Professional Practice

Question 1

sole proprietorship

Answer 1

the business is owned by an individual

pros: easy setup, total management control by the owner, possible tax advantages
cons: owner is personally liable, raising capital is dependent on owner’s credit rating & assets

Question 2

general partnership

Answer 2

two or more people share in management, profits, and risk of the business

main disadvantage: all partners are responsible and liable for the actions of the others

Question 3

limited partnershp

Answer 3

atleast one general partner and one limited partner. Limited partners are investors who receive a portion of the profits but who have no say in the management of the company and are liable only to the extent of their investment

main disadvantage: all partners are responsible and liable for the actions of the others

Question 4

corporation or C corporation

Answer 4

an association of individuals that exists as a legal entity apart from its members

three levels of participants:
stockholders - owners of the corporation in proportion to how many shared they own
directors - elected by the stockholders, have fiduciary duty to act in the best interest for the stockholders and are responsible for broad policy decisions
officers - elected by the directors, carry out day to day management

advantages: personal assets of stockholders are not at risk, has continuity that is independent of any changes of personnel, taxed at a lower rate,
disadvantages: initial cost to establish the business, shareholders are taxed twice

Question 5

S corporation

Answer 5

chooses to allocate its income and losses directly to shareholders in proportion to their holdings. limited to small business corporations (domestic companies with less than 100 shareholders

advantages: avoids corporate income tax

Question 6

limited liability companies (LLC) and limited liability partnership (LLP)

Answer 6

formed like a partnership

advantage: liability is limited to a member’s investment / no personal liability, the business itself is not taxed, easier to set up and operate than a corporation

Question 7

joint venture

Answer 7

temporary association of two or more persons or firms for the purpose of completing a specific project

used by architectural firms when a project is too large or complex to be completed by one firm alone, or when one form needs the expertise in a particular area that another firm can offer

Question 8

standard of care

Answer 8

level of skill and diligence that a reasonably prudent architect would exercise in the same community, in the same time frame, and given the same or similar facts & circumstances

beware of raising the standard of care with phrases in the contract with phrases like “with the highest standard”, promising certain results, or taking on responsibilities that are not part of the contract

Question 9

cash basis accounting

Answer 9

Revenue and expenses are recognized at the time that are RECEIVED or incurred. Used most frequently by Sole Proprietors; can be tracked easily without a checking account.

Question 10

accrual accounting

Answer 10

Revenue and expenses are recognized at the time they are EARNED or incurred, whether or not cash exchanges hands. This provides a better picture of long-term firm health, and is ideal for large corporations. Required by the IRS over a certain firm size.

Question 11

double entry book-keeping

Answer 11

Used in accrual accounting. Keeps track of transactions chronologically in a journal, which is then posted to a ledger and grouped by accounts.

Question 12

modified accrual accounting

Answer 12

A combination of both cash-basis and accrual accounting. Most typically used by architecture firms. Revenue is based only on invoiced fees and expense amounts billed or invoiced, as opposed to earned.

Question 13

cash flow statement

Answer 13

depicts inflows and outflows of cash. Necessary in order to ensure that payroll can be paid.

Question 14

project progress report

Answer 14

shows the sum of direct labor hours and labor costs for each phase of a project for the current reporting period and the total costs to date in order to compare with estimated project labor costs

Question 15

office earnings report

Answer 15

summarizes each of a firm’s projects with respect to revenue generated, expenses incurred, percent complete, and profit or loss to date

Question 16

time analysis report

Answer 16

lists each employee with number of hours spent on direct labor, indirect labor, vacation time, sick leave, and holidays. Used to calculate an employees Utilization Rate

Question 17

revenue

Answer 17

Income before expenses. Use salaries, utilization rates, and the target multiplier to set typical billing rate.

