PcM/PjM_PPI/HYPER

Question 1

The Seven Key Indicators for the Accrual P/L Statement

Answer 1

• Utilization Rate
• Overhead Rate
• Break-Even Rate
• Net Multiplier
• Profit-to-Earnings Ratio
• Net Revenue Per Employee
• Aged Accounts Receivable

Question 2

managing your firm’s finances is a relatively simple process consisting of three tasks:

Answer 2

• Measuring the variances between your year-to-date actual financial activity and your year-to-date budget
• Understanding why these variances have occurred
• Taking prompt, corrective action, as necessary

Question 3

Utilization Rate

Answer 3

• Formula: Direct labor (project-related hours) / Total hours worked × 100
• Targets: All staff: 60 to 65 percent; professional/technical staff (incl. principals): 75 to 85 percent
• Measures: Overall efficiency and effective use of labor; not a measure of productivity.
• Utilization Rate also can’t account for the efficiency of the actual work (productivity)
• So 1:4 is a ratio and it’s equivalent to saying 25%.

Question 4

Overhead Rate

Answer 4

• Formula: Total indirect expenses / Direct labor
• Target: 1.5 to 1.75 (or 150 to 175 percent) of direct labor
• Measures: The cost of operating your business that cannot be attributed directly to projects. This is the most critical indicator; if unknown or calculated incorrectly, profitability cannot be measured

Question 5

Break-Even Rate

Answer 5

• Formula: Overhead rate + 1.0
• Target: 2.5 to 2.75 (or 250 to 275 percent) of direct labor
• Measures: Your total cost of doing business for every dollar spent on direct labor. When developing project fee budgets, calculate this indicator for every team member. Add desired profit to determine billing rates.

Question 6

Net Multiplier

Answer 6

• Formula: (net operating revenue / total direct labor)
  (break-even rate / inverse of profit)
• Target: 2.75 to 3.25 or better
• Measures: The revenue generated for every dollar spent on direct labor. Compare with the break-even rate to determine if profit is being generated.

Question 7

Aged Accounts Receivable

Answer 7

• Formula: Annual average accounts receivable / (net operating revenue / 365 days)
• Target: 45 to 60 days or less
• Measures: Average time interval between invoice date and date payment is received- For example, if you have an annual average accounts receivable of $125,000 per month and annual net operating revenue of $1,000,000, then your aged accounts receivable is 125,000 ÷ (1,000,000 ÷ 365), which is equal to 45.6 days.

Question 8

Profit to Earnings (P/E) Ratio

Answer 8

• Formula: (profit before distributions and taxes / net operating revenue)
• Target: Equal to or greater than the anticipated profit in the annual profit plan
• Measures: The firm’s effectiveness in completing projects profitably.
• Profit is what remains after all expenses, including salaries, have been accounted for, and before non-salary distributions are made to shareholders and employees and income taxes for the firm are paid.
• The P/E ratio indicates the firm’s effectiveness in completing projects profitably. The higher the number, the more profitable the firm is.

Question 9

Net revenue per employee

Answer 9

• Formula: Annual net operating revenue / the number of employees
• Target: As high as possible.
• Measures: Revenue earnings per employee. Helps establish a realistic target for the net operating revenue in the budget for the coming year

Question 10

High Performing Firms

Answer 10

• minimum 20 percent Operating Profit Rate and minimum 3.00 Net Revenue Multiplier
• total utilization ratio of about 60%
• From AHPP, target for the entire firm is 60%-65% and for principals and architects it
  should be above 75%.

Question 11

General Liability

Answer 11

• General Liability is the baseline for all business insurance
• if you’re interacting with clients face to face (at their place of work or at yours) you risk the chance of them getting injured, which could lead to a lawsuit.
• This type of coverage offers protection against any third-party lawsuits arising from bodily injury, property damage (caused by you or an employee), rental property damage, financial loss, etc.

COVERAGE IS HIGHLY SPECIFIC
- A general liability policy provides coverage for claims against the named insured involving third-party legal liability, but it doesn’t cover professional, automobile, and workers’ compensation exposures.
- general liability policy covers only the named insured; it does not protect employees, unless specifically endorsed to provide for such an extension of coverage.

LIABILITY LIMITS ARE BASED ON OCCURRENCE COVERAGE
(1) the dollar amount of the claim for each occurrence or accident and
(2) the aggregate dollar amount for all claims

CONTRACTUAL LIABILITY COVERAGE SHOULD BE INCLUDED
- the design professional can encounter a variety of business contracts, including office leases, purchase orders, service agreements, and the like any of which may contain a hold-harmless provision that will contractually transfer another’s legal liability to the design professional.
- When these are found, the design professional should obtain a coverage extension if the general liability policy does not already have one.

Question 12

Professional Liability (Errors & Omissions)

Answer 12

• Professional liability insurance will protect you and your company against any claims made by a client regarding negligence, and will cover defense costs and settlement payments (up to policy limits) for any allegation that your work or advice was inadequate
• While not a contractual obligation, this coverage protects you and your company from any damage perceived to result from your services.

Question 13

Workers’ Compensation

Answer 13

• in most states workers’ compensation insurance is a requirement for businesses with one or more employees.
• It will cover any injury that occurs at the workplace or at any location where the employee is acting in the “course and scope” of employment.
• having workers’ compensation may be a wise purchase, given that it will help cover all medical expenses and loss of wages.

Question 14

PROFESSIONAL LIABILITY INSURANCE IS CLAIMS-MADE

Answer 14

• traditional insurance method
• the coverage had to be in effect when the negligence occurred and the policy must provide coverage at the time the claim is made against the professional—even though this can be years after services are performed and projects are completed
• Claims-made policies are common to professional liability insurance and should not be confused with occurrence policies common to general liability insurance.
• Under a claims-made policy, all coverage ceases when the policy is canceled or not renewed (by the firm or the insurer), even though the design professional may have been insured when the services were rendered
• The claims-made basis is used for professional liability insurance coverage because it makes costs to insurers more predictable.
• So if professional liability insurance were sold on an occurrence basis, the premium would have to be calculated for allegations of negligence for many years or even many decades
• If a firm switches carriers, prior acts coverage, as described below, usually is available to cover the risks from the earlier period.

Question 15

occurrence policy

Answer 15

• a claim filed after policy cancellation or renewal will be covered if the policy was in force when the incident that caused the claim occurred, regardless of whether the insured was covered when the claim was made

Question 16

Tail coverage / prior acts coverage

Answer 16

• to cover claims occurred between transition from one insurance to another.

Question 17

Broad policies

Answer 17

• Broad policies insure not only the firm as the “named insured” but also any partner, executive officer, director, stockholder, or employee of the insured firm when that individual is acting within the scope of professional duties.
• This includes former employees for their actions while at the insured firm

Question 18

preclude

Answer 18

prevent from happening; make impossible.

Question 19

Exclusions

Answer 19

• Exclusions are sometimes added to preclude coverage for identifiable risks
• This can be done to reduce the cost of the policy (or allow coverage in situations where risks cannot be determined).

Question 20

Endorsements

Answer 20

• Endorsements expand coverage and can carry an additional premium cost
• sometimes they are included automatically at no extra cost
• Endorsements may include, for example, first-dollar defense, special project additional limits, expanded equity interest, and design/build coverage.

Question 21

How much insurance a firm buys

Answer 21

• a function of its financial needs (including those of its principals)
• its tolerance for risk
• its confidence in risk management abilities
• the demands of clients
• Minimum per-claim and annual aggregate limits of liability for errors and omissions insurance are usually set at $100,000, with maximum limits running as high as $25 million

Question 22

Aggregate

Answer 22

• limits of liability are available to pay for claims and associated legal expenses in a policy term
• The costs of claims and legal expenses that exceed the limits must be absorbed by the firm
• With most policies, the firm receives a new limit each policy year
• Some insurance programs permit their policyholders to buy excess limits for specific projects or to buy “split limits” with one limit for each claim and another for the aggregate claims in a year that are eroded by each claim payment

Question 23

Deductibles

Answer 23

• Deductibles as low as $1,000 can be available, but many firms increase their deductibles to lower their premium costs
• As with most insurance, the higher the level of risk retained by the insured, the higher the deductible and the lower the premium cost.

Question 24

premium

Answer 24

• Each firm’s premium is calculated individually, based on such factors as the firm’s practice, project mix, claims experience, coverage needs, and resulting risks to the insurer.
• the more specific and unambiguous the information provided, the more likely the premium will be minimized.

Question 25

POLICIES COVER SERVICES, NOT CONTRACTUAL LIABILITY

Answer 25

- Professional liability insurance companies provide coverage **only for the insured firm’s negligence in performing or furnishing professional services**. - The firm has a duty to meet the standard of care for the services it has undertaken - Coverage for express **warranties and guarantees is excluded under most policies**

Question 26

indemnification

Answer 26

- Most professional service agreements published by the AIA and Engineers Joint Contract Documents Committee (EJCDC) do not include any specific indemnity provision protecting the client; the documents rely on common law rather than a contractual commitment - Many states have “anti-indemnity” statutes to regulate the use of indemnification clauses in construction contracts - some states prohibit these clauses completely if the provision requires one party to pay on behalf of the other party’s negligence - A promise to indemnify may fall within the scope of professional liability insurance coverage if it is based on harm actually caused by the failure of the professional to meet the standard of care for the services performed, but care should be taken to avoid overly broad wording that cannot be covered by insurance.

Question 27

vicarious

Answer 27

- experienced in the imagination through the feelings or actions of another person. - secondary, secondhand

Question 28

CONSULTANTS AND VICARIOUS LIABILITY

Answer 28

- A design professional routinely retains consultants. This relationship means that the design professional also has vicarious liability for any damage caused by the consultant’s negligence. - Insured design professionals will want to review their consultant’s insurance status

Question 29

PROJECT-SPECIFIC PROFESSIONAL LIABILITY INSURANCE

Answer 29

- Project insurance **covers the design team participants—even those who are otherwise uninsured**. - Project insurance is intended to cover only one project and is **usually paid for by the owner** who wants coverage beyond that normally carried by the firms. - Such coverage is sometimes limited in availability, and when offered on larger projects it can be very expensive.

Question 30

JOINT VENTURES INSURANCE

Answer 30

- From a legal standpoint, **a joint venture is quite similar to a partnership,** ; the main difference is that a joint venture normally has a more limited scope or purpose - **Broad policies provide automatic joint venture coverage** - **Some insurers exclude joint ventures from the basic policy;** coverage for joint ventures with other design professionals may be available by special endorsement for specific situations. **This endorsement extends the coverage under the basic policy to provide**. - However, coverage for other participating firms in the joint venture is not provided by this endorsement - it is more equitable if the policies are all with the same carrier with the limits and deductibles in similar amounts for all firms - The joint venture might be capable of obtaining a project policy. - **This is especially helpful if the joint venture is organized as a separate business operation, such as a limited liability partnership or corporation** - A project policy covers a prime professional and all other professional participants for a specific period of time.

Question 31

STRATEGIC ALLIANCES NEED SPECIAL ATTENTION OF INSURANCE

Answer 31

- Strategic alliances are business ventures - Clients, or other parties, claiming harm from the actions of a strategic alliance may be able to recover from any member of the alliance - the insurance concerns of a strategic alliance should be the equivalent of any joint venture or partnership. - Firms often rely on their practice policies of professional liability insurance to protect and defend them in loosely structured business combinations

Question 32

AIA-2017 B101 is the Owner-Architect Agreement. Article 2 Section 5 requires the following insurance types

Answer 32

» Commercial General Liability » Automobile Liability » Workers Compensation » Employers Liability » Professional Liability

Question 33

AUTOMOBILE / AIRCRAFT / WATERCRAFT INSURANCE

Answer 33

- While all auto insurance policies are similarly structured, there are important distinctions between personal and commercial vehicle coverage. Typically, commercial coverage carries higher liability limits and includes special provisions for rented and other non-owned vehicles, **including employees’ cars driven for company business**

Question 34

Employer's Liability insurance

Answer 34

- As an employer, **the design professional can be subjected to claims by employees for job-related injuries. In most instances, these claims are covered by workers’ compensation** rather than being treated as common-law actions. - **Situations may exist in which an employee’s injury isn’t covered under workers’ compensation**. In these instances, **the employee may attempt to sue the employer**. Employee suits are excluded both under general liability and workers’ compensation policies, and a **potential coverage gap exists**

Question 35

Foundation sinks because Geotechnical report listed incorrect soil bearing capacity. How insurance works?

