plus CM fee. Establishes date of substantial completion

87
Q

AIA docs series

A 
A - owner contractor 
B - owner architect
C - other
D - misc 
E - exhibits
G - CA and project management
88
Q

Design build requirements for success

A

Owner must understand or have experience with design build

Owners project criteria must be clearly and completely stated

Owner may hire consultant to analyze needs and develop program - they may put out RFP

Key contractors should be selected early

Contract should allow for adjustments in cost and time

Trust and willingness to work together

89
Q

Main AIA contract design build

A

A141 between owner and design builder

90
Q

IPD

A

Integrated project delivery- like design build but owner has multiple agreements with different design and construction firms

Phases:
Conceptualization
Criteria design
Implementation documents 
Agency review buyout 
Construction
Close out

Early phases take more time but later phases take less

91
Q

SPE

A

Single purpose entity- independent limited liability company established for a particular project

92
Q

Market trough

A

The time period at which the economic output of an economic cycle is at its lowest point

ARE 5.0 (2 decks)

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