Question 18

direct labor

Answer 18

Labor that is involved in the production of services and is billed to a project. Use salaries and target utilization rate to project direct labor expenses

Question 19

indirect labor

Answer 19

labor that is NOT involved in the productio of services for a project. Use salaries and target utilization rate to project indirect labor expenses

Question 20

Mattox Format (of profit & loss statement)

Answer 20

lists income and expenses of a business for a period of time (month, year) in a format for easy understanding of firm financial health

4 components:
revenue, direct labor, indirect expenses, misc. revenue and expenses

7 indicators:
utilization rate, overhead rate, break even rate, net multiplier, profit to earnings ratio, net revenue per employee, aged accounts receivable

Question 21

addendum

Answer 21

changes made to construction drawings after they went out to bid, but before a contractor is selected (basically, changes during bidding)

Question 22

allowance

Answer 22

an amount for the cost of items for which a party cannot determine with certainty when a bid or proposal is submitted

Question 23

Change order

Answer 23

A written instrument prepared by the Architect and signed by the Owner, Contractor, and Architect stating their agreement upon all of the following: 1) the change in the Work; 2) the amount of the adjustment, if any, in the Contract Sum; and 3) the extent of the adjustment, if any, in the Contract Time

Question 24

Construction change directive

Answer 24

a command to a contractor to change their work on the project. When a contractor is given a change directive, it is essentially an order: The contractor must follow the changes without any input. Change directives are also known as “force account work

Question 25

In design bid build, responsibilities for each party are:

Answer 25

Contractor - responsible for everything in the contract and nothing that isn’t in the contract Owner - responsible for everything needed that is NOT in the contract, even if the architect overlooked something (change order, condition of site before const.) Architect - instruments of service (drawing, specs, models), being on time, being on budget, coordinating everything

Question 26

professional liability insurance

Answer 26

Errors and omissions insurance Provides protection if someone accuses you of not doing your job correctly Violation of ADA, OSHA, fair housing

Question 27

general liability insurance

Answer 27

Basic insurance that covers property damage and injury claims against the firm Covers both legit claims and fraudulent ones Usually have dollar limits on claims or an aggregate limit

Question 28

who owns the drawings?

Answer 28

the architect always owns the drawings and specs, but gives the owner & contractor limited license to use them during construction

Question 29

Gross Area

Answer 29

the total area within the walls of a building structure, including the walls themselves and unlivable space.

Question 30

Net Floor Area

Answer 30

the actual occupied area not including unoccupied accessory areas such as corridors, stairways, toilet rooms, mechanical rooms and closets (programmable area, doesn’t include circ)

Question 31

Net to Gross Ratio

Answer 31

net area / gross area For a university building may be 65%, warehouse could be 90%

Question 32

Grossing factor

Answer 32

rentable area / usable area (number above 1, the higher the less efficient)

Question 33

Overhead rate

Answer 33

total overhead (inlu. Indirect salary) / total direct salary

Question 34

Break even multiplier

Answer 34

(direct salaries + total overhead) / direct salaries Always is overhead rate + 1

Question 35

Direct salary expense multiplier

Answer 35

total direct salary + total overhead + profit target / direct salary

Question 36

Utilization rate

Answer 36

total direct salary / total base salary

Question 37

Revenue factor

Answer 37

utilization rate x direct salary expense multiplier Good measure of profitability Higher number the better, 2 is good

Question 38

Negotiated select team project

Answer 38

Subcategory of design/bid/build Bring in contractor early in design process Portions of project that are difficult to fabricate can begin earlier Better quality, faster

Question 39

Negotiated bid

Answer 39

Select a GC you want to work with and negotiate the price of the work (no bidding). better quality

Question 40

Competitive bid

Answer 40

provide specifications of the work to several GCs. Each responds with a bid indicating how much they will charge if selected, lower construction cost

Question 41

Invited bid

Answer 41

good if special qualification needed for program’

Question 42

Cost plus fixed fee

Answer 42

a cost-reimbursement contract that provides for payment to the contractor of a negotiated fee that is fixed at the inception of the contract. The fixed fee does not vary with actual cost, but may be adjusted as a result of changes in the work to be performed under the contract regardless of scope of final project Disincentivizes contractor from allowing construction costs to balloon Gives lots of flexibility for change of program or issues come up on site

Question 43

Construction manager as agent

Answer 43

manages and administers the contracts b/w architect & contractor Good for inexperienced client who doesn’t want to be super involved

Question 44

Construction manager as constructor (construction manager at risk)

Answer 44

Takes place of contractor in the triangle diagram Owner engages architect and construction manager at the same time

Question 45

Integrated project delivery

Answer 45

All 3 join together as a single entity Share info with eachother without fear of litigation Share benefits and risks of the project Everyone profits if the project comes out ahead

Question 46

what are owners responsible for?