Answer 35

- Geotechnical report is provided by the owner and the Architect is allowed to rely on the owner to provide accurate information.

Question 36

Foundation cracks because PE provided incorrect rebar size and space for architect to use in drawings and specs. How insurance works?

Answer 36

ARCHITECT’S PROFESSIONAL LIABILITY...then insurance company may try to recoup cost from PE

Question 37

allegation

Answer 37

- a claim or assertion that someone has done something illegal or wrong, typically one made without proof. - **claim, statement**

Question 38

Insurances that most states require

Answer 38

- workers’ compensation insurance - unemployment insurance - state disability insurance

Question 39

CYBER LIABILITY INSURANCE

Answer 39

- Firms are also subject to providing legally required notices and meeting other regulatory obligations. Firms may face breach of contract, confidentiality, and other legal challenges as well. - In addition, other costs will include up-front investigation, data restoration, business interruption, and public relations

Question 40

rectify

Answer 40

put right; correct.

Question 41

extortion

Answer 41

- the practice of obtaining something, especially money, through force or threats. - blackmail

Question 42

COMMERCIAL PROPERTY INSURANCE

Answer 42

- **Property insurance covers everything related to the loss and damage of company property** due to a wide variety of events, such as fire, smoke, wind and hail storms, civil disobedience, and vandalism - “property” is broad and often includes lost income, business interruption, buildings, computers, company papers, and money - Property insurance policies come in two basic forms * **all-risk policies** covering a wide range of incidents and perils except those noted in the policy; and * **peril-specific policies** that cover losses from only those perils listed in the policy.

Question 43

EXCESS (UMBRELLA) LIABILITY INSURANCE

Answer 43

- This policy will provide higher limits in conjunction with underlying **general liability, automobile, and employer’s liability policies** - the cost of an umbrella liability policy is not significant. - **Professional liability is not commonly included**

Question 44

DESIGN PROFESSIONAL’S PROPERTY INSURANCE

Answer 44

- The design professional’s office building or the leasehold improvements where the design professional is a **tenant should be insured by a standard policy covering named perils or by a broader all-physical-loss form, which is generally available**.

Question 45

OFFICE CONTENTS INSURANCE

Answer 45

- The design professional’s office contents can be insured by a standard policy covering fire, windstorm, and other extended coverage perils. - Portable equipment that may be used outside the office can be insured under an all-risk floater policy. Money, securities, checks, travel tickets, and other negotiable instruments can be insured under a blanket crime or similar policy.

Question 46

VALUABLE DOCUMENTS INSURANCE

Answer 46

- This insurance is one of the most important property coverages sought by design professionals. **It covers the total value of documents lost or destroyed by any of the means described in the policy and is generally an “all-risk” coverage**.

Question 47

BUSINESS INTERRUPTION INSURANCE

Answer 47

- Business interruption insurance reimburses the design professional for continuing fixed expenses and for loss of profits in the event fire or other casualty interrupts normal business operations. - This insurance can be **written to cover fire, windstorm, extended coverage perils, computer crashes, and other hazards**.

Question 48

FIDELITY BONDS AND CRIMINAL LOSS INSURANCE

Answer 48

- **all persons** involved with authorization of payments to subconsultants or others, purchasing, and other activities **requiring liability for the misuse of funds of others should be bonded** - **Money, securities, checks**, and other negotiable paper may **be insured both inside and outside the insured’s premises under a broad-form money** and securities policy to **include loss by robbery, burglary, theft, and disappearance or destruction by fire or other causes.** - Comprehensive bonds or blanket crime policies are available.

Question 49

disbursement

Answer 49

- the payment of money from a fund.

Question 50

DIRECTORS AND OFFICERS LIABILITY INSURANCE

Answer 50

- With corporations that means the firm not only has to meet the legal requirements set out by state law, but also protect those who owe a duty to the business entity. - Directors and Officers (D&O) coverage provides protection for leaders of a firm established as a corporation against claims alleging breach of duty, negligence, error, or misrepresentation. - Directors and officers are responsible for knowing how the firm is operating and making policy and managerial decisions that are intended to benefit the shareholders

Question 51

FIDUCIARY LIABILITY INSURANCE

Answer 51

- The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for pension plans in private industry. - ERISA generally defines a fiduciary as anyone who exercises discretionary authority or control over a plan’s management or assets, including anyone who provides investment advice to the plan. - This liability insurance provides protection for fiduciaries against liabilities that arise from their administration and oversight of any employee benefit or pension plan.

Question 52

HR MANAGEMENT / HR OUTSOURCING / PEO

Answer 52

- HR functions are time consuming and may force your architectural firm to stop designing to spend time administering - A Professional Employer Organization (PEO) can help you to manage critical HR administration and ever-changing regulatory issues along with every aspect of the employee life-cycle including payroll, benefits administration, human resources tasks such as hiring and training, workers’ compensation, compliance, and 401K administration.

Question 53

The three tiers of the AIA Code of Ethics

Answer 53

- Canons : broad principles of conduct. - Ethical Standards (E.S) : more specific goals toward which Members should aspire in professional performance and behavior - Rules of Conduct : **mandatory, violation of a Rule is grounds for disciplinary action by the Institute**. In some instances, implement more than one Canon or Ethical Standard.

Question 54

The six canons of the code of ethics

Answer 54

» General Obligations » Obligations to the Public » Obligations to the Client » Obligations to the Profession » Obligations to Colleagues » Obligations to the Environment

Question 55

The Model Rules of Conduct are NCARBs ethical standards. What those are?

Answer 55

» Competence » Conflict of Interest » Full Disclosure » Compliance with Laws » Signing and Sealing Documents

Question 56

The following practices are not, in themselves, unethical, unprofessional

Answer 56

(1) submitting, at any time, competitive bids or price quotations, including in circumstances where price is the sole or principal consideration in the selection of an architect; (2) providing discounts; or (3) providing free services.

Question 57

CANON I General Obligations

Answer 57

- Members shall demonstrate a **consistent pattern of reasonable care and competence**, and shall apply the technical knowledge and skill which is ordinarily applied by architects of good standing practicing in the same locality. - **Standards of Excellence:** Members should continually seek to raise the standards of aesthetic excellence - **Knowledge and Skill**: Members should strive to improve their professional knowledge and skill. - **Natural and Cultural Heritage**: Members should respect and help conserve their natural and cultural heritage - **Human Rights**: Members should uphold human rights - **Members shall not engage** in harassment or discrimination in their professional activities on the basis of race, religion, national origin, age, disability, caregiver status, gender, gender identity, or sexual orientation. - **Members shall not engage** in conduct involving wanton disregard of the rights of others. - **Design for Human** Dignity and the Health, Safety, and Welfare of the Public: - **Allied Arts and Industries:** Members should promote allied arts and contribute to the knowledge and capability of the building industries as a whole.

Question 58

wanton

Answer 58

(of a cruel or violent action) deliberate and unprovoked

Question 59

deliberate

Answer 59

done consciously and intentionally. "a careful and deliberate worker"

Question 60

provoke

Answer 60

stimulate or give rise to (a reaction or emotion, typically a strong or unwelcome one) in someone.

Question 61

unprovoked

Answer 61

(of an attack, or a display of aggression or emotion) not caused by anything done or said.

Question 62

CANON II Obligations to the Public

Answer 62

- **Members shall not knowingly violate the law**. - Members shall **neither offer nor make any payment or gift to a public official** with the intent of influencing the official’s judgment in connection with an existing or prospective project in which the Members are interested. - **the Members become aware of a decision taken by their employer or client which violates any law** and which will materially affect adversely the safety to the public, the Members shall: (a) **advise** their employer or client against the decision, (b) **refuse** to consent to the decision, and (c) **report the decision to the local building inspector** charged with the enforcement of the applicable laws unless the Members are able to resolve by other means. - Public Interest Services: Members should render **public interest professional services, including pro bono services**, and encourage their employees to render such services. - Civic Responsibility: Members should be involved in civic activities as citizens and professionals, and should **strive to improve public appreciation and understanding of architecture** and the functions and responsibilities of architects. - Members making **public statements on architectural issues shall disclose when they are being compensated** for making such statements or when they have an economic interest in the issue - When performing professional services, Members **shall make reasonable efforts to inform their clients of the potential environmental impact**

Question 63

CANON III Obligations to the Client

Answer 63

- **Competence**: Members should serve their clients in a timely and competent manner. - In performing professional services, Members shall **take into account applicable laws and regulations**. Members may rely on the advice of other qualified persons as to the intent and meaning of such regulations. - **Members shall not materially alter the scope or objectives of a project** without the client’s consent. - A Member shall not render professional services if the Member’s professional judgment could be affected by responsibilities to another project or person, or by the Member’s own interests, unless all those who rely on the Member’s judgment consent after full disclosure. - When acting by agreement of the parties as the independent interpreter of building contract documents and the judge of contract performance, Members shall render decisions impartially. - Members shall not intentionally or recklessly mislead existing or prospective clients about the results that can be achieved through the use of the Members’ services, nor shall the Members state that they can achieve results by means that violate applicable law or this Code.

Question 64

candor (candid)

Answer 64

- the quality of being open and honest in expression; frankness. - "a man of refreshing candor"

Question 65

CANON IV Obligations to the Profession

Answer 65

- Members having substantial information which leads to a reasonable belief that another Member has committed a violation of this Code which raises a serious question as to that Member’s honesty, trustworthiness, or fitness as a Member, shall file a complaint with the National Ethics Council. - Members shall not sign or seal drawings, specifications, reports, or other professional work for which they do not have responsible control. - Members speaking in their professional capacity shall not knowingly make false statements of material fact. - Members shall not make misleading, deceptive, or false statements or claims about their professional qualifications, experience, or performance and shall accurately state the scope and nature of their responsibilities in connection with work for which they are claiming credit. - Members shall make reasonable efforts to ensure that those over whom they have supervisory authority conform their conduct to this Code.

Question 66

Responsible control

Answer 66

Responsible control means the degree of knowledge and supervision ordinarily required by the professional standard of care. With respect to the work of licensed consultants, Members may sign or seal such work if they have reviewed it, coordinated its preparation, or intend to be responsible for its adequacy.

Question 67

CANON V Obligations to Colleagues

Answer 67

- Professional Environment: Members should provide their colleagues and employees with a fair and equitable working environment, compensate them fairly, and facilitate their professional development. - 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. - Members shall recognize and respect the professional contributions of their employees, employers, professional colleagues, and business associates. - Members leaving a firm shall not, without the permission of their employer or partner, take designs, drawings, data, reports, notes, or other materials relating to the firm’s work, whether or not performed by the Member.

Question 68

CANON VI Obligations to the Environment

Answer 68

- Energy conservation: Members should set ambitious performance goals for greenhouse gas emission reduction - Water Use: Members should optimize water conservation in each project to reduce water use and protect water supply, - Building Materials: Members should select and use building materials to minimize exposure to toxins and pollutants in the environment to promote environmental and human health - Members shall consider with their clients the environmental effects of their project decisions.

Question 69

Code of Ethics and Professional Conduct Enforcement

Answer 69

(1) Enforcement of the Code is administered through a **National Ethics Council, appointed by the AIA Board of Directors.** (2) Formal charges are filed directly with the **National Ethics Council** by Members, components, or anyone directly aggrieved by the conduct of the Members. (3) **Penalties** that may be imposed by the National Ethics Council are: (a) **Admonition** (b) **Censure** (c) **Suspension** of membership for a period of time (d) **Termination** of membership. (4) **Appeal procedures are available**. (5) **All proceedings are confidential**, as is the imposition of an admonishment; however, all other **penalties shall be made public**.

Question 70

admonition

Answer 70

an act or action of admonishing; authoritative counsel or warning. "the old judge's admonition to the jury on this point was particularly weighty"

Question 71

admonish

Answer 71

**warn or reprimand someone firmly**. "she admonished me for appearing at breakfast unshaven"

Question 72

reprimand

Answer 72

a rebuke, especially an official one. "the golfer received a reprimand for a breach of rules"

Question 73

rebuke

Answer 73

express sharp disapproval or criticism of (someone) because of their behavior or actions. "she had rebuked him for drinking too much"

Question 74

promulgate

Answer 74

promote or make widely known (an idea or cause). "these objectives have to be promulgated within the organization"

Question 75

subsequently

Answer 75

after a particular thing has happened; afterward. "Mel's offhand remark subsequently became their rallying cry"

Question 76

substance

Answer 76

a particular kind of matter with uniform properties. "a steel tube coated with a waxy substance"

Question 77

supervene

Answer 77

occur later than a specified or implied event or action, typically in such a way as to change the situation. "he had appendicitis and as complications supervened, refrained from work for months"

Question 78

NCARB rules of conduct five areas

Answer 78

- competence - conflict of interest - full disclosure - compliance with laws - signing and sealing documents.

Question 79

irrespective

Answer 79

not taking (something) into account; regardless of. "child benefit is paid irrespective of income levels"

Question 80

vigorously

Answer 80

in a way that involves physical strength, effort, or energy; strenuously. "she shook her head vigorously"

Question 81

MODEL RULES OF CONDUCT RULE 1 COMPETENCE

Answer 81

- an architect’s primary duty is to protect the public’s health, safety, and welfare - In designing a project, an architect shall take into account the applicable federal, state, and local building laws and regulations - An architect shall perform professional services only when the architect has the necessary knowledge and skill in the specific technical areas involved. - An architect shall not be permitted to practice architecture if the architect’s professional competence is substantially impaired

Question 82

MODEL RULES OF CONDUCT RULE 2 CONFLICT OF INTEREST

Answer 82

- An architect shall not accept compensation in connection with services from more than one party on a project unless the circumstances are fully disclosed and waived in writing by all parties. - An architect shall not solicit or accept compensation from material or equipment suppliers for specifying or endorsing their products in connection with a project - An architect shall not perform professional services in the face of a conflict of interest that is not fully disclosed and waived in writing by all parties. An architect has a conflict of interest when: (a) the architect has or may acquire a financial or other interest in the project, someone participating in it, or any component of it; or (b) the architect’s judgment may be adversely affected by a relationship with another party. - An architect, when acting by agreement of the parties as the independent interpreter of building contract documents or as the judge of contract performance, shall render decisions impartially. - An architect serving as an AXP Supervisor for a candidate for licensure shall not have, nor enter into, any relationship with the candidate that would interfere with the objectivity of the AXP Supervisor’s certification of the candidate’s experience

Question 83

MODEL RULES OF CONDUCT RULE 3 FULL DISCLOSURE

Answer 83

- An architect shall not make statements that are misleading, deceptive, or false. - An architect making public statements on architectural matters shall disclose if the architect is being compensated for making such statements or has an economic interest in the issue. - An architect shall not misrepresent the architect’s qualifications, capabilities, and experience or that of the architect’s firm. - An architect shall not misrepresent or overstate the scope of the architect’s responsibility in connection with work for which the architect or the architect’s firm is claiming credit. - the architect becomes aware of a decision made by the architect’s employer or client, against the architect’s advice, which violates applicable federal, state, or local building laws and regulations and which will, in the architect’s judgment, materially and adversely affect the health and safety of the public, the architect shall (a) refuse to consent to the decision, and (b) report the decision to the official charged with enforcement of building laws and regulations, and (c) in circumstances where the architect reasonably believes that other such decisions will be taken notwithstanding the architect’s objection, terminate the provision of services with reference to the project unless the architect is able to cause the matter to be resolved by other means. - An architect shall not knowingly sign any verification document related to licensure that contains false or misleading information - An architect possessing knowledge of a violation of the jurisdiction’s laws or rules governing the practice of architecture by another shall report such knowledge to the Board. It is the professional duty of the architect to do so.

Question 84

notwithstanding

Answer 84

in spite of. "notwithstanding the evidence, the consensus is that the jury will not reach a verdict"

Question 85

MODEL RULES OF CONDUCT RULE 4 COMPLIANCE WITH LAWS

Answer 85

- An architect shall not violate the law of the United States or any U.S. jurisdiction that in any material way relates to the conduct of the architect’s practice. - An architect shall not engage in conduct involving fraud or deliberate disregard of the rights of others. - An architect may be subject to disciplinary action if the architect is disciplined in any other U.S. jurisdiction - U.S. jurisdiction protecting the rights of persons working for the employer, such as those pertaining to harassment, discrimination, and unfair compensation, shall be subject to discipline.

Question 86

tribunal

Answer 86

a court of justice. "an international war crimes tribunal"

Question 87

MODEL RULES OF CONDUCT RULE 5 SIGNING AND SEALING DOCUMENTS

Answer 87

- An architect shall sign and seal only those technical submissions that were prepared under the architect’s responsible control - An architect of record may sign and seal technical submissions not required by law to be prepared by an architect including information supplied by manufacturers when that information is intended to be incorporated into the architect of record’s technical submissions - An architect of record may sign and seal prototypical building documents prepared by an architect licensed in any U.S. jurisdiction, but only if the architect of record determines that such documents are in compliance with the requirements of the project’s jurisdiction

Question 88

A homeowner hires a building designer to prepare drawings for a new home. The building designer gets a licensed architect (AIA member) to stamp the drawings for permits. 18 months after the permit was received there are constructability problems and there are code issues that can’t pass inspection. What rules or ethics has the architect breached and what recourse does the owner have?

Answer 88

In the scenario given, the homeowner could file a complaint with the AIA. The 18 month timeline means the owner has missed the one-year time limit for complaints to the AIA (from the time the plans were stamped). If they could show good cause for the delay they could make a claim against the architect. This seems likely because the project is still ongoing. Possible violations of AIA Rules of Conduct include: 4.102 - Signing and Sealing Drawings (this is the big one) They could also make a case with 2.101 - Knowingly Violate the Law 3.101 - Local Laws and Regulations and maybe 4.202 - Supervisory Authority This scenario also violates the NCARB Rules of Conduct 5.1

Question 89

Standard of care

Answer 89

- what a reasonably prudent architect would do in the same general locale, in the same time frame, given similar facts and circumstances.

Question 90

For a negligence claim against an architect the following must be proved

Answer 90

- Duty : The architect actually owed something or had a responsibility to the person making the claim. - Breach of Duty : there must be a failure on the part of the architect to act or perform its services within the applicable standard of care. - Damages : there must be actual damages. These damages may be purely, economic, or they may involve personal injury or property damage. Without damages, even though there is a violation of the standard of care, there is no harm, no foul, and no liability. - Failure of Standard of Care : The architect did not meet their standard of care AND this directly led to the actual damages.

Question 91

trier of fact.

Answer 91

- Who determines if architect's **negligence caused duty, breach of duty, damages and failure of standard of care**. - **The trier of fact may be an arbitrator, a judge, or a jury.** - The trier of fact is charged with the obligation of evaluating the testimony of the fact witnesses, documentary evidence, and expert testimony; **determining the facts; and rendering an award or judgment**

Question 92

Fact witnesses

Answer 92

- those that participated in the matter and have actual knowledge of the relevant events testify to their recollection of what transpired

Question 93

Owner sells plans to neighbor to build identical house

Answer 93

Obvious copyright infringement

Question 94

Owner doesn’t hire architect for CA, then fires the contractor and provides the drawings to a new contractor in order to receive a bid

Answer 94

This is OK per the B101

Question 95

Owner gives permitted plans to 2nd architect to construct an addition on the building under a separate contract after the initial building is complete

Answer 95

This is OK per the B101

Question 96

Owner reproduces floor plans for use in a book about the process of designing and constructing the building

Answer 96

This is not specifically permitted in the B101

Question 97

Instruments of Service

Answer 97

- **drawings, specifications, schedules, sketches, renderings, etc** - Section 7.2 clearly states that the Architect retains ownership of the Instruments of Service - Section 7.3 grants the owner a non-exclusive license to use the Instruments of Service for the project in question. This means the owner can not use the same plans to build 10 copies of the building - if owner wants to use instruments of services, **owner needs to indemnify architect** - owner could get rights of instruments of service if architect fail to conduct their service

Question 98

Cash-basis

Answer 98

Cash-basis tracks actual cash in and cash out. Because money isn’t usually received at the same time money is paid (salaries, etc) there is no time component to this method

Question 99

Accrual-basis

Answer 99

Accrual-basis is used by most firms larger than sole proprietorships. This tracks invoices and expenses, not the actual movement of cash. So when you bill a client, it goes on the report, not when you get paid

Question 100

Profit-Loss Statement

Answer 100

- The Revenue component of the Profit-Loss Statement is the most basic accounting of expected money in and out - This sets the baseline for the rest of the report as well. All the percentages you see in the chart are based on the value at Line A being 100%. (Net Operating Revenue)

Question 101

Balance Sheet

Answer 101

- Assets = Liabilities + Shareholders’ Equity - balance sheet shows my financial position for a specific moment in time. Like a snapshot of my firm’s financial health, it identifies my firm’s assets such as cash, inventory, property owned, etc. and it’s liabilities, which are my debt, accounts payable, etc. - On a balance sheet your Assets should always equal your Liabilities and Equity. - Basically what you have (assets) is supposed to equal what you owe (liabilities) and what you paid to get it (equity) - such as buying a car for $10,000. In this case, you might use a $5,000 loan (debt), and $5,000 cash (equity) to purchase it. Your assets are worth $10,000 total, while your debt is $5,000 and equity is $5,000. In this example, assets equal debt plus equity.

Question 102

For P/L Statement

Answer 102

1. Overhead rate: Total Indirect Expenses/Total Direct Labor (TDL) 2. Break-Even rate: Overhead Rate + 1.0 (Unit Cost for Salaries) 3. Utilization rate: TDL/Total Labor 4. Net Multiplier: Net Operating Revenue (NOR)/TDL) 5. Aged Accounts Receivable (AR): Avg. Annual AR/NOR/ 365 (Days in Year) 6. Profit-to-Earnings Ratio (P/E): Net Profit/NOR 7. Net Revenue per Employee: NOR/Total No. of F-T Employees

Question 103

For Balance sheet

Answer 103

1. Current Ratio (SOLVENCY): Total Current Assets/Total Current Liabilities (Ability to pay current debt) 2. Quick Ratio (LIQUIDITY): Cash+A/R’s+WIP/Total Current Liabilities (Ability to convert current assets to cash) 3. Debt-to-Equity (LEVERAGE): Total Liabilities/Total Equity (Ability to manage debt effectively) 4. Return on Equity (ROE): Net Profit/Total Equity (Total Cum. Net Profit (Retained) relative to the investment made)

Question 104

TDL to NOR

Answer 104

TDL/NOR. This metric will indicate the balance between revenue being earned and the number of FTE’s. The optimum ratio is: a range of 28%-32%.

Question 105

Outside Consultant’s (O-C) Fees Billed/Total Fees Billed

Answer 105

The optimum ratio for this metric is: a range of **25%-30%**. Keep in mind that every dollar of revenue or expense paid out is a dollar less profit.

Question 106

Cash Flow

Answer 106

No Formula. Represents the available dollars for the firm to use to pay its salaries, taxes and all overhead expenses.

Question 107

Proposals Pending

Answer 107

No Formula. Represents those Proposals that have been sent and are still waiting for a decision to be made. Proposals Pending are comprised of two types of proposals: - Prospects: Those proposals with a 50% or better chance of becoming a real project. - Suspects: Those proposals with less than a 50% chance

Question 108

Backlog Volume

Answer 108

Represents the unbilled portion of existing contracts.

Question 109

Censure

Answer 109

the expression of formal disapproval.