Answer 46

pre-existing site conditions (geological, haz mat, surveying) Paying contractor Paying Owner's subs Change orders With or without cause hiring & firing architect ... also anything not in contract

Question 47

Scheduled performance index

Answer 47

earned value (at percent of project completed) / planned value (at percent of project completed)

Question 48

phased bid

Answer 48

Fast track construction portions of construction will be bid on piece meal Design and fabricate parts before plans are finalized

Question 49

negotiated bid

Answer 49

Contractor works with architect from beginning of project Final bid is between contractor and the owner Increases the quality at higher cost because the contractor is working with the architect in real time

Question 50

invited bid

Answer 50

Design bid build Pre selected contractors are given opportunity to bid

Question 51

Bid bond

Answer 51

An agreement that is the low bidder cannot follow through the work and the bid bond should pay the difference of low bidder’s bid and the next lowersst bid

Question 52

Performance bond

Answer 52

The third party offers to pay for the project to be completed if the contractor defaults

Question 53

Contractor’s warranty / continuing warranty

Answer 53

Usually for 12 months after substantial completion If a quality issues appears in that 12 months, the contractor has to fix it and the warranty period restarts Ends when statute of limitation expires is also correct Doesn’t cover improper operation or normal wear

Question 54

when is a project late?

Answer 54

when substantial completion is late

Question 55

what does the contractors application for payment include?

Answer 55

Change order summary The amount of money needed to complete the project The amount of current retainage for the work-in-place The amount of current retainage for stored materials Certification that the contractor’s subs have been paid

Question 56

retainage

Answer 56

a percentage (agreed upon in contract) of money owed to contractor but intentionally not paid yet, is paid at end of project. Ensures that contractor stays till end of project

Question 57

Net operating revenue

Answer 57

total firm revenue minus reimbursable (pass-through) expenses, such as project-related consultants and miscellaneous project-related expenses (whats coming in vs whats going out)

Question 58

Current earnings

Answer 58

whats left over after all stocks and taxes are paid Net profit - calculator before taxes and distributions (the left over after you've paid everyone who works for you & your bills and before you've paid taxes and distributions)

Question 59

profit/earnings ratio

Answer 59

divide profit by net operating revenue, key measure of firm health and worth

Question 60

Utilization rate

Answer 60

percentage of an employee’s time that is billed to a project

Question 61

Accounts receivable

Answer 61

an invoice that is out but not paid yet

Question 62

types of firms

Answer 62

Efficiency based - faster and cheaper, more routine projects, repeatable elements, one sector of market, lots of junior staff Experience based - most common, more complex routine projects, selling points are knowledge and experience, challenge is matching project and pay Expertise based - pritzker winners, passivhaus architects, architectural acousticians, deep knowledge or exceptional talent in their field, mostly senior staff, minimal or no junior staff

Question 63

AIA B101

Answer 63

(Owner Architect Agreement) Obliges that the architect has to be on time and under budget (or no more than 10% over To get a cost estimate after SD DD and CD excuses the architect from mistakes associated with work by consultants hired by the owner Obliges the architect to visit the site one year after substantial completion Owner can fire the architect for convenience claims must be brought before 10 years Allows for liquidated damages if there is a claim

Question 64

fast track project

Answer 64

Common in commercial and institutional projects Pose significant risks for architects Owners want to monomixe loan interest costs Architect must maintain a coherent design May include phased bidding - Schedule must be worked out ahead of time - Agree on milestones - Hours and fees for architect - Bill reflect scope and ac celebrated schedule

Question 65

3 levels of corporation

Answer 65

stockholders - owners of the corporation in proportion to how many shared they own directors - elected by the stockholders, have fiduciary duty to act in the best interest for the stockholders and are responsible for broad policy decisions officers - elected by the directors, carry out day to day management

Question 66

AIA requires which insurances? And for what?