Question 110

double entry

Answer 110

- a method of bookkeeping that recognizes both sides of a business transaction by debiting the amount of the transaction to one account and crediting it to another account so the total debits equal the total credits - you decided to sell your car for $10,000. In this case, your asset account will decrease by $10,000 while your cash account, or accounts receivable, will increase by $10,000 so that everything continues to balance.

Question 111

asset

Answer 111

Assets are the first of three major categories on the balance sheet. Current assets represent the value of all assets that can reasonably expect to be converted into cash within one year and are used to fund ongoing operations and pay current expenses. Some examples of current assets include: - Cash and cash equivalents - Accounts receivable - **Prepaid expenses** - Inventory - Marketable securities

Question 112

Noncurrent assets

Answer 112

company’s long-term investments or any asset not classified as current. Both fixed assets, like plant and equipment, and intangible assets, like trademarks, fall under noncurrent assets. Some examples of noncurrent assets are: - Land - Property, plant, and equipment - Trademarks - Long-term investments and even goodwill

Question 113

Liabilities

Answer 113

Current liabilities are short-term liabilities that are due within one year and include: - **Accounts payable** are a short-term debt owed **to suppliers**. - **Accrued expenses** are expenses that have yet to be paid, but have a high probability of **being paid**.

Question 114

Noncurrent liabilities

Answer 114

Noncurrent liabilities are also listed on the balance sheet and are included in the calculation of a company's total liabilities. Noncurrent liabilities are long-term debts or obligations and unlike current liabilities, a company does not expect to repay its non-current liabilities within a year. Some examples of noncurrent liabilities include: - Long-term lease obligations - Long-term debt like bonds payable

Question 115

Retained earnings

Answer 115

'Retained earnings' is money held by a company to either reinvest in the business or pay down debt. 'Retained earnings' are also earnings that have not been paid to shareholders via dividends

Question 116

Shareholders' equity

Answer 116

- Shareholders' equity is the **net of a company's total assets and its total liabilities**. Shareholders' equity represents the net worth of a company and helps to determine its financial health. - Shareholders' equity is the amount of money that would be left over if the company paid off all liabilities such as debt in the event of a liquidation

Question 117

What are the four greatest risk factors?

Answer 117

- **AVOID RISK** : Select project types that fit with firms experience and expertise : Work with clients that have good reputations - **TRANSFER RISK** : Contract transfers risk away from the architect, either back to client or down to consultants : Insurance transfers risk away from the architecture firm - **ASSUME RISK** : Accept work within the firm’s capabilities and maintain enough money to keep insurance paid - **CONTROL RISK** : Adopt best practices and consistent procedures. : Train employees : Hire lawyers when necessary

Question 118

The four general categories of risk factors are

Answer 118

* Negotiations and Contracts * Selecting the Client * Project Team Capabilities * Communications.

Question 119

Biggest Risk Factors for each Category - Negotiations and Contracts - Client Selection - Project Team Capabilities - Communications

Answer 119

- Negotiations and Contracts 1. Unclear or Inappropriate Scope of Service (38%) 2. Did not formally evaluate risks (16%) 3. Contract not in place before work started (12%) - Client Selection 1. Client inexperienced in design issues (43%) 2. Client has history of claims/litigation (21%) - Project Team Capabilities 1. Inexperienced Design Staff (50%) 2. Inexperienced on-site staff (20%) 3. Inexperienced project manager (18%) - Communications 1. Lack of Procedures to Identify Conflicts, E&O (51%) 2. Project issues & disputes not handled correctly (20%) 3. Scope of services not explained to client (13%)

Question 120

risk management process

Answer 120

* Identification * Quantification * Probability * Impact * Mitigation

Question 121

Risk identification

Answer 121

Many businesses prefer to identify and record risks in what is termed a **‘risk catalogue’**. This provides a summary of the various exposures and offers a starting point for discussion at **operational and management level.**

Question 122

Risk Quantification/Probability/Impact

Answer 122

- One popular way of recording risk is to use a **traffic light matrix system**, where high probability exposures which are likely to have a high financial cost (quantum) and high impact on the organisation, are recorded as red (and attract the most scrutiny), whilst those with lower probability, quantum and impact are recorded as amber or green. - It is also possible to combine such an approach with a **simple scoring system to assist in determining the category**. For example, taking a simple scoring system where red = 3 points, amber = 2 points and green = 0 points;

Question 123

Risk Mitigation

Answer 123

Once the risks have been identified and coded it is possible (a) to see which need to be tackled with the greatest urgency and (b) to discuss and adopt strategies designed to mitigate them. * Accept: The risk and the associated exposure is accepted as a business risk, and action is taken to monitor and manage it. * Transfer: Risk transfer may be achieved contractually, by sub-contracting or mitigated by way of insurance. The degree to which this last strategy, which involves transferring exposure to an insurer for a known financial cost in the form of premium should be applied, depends on the risk bearing capacity of the organization involved. * Reduce: By modifying the way in which a process or procedure operates it might be possible to reduce the exposure by a greater or lesser degree. * Eliminate: By ceasing an activity it might be possible to eliminate the exposure entirely. * Decline: The risk is simply not taken. For example, you might choose not to enter into a particular contract or appointment.

Question 124

Risk takes many forms. Common examples include

Answer 124

* Financial * Operational * Legal and regulatory * Strategic * Reputational * Health & Safety * Political risk/exposure * Environmental risk * Ethical policy

Question 125

Typically the stages for a risk review will be as follows:

Answer 125

* Bid review * Formal bid * Contract * Mid-contract review * Contract closure * Lessons learned/feedback

Question 126

Managing risk

Answer 126

- What’s the problem? - Talk to your clients - Use the agreement as an interview tool - Define the project first, then the agreement - Establish a pattern of communication - Balancing the risk - Identifying the ins, the outs, and the maybes - Tailoring the services and compensation

Question 127

Minimizing risk for Negotiations and Contracts

Answer 127

» Do NOT work without a contract. This can prevent you from being paid AND increase your exposure to liability. » Avoid accepting a heightened standard of care. » Avoid indemnifying the client. This exposes you to risk from claims by third parties. » Stay out of construction Means & Methods. This is the GCs responsibility » Avoid guarantees. This goes along with heightened standard of care » Have a clear scope of work (and make sure it’s explained to the client) » Use Standard forms of Agreement...like the AIA docs.

Question 128

Minimizing risk for Selecting the Client

Answer 128

» Work within the firm’s expertise. » Be familiar with the client...what is their reputation? What’s their skill/history with projects of the scale they want? Are the experienced or novices?

Question 129

Minimizing risk for Project Team Capabilities

Answer 129

» Hire and train qualified staff. Select the most qualified person for each project. » Train senior staff to use computers, train junior staff to learn what to draw » Minimize project turnovers, maximize project member continuity » Create and use office standards

Question 130

Minimizing risk for communication

Answer 130

» **Peer Review and QA/QC** More on this in Week 6, but NCARB loves asking about peer review and QA programs. » Make sure everyone, especially the **PM, knows the contract!** » Hold **coordination meetings** » **Keep track** of when documents are issues, for what purpose and by whom.

Question 131

Which of the following are true of litigation, as opposed to arbitration? - Parties can select the decision maker - Appointed decision maker - Private - Public - Faster - Slower - Limited Discovery - Unlimited Discovery - High Attorney Fees - Lower Attorney Fees - High hard costs - Lower hard costs

Answer 131

- Parties can select the decision maker - Appointed decision maker (o) - Private - Public (o) - Faster - Slower (o) - Limited Discovery - Unlimited Discovery (o) - High Attorney Fees (o) - Lower Attorney Fees - High hard costs - Lower hard costs (o)

Question 132

arbitration should have:

Answer 132

* A third party **decision maker chosen by the parties** * Neutrality of the decision * An opportunity for both parties to be heard * **A binding decision** or result (the owner-architect agree to this in the contract)

Question 133

Benefits of arbitration include

Answer 133

* Privacy. Arbitration results aren’t required to be made public * Selection of the decision maker and more qualified decision maker (as opposed to a court-appointed judge) * Faster. It’s privately executed, no waiting on courts. * Can be less expensive due to less discovery. * No juries

Question 134

The definition of “discovery” in law

Answer 134

The definition of “discovery” in law is the exchange of legal information and known facts of a case. Think of discovery as obtaining and disclosing the evidence and position of each side of a case so that all parties involved can decide what their best options are – move forward toward trial or negotiate an early settlement. Parties in a case are required to participate in the discovery process, meaning they must hand over information and evidence about a claim so all participants can know what they are facing at trial.

Question 135

Go / No-Go Policy Criteria

Answer 135

- Project Falls Under Mission (yes) - Target Market Sector (no...public not private) - Geographic Range (yes) - Appropriate Size (yes) - Budget Realistic/Funded? (yes) - Potential for Profit? (yes) * If there is only one No, it is good to go

Question 136

RFQ

Answer 136

- It can be a precursor to a full RFP. - Project owners may use an RFQ to identify and **filter out Architectur firms to which they may send an RFP** - The RFQ might include a standardized form, either the **SF 330 developed by the GSA** or some version of it with similar required info.

Question 137

RFP

Answer 137

- Project owners will provide a scope of work and other important information about the project and request proposals from Architecture firms as to how that firm would accomplish the job, and for how much. - There is more to a successful RFP response than just having the lowest price. - Responding to an RFP takes a lot of time (unpaid time... indirect labor...low utilization) Before responding to an RFP a firm should consider some broad issues. Is the project worth the risk of the time spent on the proposal? Is the client good? Is it the kind of project we do? Do we have a good chance of winning? - The AHPP considers responding to RFPs marketing, as it is a method of winning projects for a firm.

Question 138

Design-bid-build

Answer 138

PROS -Competitive bidding -Traditional method - Division of responsibilities - Architect can be owner’s agent CONS - Riskier - Adversarial - Costs unknown for longer - Cost plus fixed fee, or cost-plus, is a way of controlling some of the costs of a project if the contractor needs to be selected before the design is finished - The owner will pay the contractor actual cost of labor and materials and a fixed fee for the contractors profit. This removes the link between a contractor’s profit and the cost of the design - Owners will select this method if cost is the primary factor in their decision. Risk is also considered but is secondary to cost.

Question 139

DESIGN - BUILD

Answer 139

PROS - Single point of responsibility - Mitigates conflict between architect and contractor* - Earlier known costs CONS - Not bid competitively - Less transparency - No agent for owner - An example would be a large company that has their own architect and builder. - In practice this is often a contractor who subcontracts out the design work. - Owners will select this method if risk is the primary concern. As above, there is less risk when one entity is responsible for design and construction. - This can come at the cost of increased... cost. - Bridging is a tool owners may use to ensure they enter into an agreement that will result in the quality they want. - The owner will hire a third party to provide the design-build entity with the program and the project requirements. The owner would use this method if they were unable to create this information themselves or were not able to communicate it to the Design-Build Entity prior to sending them information about the project.

Question 140

CONSTRUCTION MANAGER AS ADVISOR

Answer 140

PROS - Less management work for owner - Earlier estimate of cost CONS - Added cost of CM-A - Later known costs - Construction Manager as Advisor is very similar to Design-Bid-Build delivery method with the exception that the Construction Manager acts as the owner’s advisor and not necessarily the builder. - The CM-Advisor will work for a fixed fee and pass on savings and cost overruns to the owners - CM-Advisor delivery method can actually be used with any of the other delivery methods - CM-Agent is very similar, but has the addition of an agency relationship between the Owner and the CM.

Question 141

CONSTRUCTION MANAGER AT RISK

Answer 141

PROS - Early known costs - Less management work for owner - Architect remains as agent - GMP CONS - GC and Owner interests may conflict - Additional cost of CM - CM-C will advise the owner and coordinate with the architect in the early design stages to get an idea of the project price - At some point the CM will sign a contract for construction with a Guaranteed Maximum Price (GMP). - Owners like this because they have a set price in the contract and the Contractor takes on the risk of getting the project delivered on budget. - This can lead to problems because the Contractor’s goals may not always match up with the owner’s.. - This method is used if minimizing time is the most important factor.

Question 142

Architect's fee % of construction

Answer 142

- The traditional method - At each phase of the project the architect may draw a payment based on the estimated total cost of the project at that point in time - **architect’s fee should be paid by the time construction starts** - Owners dislike this because they think the architect is incentivized to increase construction cost - they might not understand why they have to pay more to the architect for choosing nicer finishes

Question 143

Architect's fee Fixed fee

Answer 143

- AKA Stipulated Sum, the owner pays the architect a set amount for a specific scope of services. - . Clients like this because they have a fixed cost to include in their budget - Architects might like this because they know the full value of the contract early on - There is also some risk if they did not correctly estimate the time it will take to complete the project - Architects need to get as defined a scope of work as possible with this method and make sure changes to the scope are covered as additional services.

Question 144

Architect's fee Hourly

Answer 144

- You get paid an hourly rate for each hour you work - Clients like this because they only pay for what they use, but they might think the architect has no incentive to work quickly - It is also difficult to establish the total design fee - Architects like this because there is less risk and they can build in profit margins to the hourly rate - Hourly-Not-to-Exceed lets the owner pay the hourly rate for work actually done AND get a fixed maximum cost

Question 145

A Sole Proprietorship

Answer 145

- It often takes minimal to no paperwork to get started. If you start doing work for other people you are considered a sole proprietor - the biggest risk for Sole Proprietors is liability. There is no separation between you and your business - The beneft of this entity is that it is easy to set up, it’s easy to work and it’s easy to do your accounting

Question 146

A General Partnership

Answer 146

- A General Partnership carries the same personal liability risk as Sole Props. The biggest difference is that you have a partner. - The benefit is that you can form a group or two or more people, so additional skills, connections, assets, etc. - Because of the risks of GPs, a Limited Liability Partnership is often a desirable option. This is the smallest form of business entity that offers liability protection That is, lawsuits can only go after assets held by the company. - Many states have specific rules about using these business entities to practice architecture, i.e. 50% of partners need to be licensed, additional paperwork, etc - All of these entities can have employees (even sole props) and taxes are handled on the individuals’ personal income taxes.

Question 147

A General Partnership

Answer 147

- Partnerships are formed by registering the business as a partnership with your state. - Typically, the legal name of the business is required to be the names of the individual partners. If an alternative name is preferred, some states permit the use of a DBA name. - Taxes are filed by completing and submitting an “annual information return”, which identifies the income, deductions, gains and losses of the business. Similar to the sole proprietor, all earnings and loses “flow through” to the partners’ personal tax returns. - A disadvantage to a partnership is that all liabilities are shared by the partners. Each partner is not only liable for his or her own actions, but the actions of all the employees and partners within the business.

Question 148

Corporation (C Corporation)

Answer 148

- A corporation is an independent legal entity owned by shareholders. - Shareholders are protected from liabilities for all the actions and debts the business incurs. - Corporations offer the ability to sell ownership shares in the business through stock offerings. - Some states allow professionals to form a Professional Services Corporation. A Professional Services Corporation, or P.C., has the same advantages and protections as a corporation, but is exclusive to professionals such as architects, physicians and attorneys. - Corporations receive a tax ID number and are required to pay taxes separate from it’s shareholders - Unlike sole proprietors and partnerships, corporations pay income tax on its profits. - The complex legal and tax requirements of a corporation could make it more appropriate for larger companies.

Question 149

S-Corporation

Answer 149

- An S-Corp is a special corporation which allows shareholders to avoid the double taxation of a corporation. - The limited liability of a corporation remains but the profits and losses “pass through” the business to the shareholder’s personal tax returns like a partnership. - S-Corps require scheduled director and shareholder meetings, minutes from those meetings, adoption and updates to by-laws, stock transfers and record maintenance.

Question 150

Limited Liability Company (LLC)

Answer 150

- A limited liability company combines the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. - LLCs are not taxed as separate entities like corporations. Profits and losses are “passed through” the business to each member of the LLC. Members are required to report profits and losses on their personal tax returns, just like with a partnership. - One disadvantage of an LLC is that members are considered self-employed and are required to pay the self-employment tax contributions toward Medicare and Social Security. The entire net income of a LLC is subject to tax.

Question 151

General termed Owner Agreements, these contract among the owners of a business contain written guidelines for how some of the major elements of the business will operate. What You Need to Know an Owner Agreement should include the following:

Answer 151

» Capital Contributions and Equity Interest * how much does each person pay in and how much do they own » Proft and Loss Allocation and Distributions * how much does each person stand to risk or gain along with the business...does not have to be tied to equity percentage for LLC » Buy-Sell Arrangement * how does someone leave the partnership? » Management * how is the frm run? » Confdentiality * what info, like client lists, can partners use outside the partnership and if they leave » Non-Compete Agreement * when partners leave, are they restricted from hiring a way employees or running a similar business? » Dispute Resolution * you already know all about this!

Question 152

Match the term for the owner’s agreement with the business entity with which is will be used. Shareholders Agreement Partnership Agreement Operating Agreement

Answer 152

Shareholders Agreement - Corporation Partnership Agreement - LLP Operating Agreement- LLC

Question 153

S-Corp, C-Corp and Professional Corporations

Answer 153

- all owned by Stockholders. Between the three there are differences in who the stockholders can be and how many of them are allowed, but the answer is Stockholders. - S-Corp, C-Corp and Professional Corporations all provide liability protection of personal assets from claims against the company. - Owners can probably still be at risk for their own personal negligence - The tax methods vary between these entities with S-Corp working similar to an LLC -

Question 154

Limited Liability Corporations

Answer 154

- They offer liability protection of a corporation and the easy pass-through taxation of a Sole Proprietorship or LLP (or S-Corp). - An individual can form an LLC and so can groups of people working together. - The owners are called Members. - There is more paperwork and registration requirements than with a sole proprietorship and many states have rules about LLCs practicing architecture, same as we discussed with LLPs.

Question 155

General Firm Organization

Answer 155

Question 156

A flat organizational structure

Answer 156

- A flat organizational structure doesn’t have the direct reporting up and down a chain of command the way a hierarchical organization does - Employees are more or less on the same level which increases the reward opportunity for those who do good work - The downside is there is less strict organization and fewer single decision makers

Question 157

A matrix firm organization

Answer 157

- This organizational structure is good when you have complex projects because the production staff can work directly with multiple managers who are skilled in different areas - This is also a con, because one worker can have multiple bosses and the order of precedence may not be clear.

Question 158

Flat Organizational Structure

Answer 158

- A flat organization refers to an organization structure with few or no levels of management between management and staff level employees. The flat organization supervises employees less while promoting their increased involvement in the decision-making process. - Advantages of a Flat Structure : It elevates the employees' level of responsibility in the organization. : It removes excess layers of management and improves the coordination and speed of communication between employees. : Fewer levels of management encourage an easier decision-making process among employees. : Eliminating the salaries of middle management reduces an organization's budget costs. - Disadvantages of a Flat Structure : Employees often lack a specific boss to report to, which creates confusion and possible power struggles among management. : Flat organizations tend to produce a lot of generalists but no specialists. The specific job function of employees may not be clear. : Flat structure may limit long-term growth of an organization; management may decide against new opportunities in an effort to maintain the structure. : Larger organizations struggle to adapt the flat structure, unless the company divides into smaller, more manageable units.

Question 159

Hierarchical Organizational Structure

Answer 159

- A hierarchical organization follows the layout of a pyramid. Every employee in the organization, except one, usually the CEO, is subordinate to someone else within the organization. The layout consists of multiple entities that descend into the base of staff level employees, who sit at the bottom of the pyramid. - Advantages of a Hierarchical Structure : Employees recognize defined levels of leadership within the organization; authority and levels of responsibility are obvious. : Opportunities for promotion motivate employees to perform well. : Hierarchical structures promote developing employees as specialists. Employees may narrow their field of focus and become experts in specific functions. : Employees become loyal to their departments and look out for the best interest of their area. - Disadvantages of a Hierarchical Structure : Communication across different departments tend to be less effective than in flat organizations. : Rivalry between departments may inflame as each department makes decisions that benefit its own interests rather than the organization's as a whole. : Increased bureaucracy often hinders an organization's speed to change. Increased time may be required to respond to clients. Salaries for multiple layers of management increase an organization's costs.

Question 160

inspection based systems

Answer 160

- inspection based systems audit work in progress or once it has been completed. - Drawings are reviewed at the end, revised and reviewed again. - This process is more diffcult now that BIM and CAD are standard production tools, making it harder for senior level staff to train and mentor production staff

Question 161

Process based systems

Answer 161

- use reviews during the production of work, not just at the end. This is a better method for catching problems earlier in the project timeline. - ISO 9001, Six Sigma and Lean Systems. AHPP says the best QM program is a combination of two or more of these actions/systems.

Question 162

ISO 9001

Answer 162

- International Organization for Standardization. - a certifcation for a Quality Management System. A frm can implement a QMS that meets ISO 9001 standards and receive a certifcation from ISO 9001 that they can then use to market to potential clients to whom the certifcation is important. Similar in concept to LEED..

Question 163

Checklists

Answer 163

- A checklist is set of ordered instructions that provide requirements for a specific task, such as what information is required on a floor plan or how you organize a specification book for a project. - Though a checklist tells you what the requirements are, the production staff still has to know how to accomplish the tasks - If the checklist says “dimension all column grids” the person doing the drafting has to understand what that means and how to do it correctly. Inspection/oversight is still needed.

Question 164

Process Quality

Answer 164

Process Quality is used to automate some tasks that may not need people to do the work.

Question 165

Lean Systems

Answer 165

- Lean Systems is a QM program from the manufacturing world, but can be adapted to architecture work - The goal is to increase value and eliminate waste - There are 5 principles of the Lean System * Specify Value * Create Value Stream * Create Value Flow * Pull * Perfection

Question 166

Six Sigma

Answer 166

- The goal is to eliminate variation...make the process as consistent as possible across all different uses. The five steps are: * Defne the problem * Measure * Analyze * Improve * Control

Question 167

the quality of your service

Answer 167

- This is somewhat connected to Standard of Care - Though it can’t be definitively measured, the quality of your service should be agreed upon in the contract. - Though it can’t be definitively measured, the quality of your service should be agreed upon in the contract.

Question 168

With a process-drive QM system

Answer 168

QM happens at all phases of the project. There are many things you can do during SD, including critiques, reviews, audits and peer-reviews.

Question 169

The Project Coordination Matrix

Answer 169

- a simple chart showing responsibilities for general tasks. It quickly identifies points that require coordinated input.

Question 170

The Project Manager (PM)

Answer 170

- a project facilitator, not a member of the production staff. - The PM delegates tasks and organizes resources in order to meet the project goals - This work generally falls into three categories: 1. Organizing the Project, 2. Facilitating the Work 3. Facilitating effect of Client Expectations on the Project - The PM’s primary tool for Organizing the Work is the Work Plan, an eight or nine part document that outlines the plan for getting the work done. This includes basic information like 1. the project description, 2. the organization of the team 3. responsibilities and a preliminary project schedule.

Question 171

The PM’s primary tool for Organizing the Work

Answer 171

- The PM’s primary tool for Organizing the Work is the Work Plan, an eight or nine part document that outlines the plan for getting the work done. This includes basic information like 1. the project description, 2. the organization of the team 3. responsibilities and a preliminary project schedule.

Question 172

PM's facilitating the project is the second category

Answer 172

- Facilitating the project is the **second category and includes action items** to actually accomplish work. - **Staffng and managing** the design team, **scheduling, managing meetings, coordinating** with the client, the senior level architecture staff (principals) and the PMs own production staff, setting a project **fling system and distributing information** are all examples of facilitation work

Question 173

Finally, the PM needs to work directly with the client and manage the client expectations

Answer 173

This includes items like updating the client on cost changes and educating the client on the effects of proposed changes. QM falls under this category as well as a good QM program will produce better project documentation and minimize conflict points with the client.

Question 174

Net Service Revenue

Answer 174

- Net fee determined by subtracting consultant fee from the gross fee for the project - It’s the money you get to keep from the total project fee which can be used to do the work of the project, and make a profit - . If your design fee is $100,000 and you owe the structural engineer $20,000 your Net Service Revenue is $80,000

Question 175

A Gantt chart

Answer 175

- a bar graph of project tasks and durations. It’s a good way to see start and end dates as well as overlap between tasks. You can also use a Gantt chart to represent the Critical Path for a project.