Answer 66

1 - General Liability - covers the physical office space 2 - Professional Liability - Covers errors and omissions 3 - Worker's Compensation Insurance - Covers employee injuries or illness, medical care and lost wages 4 - Automobiles Liability - Covers company vehicles and personal cars used for business purposes 5 - Employer's Liability - Covers employers if they get sued for causing a workplace injury - settlements, court costs, legal fees

Question 67

Format types for specifications

Answer 67

Masterformat - developed first, list be material, more commonly used Uniformat - list by system (newer, better for BIM)

Question 68

employment practice liability insurance Intellectual property insurance

Answer 68

Intellectual property insurance - covers claims based on copyright/intellectual property infringement Employment practice liability insurance - protects from wrongful termination

Question 69

aggregate limit

Answer 69

total coverage amount

Question 70

premium (in insurance)

Answer 70

monthly/yearly bill

Question 71

deductible (in insurance)

Answer 71

(in insurance)maximum paid by you, prior to coverage kicking in and paying

Question 72

claim (in insurance)

Answer 72

you think you experienced a covered event and demand payment from the insurance company

Question 73

tail insurance

Answer 73

liability insurance for projects the architect did prior to retirement which are still within the relevant statures of limitations/repose

Question 74

fiduciary duty (and do architects have it to client?)

Answer 74

the obligation a professional has to act in the best interests of their client & no

Question 75

who contracts under architect vs owner?

Answer 75

architect: MEP, lighting, civil (related to new work), landscape, cost estimator, code consultant owner: zoning, traffic, site, geotechnical, surveyor, civil (related to existing site)

Question 76

what is the contractor responsible for?

Answer 76

"perfection" in construction nothing outside the contract paying and coordinating subs providing owner with operation manuals some design of specific systems for things like curtain wall details, concrete formwork, and steel shop drawings

Question 77

what is the architect responsible for?

Answer 77

the project being on time and on budget instruments of service standard of care coordination of project team enforcement of contract terms NOT means & methods, existing site, job site safety, anything outside contract

Question 78

professional liability insurance

Answer 78

covers the cost of mistakes made by the architect as well as disciplinary, regulatory, and administrative expenses (also called errors and omissions insurance)

Question 79

common types of small business taxes

Answer 79

federal & state income tax self-employment tax personal property tax

Question 80

contractual liability insurance

Answer 80

covers you when something goes wrong and you, due to the contract, are held responsible for it typically included in general liability insurance

Question 81

subrogation

Answer 81

process of the insurance company assuming agency for an insured party in order to sue another party (there are in depth examples of this in PcM flashcard #25)

Question 82

revenue factor

Answer 82

utilization rate * direct salary expense ratio

Question 83

profit earnings ratio

Answer 83

= profit / net operating revenue (defines the health of the business

Question 84

net billing

Answer 84

billing that only covers fees for architects labor

Question 85

What types of damages can be pursues in litigation? What are called for in AIA B101?

Answer 85

consequential damages - estimated cost of lost owner profit due to project delays (AIA prohibits all parties from this) liquidated damaged - per-day penalty for a delayed construction project completion, agreed upon at the beginning (A101 allows for this, B101 states that the owner cannot deduct or withhold any amount of money from the architects compensation as a penalty or liquidated damages without the architects agreement) direct damages - actual cost of fixing unacceptable work (max allowed is the architect's fee)

Question 86

types of bonds

Answer 86

municipal bonds - loans made by investors to a government in order to build a public good (ex. firehouse) revenue bonds - municipal bonds issued to finance facilities for revenue producing public enterprises (ex. toll booth, stadium) corporate bond - private company issues bond to borrow money for construction projects

Question 87

architects basic services

Answer 87

instruments of design SD, DD, Bid, CD, CA, cost estimation , and coordination budget & schedule management codes & utilities MEP & Structural