Question 176

Critical Path Method

Answer 176

- Critical Path Method lists or graphically represents the project tasks in order of when they can begin. Milestones are shown in circles - A CPM diagram is an easy display of which tasks can begin once a milestone is reached. The actual Critical Path is the combined longest set of tasks between each milestone - All tasks that can be completed in less time than the Critical Path have Float. This means the projected time to complete these tasks can slip a little and not delay the overall project

Question 177

verbiage

Answer 177

the way in which something is expressed; wording or diction.

Question 178

Supplemental Services / Additional services

Answer 178

- Supplemental Services is work the Architect is required to do outside of Basic Services that has been written into the contract - Additional services is work the Architect is required to do outside of what’s in the contract and after the project has commenced.

Question 179

EXPEDITIOUSLY / AS SOON AS PRACTICABLE /REASONABLE PROMPTNESS

Answer 179

2.2 The Architect’s general requirement to perform services 3.1.3 The Architect to submit schedule of work 3.6.4.2 The Achitect to review of Contractor submittals

Question 180

INTERVALS APPROPRIATE TO THE STAGE OF CONSTRUCTION

Answer 180

3.6.2.1 - Architect site visits during construction

Question 181

SEVEN DAYS

Answer 181

- Architect issue Certificate of Payment to Owner after receiving Application from Contractor (§9.4.1) - Contractor shall pay Subcontractors after receiving payment from Owner (§9.6.2) - Contractor provides proof of payment to Subcontractors after request from Owner (§9.6.4) - If the Architect doesn’t issue a Certificate of Payment, Contractor can issue written notice and stop work in an additional seven days, 14 total (§9.7) - Contractor can terminate the contract (§14.1.3)

Question 182

15 Days

Answer 182

5.15 - Owner provide information about Liens

Question 183

90 Days

Answer 183

Architect can terminate agreement if owner suspends project for 90 days

Question 184

Cost of the Work

Answer 184

- This includes “all elements of the project designed or specified by the Architect...” It’s important to note this DOES include Contractor overhead and profit - Those items may not be specifically listed in a typical Design-Bid-Build project, so they can’t be excluded from the Cost of the Work as it relates to Architect’s compensation. - Items that are not included in Cost of the Work are land costs and financing, contingencies or other things the Owner pays for directly - . If the Owner brings their own materials, lumber, whatever, that stuff DOES count toward the Cost of the Work. A reasonable value must be assigned.

Question 185

If all bids are higher than the Owner’s budget for the Cost of the Work, the owner can do one of the following:

Answer 185

* §6.6.1 - increase the budget * §6.6.2 - rebid or renogiate the project * §6.6.3 - end the project * §6.6.4 - revise the program, scope or quality * §6.6.5 - anything else they want that Owner and Architect agree on

Question 186

**Cross out the items that are NOT Responsibilities or Basic Services of the Consultant per the C401**. Circle items that are Responsibilities or Basic Services of BOTH the Architect (per B101) and the Consultant (per C401) » Perform services consistent with the professional skill and care ordinarily provided by professionals practicing in the same or similar locality » Recommend appropriate surveys and tests » Submit a schedule for the performance of work » Provide (4) site visits during construction » File documents required for approval of the AHJ » Submit a Cost of the Work Estimate » Maintain a License to perform services » Maintain Professional Liability Insurance

Answer 186

» Perform services consistent with the professional skill and care ordinarily provided by professionals practicing in the same or similar locality - Architect/Consultant responsibility » Recommend appropriate surveys and tests - Consultant responsibility to architect » Submit a schedule for the performance of work - Architect/Consultant responsibility » Provide (4) site visits during construction - Architect/Consultant responsibility (no fixed visiting number) » File documents required for approval of the AHJ - Not responsibility » Submit a Cost of the Work Estimate - Not responsibility » Maintain a License to perform services - Architect/Consultant responsibility » Maintain Professional Liability Insurance - Architect/Consultant responsibility

Question 187

Prime Agreement

Answer 187

In this contract, the term Prime Agreement refers to the B101 Owner-Architect Agreement. The C401 is references the B101 for various items. The Scope of Work for the C401 is limited to the work done by the Consultant and is referred to as This Portion.

Question 188

TEN DAYS

Answer 188

- Prior to date established, Contractor will submit Application for Payment (§9.3.1) - Initial Decision Maker to review Claims (§15.2.1)

Question 189

14 DAYS

Answer 189

- Contractor maximum time to make Architect aware of concealed conditions that differ from the Contract Documents (§3.4) - Architect to notify Contractor if Architect or Owner has objections to the Contractor’s proposed superintendent (§3.9.2) - Architect to notify Contractor if Architect or Owner has objections to the Contractor’s proposed subcontractors (§5.2.1)

Question 190

21 DAYS

Answer 190

- Maximum time to report injury or damage cause by acts or omissions of the other party (§10.2.8) - Notice of a Claim by either the Owner or the Contractor (§15.1.3.1)

Question 191

60 DAYS

Answer 191

- After consecutive days of suspended work, Contractor can terminate the Agreement...plus another seven days for written notice, 67 total. (§14.1.4)

Question 192

project vs work

Answer 192

The Project is the total construction, it is the biggest umbrella for work and services. The Work is a part of the Project and includes the construction and services required by the Contract Documents to be performed by the Contractor

Question 193

The Contract Documents specifically include: (The CONTRACT DOCUMENTS define THE WORK required to build THE PROJECT)

Answer 193

* The Agreement * General and Supplementary Conditions of the Contract * Drawings * Specifications * Addenda (issued prior to the contract) * Modifications (issued after the contract) The Contract Documents do NOT include: * basically anything related to the bid and bid process

Question 194

Contract Time

Answer 194

- Contract Time is the time between when the Contract is signed or the date specified in the Contract until Substantial Completion. - Substantial Completion is the first “inspection” the Architect must do...all other visits are observations. In the A201 a day is a calendar day, so Saturday and Sunday DO count when you’re counting days for required events per the contract.

Question 195

Prior to the Contractor doing The Work

Answer 195

- the Owner shall furnish reasonable evidence that the Owner has the financial resources available to fulfill the Owner’s responsibilities under the contract. - The Contractor takes a lot of risk during construction; they need to know the Owner will be able to pay them when it’s time.

Question 196

If the Contractor fails to do The Work / If the Contractor does not carry out The Work in accordance with the Contract Documents

Answer 196

- the Owner can stop The Work. - the Owner is allowed to carry out the work...with their own resources or a new Contractor - The first step in this process would be to cancel any outstanding Certificates of Payment. If that’s not enough to cover the costs the Contractor will owe the difference to the Owner, including costs of the Architect’s Additional Services to get The Work going via an alternate method

Question 197

What are three ways to change the Work required without signing a new contract? Briefly describe each one

Answer 197

Change Orders, Construction Change Directives and minor changes in the work.

Question 198

A Change Order

Answer 198

The Architect writes it and the Owner, Architect and Contractor all have to sign it. This means that all three parties agree to: - The actual change in the Work... what is to be done - The amount this change in the Work changes the contract...this could be an increase OR a decrease in the cost of the project - The Time it will take to make this change.

Question 199

Construction Change Directive.

Answer 199

- If the Contractor doesn’t agree with any of the above they will be unlikely to sign a Change Order - The Architect writes this up and signs it, along with the Owner. At this point the Contractor must do the work. If they still disagree with the scope, the cost, the time, etc, they can file a claim. Otherwise the work must be completed. - If the Contractor does not agree with the Time the Architect has added (or subtracted) from the Contract Time, they can file a claim, as outlined in Section 15 of the A201. - If the Contractor does not agree with the change in Cost the Architect determined the Architect can ask for information related to the actual cost of the change to the Contractor.

Question 200

A Minor Change in the Work

Answer 200

- something the Architect can sign themselves and direct the Contractor to do without approval from the Owner. These are items that are * consistent with the intent of the Contract Documents * don’t change the Contract Sum * don’t change the Contract Time

Question 201

Which of the following should the Architect not approve from an Application for Payment with the Work approximately 45 days from Substantial Completion? $20,000 for Electrical work, per the Schedule of Values. Contractor fired original Electrical Subcontractor who did the work, without payment, and will use the $20,000 to pay the new Electrical Subcontractor to do additional work in accordance with a Change Order. $10,000 for additional framing the Contractor performed after receiving a Construction Change Directive. A formal Change Order has not been signed by the Owner. $15,000 for Drywall stored safely at the Project site instead of at the Contractor’s headquarters as specificized in the contract. 100% of the $50,750 balance for tenant fit-out Plumbing work scheduled to last 60 days

Answer 201

$20,000 for Electrical work, per the Schedule of Values. Contractor fired original Electrical Subcontractor who did the work, without payment, and will use the $20,000 to pay the new Electrical Subcontractor to do additional work in accordance with a Change Order. (§9.3.1.2 the Contractor can’t request money for Work done when they don’t intend to pay the Subcontractor who did the work) $10,000 for additional framing the Contractor performed after receiving a construction Change Directive. A formal Change Order has not been signed by the Owner. (§9.3.1.1 the Contractor can request money for work done by Construction Change Directive) $15,000 for Drywall stored safely at the Project site instead of at the Contractor’s headquarters as specificized in the contract. (§9.3.2 storing material onsite is typical. Material may be stored offsite b y agreement in the contract) 100% of the $50,750 balance for tenant fit-out Plumbing work scheduled to last 60 days (§9.5.1.6 the Architect can withhold payment if the Work will not be completed within the Contract time and the remaining balance will not be enough to cover any damages to the Owner from the Work not being done on time. )

Question 202

How does the Architect know how much money the Contractor should be asking for when they submit an Application for Payment?

Answer 202

- §9.2 Prior to submitting the first Application for Payment, the Contractor submits a Schedule of Values for the rest of the project. - The Architect uses that schedule, as well as their observations of the Work, to determine if the Contractor is asking for a reasonable and correct amount.

Question 203

What two promises does the Contractor make to the Owner when they submit an application for payment? What is a Mechanic’s Lien?

Answer 203

- §9.3.3 with their Application for Payment, the Contractor warrants that the title to all the Work being paid for will transfer to the Owner AND that the Work is free of liens and other claims. - This is a big thing, and we’ll come back to it later. A Mechanic’s Lien is a claim made against the Owner’s title to a property by subcontractors who worked on the project and didn’t get paid.

Question 204

What is Substantial Completion and how does the Owner know ths milestone has been reached?

Answer 204

- Substantial Completion is a big date, this is generally regarded as the end of Contract Time. - Any change orders that change the Contract Time have moved this date back. - From §9.8.1 this is the date when the building is sufficiently complete so that the Owner can use the building for it’s purpose. - The Owner knows Substantial Completion has been reached because the Architect will do the first of their two INSPECTIONS. The second is at Final Completion.

Question 205

How can the Architect protect the Owner from paying for work not done or done incorrectly? What if the Architect approves payment, then discovers work done incorrectly?

Answer 205

- **As the Owner’s agent**, the Architect must protect the Owner from paying for work that is incorrect, hasn’t been completed, won’t be completed on time, is not free and clear of liens, or other issues. - **To do this, the Architect may reject an Application for Payment**, may **reduce the amount requested by the Contractor** or can place a **hold on payment** from previous Applications already approved. See §9.5 for more info.

Question 206

Final Completion allows the Contractor to be paid the remainder of the contract sum. What does the Contractor submit along with the Application for Payment? What does the Owner relinquish by making the final payment?

Answer 206

- §9.10.2 At Final Completion the Contractor must submit an affidavit and other proof that all their bills for material and labor have been paid. This helps the Owner avoid liability arising from a Mechanic’s Lien (I think, I’m not a lawyer) - §9.10.4 The Owner then pays the Contractor and relinquishes their right to make any Claims against the Contractor, with four exceptions, that seem really broad: * liens and claims, etc that come up * failure of the Work to comply with the requirements of the Contract Documents * terms of any special warranties * audits performed by the Owner after final payment

Question 207

scenario : who pays and time changes? The contract requires the Architect examine an air filtration system prior to it being enclosed. At the last coordination meeting before the system is enclosed the Architect forgets to inform the contractor that they will be performing the inspection. The Architect arrives at the job site and requests that the filtration system be uncovered.