Question 88

types of bids

Answer 88

competitive - lowest immediate cost negotiatied - owner selects a single trusted constractor and they negotiate a price, greater speed and quality but more expensive invited - competitive bid with specifically qualified contractors proposed - owner negotiates for best quality out of the lowest 4 bids

Question 89

A B and C of AIA contracts

Answer 89

A - Owner Contractor B - Owner Architect C - Architect Consultant

Question 90

Construction contingency

Answer 90

money set aside, by the owner, in the budget, to cover unexpected buildings costs that inevitably arise throughout a project

Question 91

who's responsible for preparing the punch list?

Answer 91

typically the contractor

Question 92

who is typically the initial decision maker?

Answer 92

the architect

Question 93

if the design is over budget, who pays the consultants to redesign?

Answer 93

no one, they do it for free per typical contract

Question 94

what is included in the contract?

Answer 94

construction drawings specs addenda change orders amendments to the contract minor changes to the work construction change directives bidding documents

Question 95

what is an ASI

Answer 95

Architects Supplemental Instruction used to resolve minor changes in the work, interpret drawings, or offer additional instructions

Question 96

what equipment is the architect required to design, select, or specify?

Answer 96

the equipment that is attached and integral to the building (fume hoods, counters, sprinklers, dishwashers, ovens, elevators, chillers, power generators)

Question 97

What level of specs do you need for each design phase?

Answer 97

SD - narrative specifications DD - “outline specifications” CD - “specifications”

Question 98

Design assist services

Answer 98

architect who prepares the RFP, selects the site, establishes deadlines & budgets. Pairs well with design build, can become bridging consultant

Question 99

Accessory occupancies

Answer 99

small spaces (total area of which is less than 10% of the floor area they are serving) that serve the main occupancy and require classification as different occupancy groups but do not require fire separation from the main occupancy

Question 100

If the owner suspends the project, the architect can

Answer 100

Suspend work, require payment for work to date, require payment for delay caused expenses, submit a new schedule

Question 101

What is AIA B101 SP

Answer 101

B101 but with a focus on sustainability. Owner must provide drawings, manuals, and building operational costs, appeal for certifications, ensure design its sustainable guidelines, and comply with authorities on ownership & operations

Question 102

guaranteed maximum price

Answer 102

like a cost plus fixed fee, but if the project is delayed or the price of materials goes up beyond a total project cost, the contractor has to complete the project and eat the extra cost

Question 103

Stipulated (lump) sum

Answer 103

owner pays contractor one price to build everything in the contract

Question 104

if the contractor requests info from the owner, how many days does the architect have to get it to the contractor?

Answer 104

7

Question 105

AIA C401 Architect Consultant Agreement

Answer 105

the consultant is not responsible for other consultants' work but still has the same duty to say something when errors appear. The consultant only report to the architect, then the architect reports to the owner and contractor

Question 106

ADA clear floor space

Answer 106

30" x 48"

Question 107

what is in a project manual

Answer 107

bidding requirements contracts general & supplemental conditions specifications

Question 108

Electrical engineer provides services for what parts of the building?

Answer 108

Data & telephone, power system & specs, signal systems, lighting systems

Question 109

total working capital

Answer 109

firm's current assets (cash + accounts receivable

Question 110

who certifies substantial completion?

Answer 110

architect

Question 111

When can a contractor terminate ?

Answer 111

After 30 days of owner stopped work If the architect refuses to pay without reason Owner is delinquent in paying If work is stopped due to court order

Question 112

Instrument of service

Answer 112

any tangible or intangible work by the architect or consultants, including drawings, specifications, sketches, models, notes, and surveys

Question 113

Closeout project notebook

Answer 113

Summary of costs, certificate of substantial completion, summary of fee expenditure, comments on completed work

Question 114

what types of tax might an architecture firm expect to pay?

Answer 114

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.

Question 115

What info does A305 Contractor's Qualification Statement require?

Answer 115

financial statement, references, business model

Question 116

Minimum slope for a flat roof

Answer 116

1/4" per foot