Answer 207

Who Pays: Contractor because the examination was listed in the contract Time Increase: None

Question 208

scenario : who pays and time changes? An LED light fixture was enclosed in a wall in accordance with the project timeline and with the Architect’s approval. The Architect later became unsure if the light specified in the Contract Documents was the same as the light that was installed and required the contractor to uncover the fixture. It was in fact the correct light fixture.

Answer 208

Who Pays: The Owner Time Increase: Yes, as appropriate for the delay

Question 209

scenario : who pays and time changes? An electric raceway for a data center was installed below an access floor and was examined by the Architect prior to it being enclosed. Later, the Architect realized that the wrong raceway was installed and required the Contractor to uncover the work for another examination, which confirmed that the wrong raceway was installed.

Answer 209

Who Pays: Contractor because the work was not in accordance with the Contract Documents Time Increase: None

Question 210

Who is responsible for initiating, maintaining and supervising ALL safety programs for the performance of the Work? How many times is the word Architect written in the entire section on Safety? (you don’t really have to count)

Answer 210

Article 10 covers safety and the Contractor is responsible for absolutely everything about safety. This is mentioned here and also in the earlier sections about the Architect’s field observations. The Architect is only mentioned twice in this entire section, see §10.2.5 and §10.2.6.

Question 211

What are means and methods? What responsibility does the Architect have in supervising the Work?

Answer 211

- Means and methods is the term used for how the Contractor goes about doing The Work. - The Architect draws and specificizes what is to be made, the Contractor makes it happen through means, methods, techniques, sequences and procedures. - These things are entirely up to the Contractor and the Architect is not supposed to interfere or insert themselves into this system. - The Architect has ZERO responsibility in supervising the Work. See §3.3.1 for the Contractor’s responsibility in supervising the Work and §4.2.2 and §4.2.7 for the contract telling the Architect to NOT be involved or take any responsibility here.

Question 212

What should the Architect do if they notice an unsafe condition created by the concrete subcontractor? Similarly, what should the Contractor do if they notice inconsistencies in the Structural Engineer’s drawings?

Answer 212

- If the Architect notices a subcontractor creating an unsafe condition (or building something incorrectly according to the Contract Documents) the Architect should make the Contractor aware. Similarly, the Contractor should make the Architect aware of issues they notice with the work of the Architect’s consultants.

Question 213

Which Hazardous Materials are specifically listed in the A201? Are there special precautions for these materials as opposed to all other Hazardous Materials?

Answer 213

§10.3.1 specifically lists asbestos and polychlorinated biphenyl (PBC). There is no special treatment of these two materials over any other Hazardous Material per the A201

Question 214

What’s included in a Project Work Plan?

Answer 214

- what the **job requirements** are - **who is going to complete** the tasks needed to meet the requirements and when it’s all going to happen. - **The scope of services**, per the contract. What is the big picture? - **Bar charts/project schedules** - Design Team member **assignments** - **Consultants and their deliverables**

Question 215

When should a Project Work Plan be created?

Answer 215

- before you have a contract for the project...during the marketing phase. - Simple work plans with top-down budget estimates can help a firm determine if a project they are chasing can be profitable - The work plan can then evolve to a more specific document if and when a contract is signed, and then evolve again at each phase when specific tasks needed become more clear

Question 216

What’s a WBS?

Answer 216

- Work Breakdown Structure - It is a list/chart/diagram of what actual work needs to be done. - It starts broadly, with the Project Name and Phase Name, then can get more granular with tasks and sub-tasks assigned to team members

Question 217

What are the implication of having too many or too few levels in a WBS?

Answer 217

- Too few levels doesn’t provide enough guidance and limits the value of the WBS. An example would be a large project with just two levels, Project Name and Project Phase. Like: * College Ave Dormitory * Schematic Design: Ben So I’m responsible for all of SD? What exactly does that mean? - Too many levels indicates micro-managing and can limit the ability of your worker bees to determine the most efficient way to do their tasks. That might be 5 or more levels like: * College Ave Dormitory * Schematic Design * Code Analysis * IBC 2015 * Chapter 7: Ben Ok cool I have a week to read this one chapter?

Question 218

How many levels are ideal in work plan?

Answer 218

3-4 is usually the most appropriate number of levels, with staff assignments typically at level 3. That means you can assign someone “Code Analysis” without telling them in detail what exactly that means...then it’s up to the PM to make sure it’s done correctly. Trust but verify!

Question 219

Compare and contrast Top-Down Budgets with Bottom-Up Budgets. When should each one be used? Which one is more accurate for a project type with which a firm has experience. Which one is better for a new project type?

Answer 219

- A Top-Down approach ( Familiarity with project type ) : budgeting requires a firm to start with an estimate of the total project fee : This will traditionally be determined as a percentage of construction cost. The firm then assigns different percentages to the major budget expenses, i..e consultants, direct expenses and a contingency : The remainder becomes the Project Labor Budget...how many dollars (and hours) they can spend to do the work : AHPP refers to this as a formula-driven approach : This method can be very accurate when firms are creating a budget for a project type with which they have experience - Bottom-Up approach (New project type, atypical scope of work) : It actually starts with the Project Work Plan and an understanding of the actual phases and scope of work for the project. You figure out how long it will take to do the work required, then add your multipliers, contingencies, consultant fees etc to reach your fee proposal : This method may not result in a bid that will be acceptable based on market rates. Basically if you only consider your own estimates and don’t look at typical project costs you can end up with a proposal that’s far above what clients typically pay for that project type. - the best method is really a combination of the two, or to use the Bottom-Up approach to check and ensure profitability of your initial Top-Down method.

Question 220

Gross Fee

Answer 220

This is the contract amount

Question 221

Consultant Fee

Answer 221

This is what you have to pay to your consultants (Structural, MEP) out of your Gross Fee

Question 222

Net Service Revenue

Answer 222

This is Gross Fee minus the Consultant Fee. This is the amount you have to use to provide your services and make a profit

Question 223

Direct Expense Budget

Answer 223

These are costs you incur directly related to a project, like travel or presentation costs. This is NOT overhead like rent.

Question 224

Contingency

Answer 224

- This is an amount you save to protect yourself from unforeseen changes/situations which might cost you additional (unpaid) work or actual liability. - Gross fee X Contingency rate

Question 225

Project Labor Budget

Answer 225

This is the dollar amount remaining after you subtract Direct Expenses and Contingency from your Net Service Revenue. This is how much is left to allocate work hours to the design team members and/or to the phases.

Question 226

» Why would the breakdown of fees per phase in a contract not match the Architect’s internal budget for labor required for the same phase? » What items might be in the internal budget that are not listed in the contract?

Answer 226

- The amount of labor hours available for each phase is based on the Project Labor Budget. - The fee distribution in the contract is based on the Gross Fee. - Remember, the Owner doesn’t pay your consultants, you do, out of the Gross Fee. Your contract also doesn’t specifically list your non-reimbursable direct expenses or your contingencies. These are internal tools for the Architect’s budgeting purpose.

Question 227

Of SD, DD, CD, Bidding and CA, which will take the most time and should have the largest % of the budget? Which will be the least?

Answer 227

- Construction Documents is the longest phase of the project and would have the largest percentage of the labor budget, and design fee as well. Bidding is the lowest, per AHPP

Question 228

What is Earned Revenue as compared with Billed Fees? Which one carries more risk if it is significantly higher than the others?

Answer 228

- Earned Revenue : Earned Revenue is the amount of money you have “earned” by working on a project. Most broadly it can be shown as the percent of the labor budget that has been completed. $5,000 for a phase that takes 5% of the time on a $100,000 contract - Fee Billed : Fee Billed is what has actually been billed to the client. This usually doesn’t match up 1:1 with the Earned Revenue. - There is risk to the Architect in allowing the Earned Revenue get too far ahead of the Fee Billed...this means you’ve done a lot of work and haven’t been paid.

Question 229

» What are Milestone Charts? For what size projects are they typically used?

Answer 229

- A milestone chart is the simplest schedule. used for short-duration and/or low-fee projects, $35,000 or less, - It’s more or less a small spreadsheet that lists the broadest tasks, an assigned people and other basic information such as start/end dates, budgeted hours and % complete. - This should not be used with larger or more complex problems, though the Milestone Chart does set up a baseline from which you can create a Gantt Chart,

Question 230

» What is a Wall Schedule? For what size projects are they typically used? Are they used during construction?

Answer 230

- The Wall Chart is used for medium to large projects. It is not used to track or manage the project. It’s actually a project planning...planning tool. - You create the Wall Schedule in order to help you create the actual project work plan. This is not a tool to be used during the actual design or construction phase of the project.

Question 231

» What are two broad categories of changes that can delay a project?

Answer 231

- Internal changes : the result of mistakes/decisions/new ideas from the architecture firm : They need to be discussed with the client and all team members and consultants need to be informed of the change and additional work it may require of them : If the Architect is the source of the required change the contracted work must still be completed for the fee and time listed in the contract. - External Changes : External Changes are driven by the Client, the Contractor, market conditions, other outside factors : Changes to the scope of the Architect’s service can result in additional time and fees.

Question 232

» In terms of project management, what is ETC?

Answer 232

- ETC is Estimate to Complete - This is the single most important metric when managing the project. - It is an honest assessment of the hours and money remaining to complete the contracted work. - Not how much is left in the budget, but how much it’s going to actually cost to get to the finish.

Question 233

» What is the AHJ?

Answer 233

- The AHJ is the Authority Having Jurisdiction - This is the City or County or whoever you submit plans to. They are the Building Authority

Question 234

» What’s the difference between zoning and code?

Answer 234

- Zoning laws are concerned with land use : What kind of projects can be built and how big can they be : The AHJ uses zoning to control density and create neighborhoods. - Building code is concerned with life safety : Making sure buildings provide a safe, sanitary interior environment and access to a safe means of egress in the event of fire or other dangerous situations. Building codes do NOT care about the protection of the owner’s property.

Question 235

» What’s the difference between code and ADA? Does the AHJ enforce the ADA?

Answer 235

- This is Federal Law, it is not enforced by the AHJ - In real life most of us haven’t been able to get a set of plans approved without proving compliance...but as far as the ARE is concerned know that the ADA is Federal Law, above the jurisdiction of the AHJ.

Question 236

» What building materials can be used with Type I and II construction? What about Type V? Is A or B sprinklered?

Answer 236

- You should have a basic understanding of the five general types of construction, I, II, II, IV and V. - You will most likely encounter I, II and V - Types I and II are non-combustible materials, like steel and concrete - Type V is “any material” which is what we generally use with wood framed construction. - A or B designators DO NOT have anything to do with whether a building has sprinklers or not. - They differentiate the level of protection different building elements must have - A Type IA exterior wall will have a higher fire-resistance rating requirement than a Type IB wall. - A Type VA structural framing member will have a higher fire-resistance rating requirement than Type VB - Sprinklers DO give you a lot of leeway in the code...lower ratings, more area, more height, but that is noted through exceptions and formulas, NOT through the A & B types.

Question 237

State the most likely Occupancy and Construction Type: * 10 unit wood-framed apartment building with a concrete foundation * 20 story office tower with protected steel framing and a cast-in-place concrete floor system * School gymnasium with CMU walls and exposed steel roof trusses

Answer 237

- Chapter 3 for Use and Occupancy. Chapter 5 for Heights and Areas. Chapter 6 for Construction Types * 10 unit wood-framed apartment building with a concrete foundation Occupancy: R-2. Construction Type: VB * 20 story office tower with protected steel framing and a cast-in-place concrete floor system Occupancy: B Construction Type IA * School gymnasium with CMU walls and exposed steel roof trusses Occupancy: A-3 (but maybe A-4). Construction Type IIB

Question 238

Are the following items regulated by code, zoning or both? * Building Height * Fire-resistance * Property line setbacks * Distance from other buildings * Impervious surface limits * Number of exits * Height of Stairs * Building Use * Length of Ramps * Parking spaces

Answer 238

* Building Height - both * Fire-resistance - code * Property line setbacks - zoning * Distance from other buildings - zoning - code will set requirements for fire ratings if you are too close to a propert line or adjacent building) * Impervious surface limits - zoning * Number of exits - code * Height of Stairs - code * Building Use - zoning - code will provide requirements based on what the use is, but code doesn’t regulate what uses you can or cannot have * Length of Ramps - code * Parking spaces - zoning

Question 239

» When does the Architect first provide a cost estimate? When are these estimates updated?

Answer 239

- It is the Architect’s responsibility to manage the scope and the cost of the project - Changes and increases to the scope of the work not only require additional work on the part of the Architect, but most likely increase the cost of construction as well - **The Architect first provides an estimate to the Owner during Schematic Design**. See B101 §3.2.2. The Architect is required to provide estimates as each subsequent phase of the work as well...DD and CDs.

Question 240

» How can the Architect provide a cost estimate before the full scope of work has been established?

Answer 240

If the Architect is required to provide an estimate before the full scope of work has been determined the Architect can use historical data and square footage estimates to give the owner a ballpark price.

Question 241

» Explain the following estimating methods: Order of Magnitude, Unit of Measure, Assemblies/Systems and Unit Price

Answer 241

* The CSI Manual of Practice lists four methods for estimating. - **Order of Magnitude: This is your ballpark price**, usually just a simple multiplier, based on **historical data**. You want to build a school for 600 students, probably going to cost $15,000 per student so your estimate is $9,000,000. - **Unit of Measure** : is based on the size of the project once it has been more well defined. The school is actually going to be 21,250 sq ft and construction is probably going to be $400/sf so the school will cost $8,500,000. **This is more accurate than Order of Magnitude**, but still an early phase estimate. - **Assemblies/Systems** : is more detailed than the previous two methods. You need more specific information about the actual construction materials and you break out different systems in the estimate. You know a price for the floor system and for the roof system and unit prices for things like windows and doors. So your floor system is **21,250 sf at $150/sf and your roof system is 10,625 sf at $300/sf and you have 250 windows at $500 each and 100 doors at $100 each, your school is now about $6,500,000**. - **Unit price** : is the most specific estimate, and it is more than just knowing the cost of physical units like doors and windows mentioned above. **It includes full material takeoffs AND associated labor for that work. This estimate is the most accurate and also the most time consuming**

Question 242

» Explain the following variables in cost: Allowances, Alternates and Unit Prices.

Answer 242

- Allowances : is a fixed number, usually written into the contract, for how much the Owner will pay for a portion of the Work. The typical example is floor finishes, which may not be selected at the time the contract is signed. The contractor can’t give a price for something not specified, but they can include an estimate that is included in th Cost of the Work. The Owner will then expect to pay that amount for floors until a selection is made, at which point the cost may be adjusted. - Alternates : are additional or different portions of the work the owner can choose to add to the base project. It may be a pre-defined selection of nicer finishes or a whole addition of new space. These would be listed as set prices in the contract, not included in the initial Cost of the Work, but they would be added to the Cost if the owner chooses to add one of the Alternates - **Unit Price : work as described above**, if enough information is known about the different systems, but the actual quantity needed is not yet determined. The Unit Price will be stated in the contract and the Owner can later decide how much of something they want to add.

Question 243

» At the end of Construction Documents phase, what documents should be created to create a bid package?

Answer 243

- The contractor signs a contract with the owner to build a building...you as the architect define what that building is through drawings and specifications - The drawings and specifications you produce are referenced in the actual contract for construction, so your documents are referred to as Contract Documents. The full list is: * drawings * specs * contract for construction * general and supplementary conditions to the contract * addenda issued before execution of the contract * other as defined in the contract

Question 244

» What’s the difference between Construction Drawings and Specifications? Which one is more important?

Answer 244

- Construction Drawings identify the quantity, size and location of items - Specifications identify the quality - The drawings and specifications are COMPLEMENTARY. - You may have to choose what to do in a situation the drawings and specs don’t match

Question 245

» What are four general categories of specification?

Answer 245

- Descriptive: A technical description of the properties of an item or material. Might specifically list flame spread ratings and composition of a finish material - Performance: Describes the way an item performs. Might say, “must resist fire for one hour.” - Reference: The item must meet the standards of some 3rd party. An example would be requiring that a wall must meet the standards of UL U305 - Proprietary: You give a specific brand name and product line. This is the simplest specification and the easiest to provide cost estimation, though may not be the most efficient of cost effective.

Question 246

» How can a Project Manager reduce redundancy in the drawings?

Answer 246

- The best way to do this is to put information in ONE PLACE in your drawing set and reference that one place in all other locations

Question 247

Match the items on the left with the location in the Contract Documents in which they may be found. * Shop drawing for metal stair railing * Required strength of metal stair railing * Dimension for the building footprint * Reference to the location of a typical wall detail * Building Section * Thickness of Gyp Board on an interior wall * Instructions for shoring during the demo phase * Quality of gyp board finish Contract Document below » Drawing Set * A100 * A201 * A303 * Partition Legend » Specification Book * Performance spec * Descriptive spec » Not Included

Answer 247

* Shop drawing for metal stair railing (NOT INCLUDED. Shop drawings are NOT part of the contract documents.) * Required strength of metal stair railing (PERFORMANCE SPEC) * Dimension for the building footprint (A100. The 100 series is for plans) * Reference to the location of a typical wall detail (A100 or A303. The 300 series is for sections.) * Building Section (A303) * Thickness of Gyp Board on an interior wall (PARTITION LEGEND) * Instructions for shoring during the demo phase (NOT INCLUDED. This is means and methods, entirely up to the contractor and not part of the contract documents) * Quality of gyp board finish (DESCRIPTIVE SPEC)

Question 248

» Broadly describe the basics of what happens during bidding

Answer 248

* Identify bidders * Send them an invitation to bid * Send them the Bid Documents (see below) * Respond to RFI (see below) * Receive bids * Choose winner

Question 249

» What are some differences in the bid process between Public and Privately funded projects?

Answer 249

- Public projects : Public meaning government of some level is the Owner. : Public projects usually require the project to be announced to the public so that different companies can have a chance to bid. : Public projects generally must be competitively bid as well, meaning that the low bid gets the contract - Private projects : Private projects can be more selective. : They can choose which contractors receive invitations to bid and can pre-select this list through the use of various qualifications

Question 250

» What are the actual bid documents?

Answer 250

* Instructions to bidders (A701) * Proposed contract (A201 and A101) * Supplementary Conditions to the contracts * Construction Drawings * Construction Specifications * Addenda to all the previous items - Bid documents can be provided to bidders in a number of ways...hosted on a website, provided electronically, printed and available for pick up at some location (architect or owner office), printed and mailed to contractors. - The owner generally pays for the cost of bid documents as a reimbursable expense to the architect. This should be covered in the B101 - The most important thing for the release of bid documents is that all contractors get the exact same information

Question 251

» What is an RFI? How is this different from an RFP? Which one counts as Direct Labor?

Answer 251

- An RFI is a Request for Information. : Bidders submit these to the Architect when they have questions and/or need clarification in regards to the Construction Drawings and the Specifications. : If one bidder submits an RFI the answer must be provided to ALL bidders. : RFI are Direct Labor. This work is part of the design contract and it needs to be accounted for when the Architect determines the budget for labor : This obviously falls under the Bid phase, which is generally the shortest phase of the project. - An RFP is a Request for Proposal : This is what the Owner submits to the Architect in order to receive proposals for the design contract. : RFPs are Indirect Labor. They are marketing, there is no client paying you do spend time on an RFP

Question 252

» What is a Bid Bond? What is a Surety?

Answer 252

- A Bid Bond is a type of Bid Security that bidders submit with their bids. . It’s their way of promising to do the work - if they win the contract. The owner will accept bid bonds of $1000* to all the bidders. **Those not selected get their bond returned** - **Then if the winning contractor decides not to do the job according to the bid they submitted, the Owner can keep their bond** - The **Surety is the bonding agency, the company that puts up the actual money** - This is what a GC means when they say, **“Licensed and Bonded.”** **They have a license and they have a surety**.

Question 253

» Does the lowest bid automatically get the job?

Answer 253

- The lowest price does not always get the job, as long as the bid information lists other criteria, such as experience, completeness of bid, etc. - For public, competitively bid projects, the lowest bid should get the contract.

Question 254

» What AIA Document would be a good baseline for creating a new office checklist?

Answer 254

The AIA D200-1995 is the latest Project Checklist template provided by the AIA family of documents

Question 255

» Should checklists include tasks that need to be done on every project, or specialized tasks custom to one project?

Answer 255

- Checklists are best utilized for repitive tasks. They help bring consistency to tasks that are “performed repeatedly on every project” - Obviously not every tasks can be included in a checklist, especially custom tasks that are required by the unique nature of individual projects.

Question 256

» Who should develop the checklist? Whose responsibility is it to ensure a project is complying with the checklist?

Answer 256

- The checklist should be developed by, or with significant input, of the desired end-users of the checklist. - That means the Design Staff for drawing standards issues, Project Managers for higher level project management kind of things - Though the Design Staff or actual workers may be using the checklists to ensure they are completing their tasks correctly, - the Project Manager has overall responsibility for the use of the checklists and the accuracy of the project documents. - You won’t have one giant checklist with every single task for the entire project. A better system is to have smaller checklists for each phase of the project - Within these checklists you can then have sub-checklists as necessary. - A Phase Checklist can have three separate parts : General Phase Objectives, : Phase Task Objectives : Phase Deliverables.

Question 257

» What is a Project Phase Checklist? How is it organized?

Answer 257

- General Phase Objectives, : One small checklist for the big picture items you need to accomplish in a phase - Phase Task Objectives : Then a longer, more detailed checklist with specific work tasks and quality control line items - Phase Deliverables. : finally a checklist to account for what needs to be delivered at the end of the phase

Question 258

» In regards to design drawings, what is an audit?

Answer 258

- An Audit is a formal review of the current documents to determine if they meet the requirements of the project. - It is not randomly done on a portion of the drawings, it is a “systematic” process

Question 259

» How does this fit into a quality control program?

Answer 259

- It is an important part of any quality control program and should be budgeted for, both in terms of time and dollars.

Question 260

» Should a Peer Review be accomplished by the Project Manager, a senior member of the architecture firm not involved in the project or a third party completely outside the firm?

Answer 260

- An Audit can be accomplished by anyone, including the Project Manager, but a Peer Review is, by definition, someone outside of the project team * 1st Party - Project Team reviews their own drawing * 2nd Party - Someone with an interest in the firm (i.e. a senior member) but not directly responsible for the project. * 3rd Party - An outside firm/person - The backgrounder clearly defines Peer Review as either a 2nd or 3rd party audit, that is someone NOT on the project team, though it could be someone inside the firm. - The important concept to keep in mind is that someone not on the project team should review drawings.

Question 261

» Should **audits occur before or after a set of documents is issued** to close out a design phase?

Answer 261

- **Audits/Peer Reviews should occur before a drawing set is issued**. That is before you give the Owner your final SD, DD and CD drawings - For **Construction Drawings, the audit should take place when the drawings are in the range of 75-90 percent complete**

Question 262

» What items might a reviewer check during an audit of Construction Documents?

Answer 262

* Compliance with code and zoning requirements * Completeness of the architectural and consultant drawings * Coordination between the architectural drawings and consultant drawings * Detailing of different areas of the project. Many 3rd Party Review companies specialize in helping architects detail the building envelope. Water intrusion is the #1 cause of lawsuits against architects...I think.

Question 263

» You hire an outside consulting firm to review your drawings’ compliance with ADA standards. They miss an error in your drawings and the project gets built with an accessible bathroom that isn’t accessible. Who is at fault?

Answer 263

The Architecture firm and the Project Manager are accountable for the drawings, regardless of any third party reviews that are done.

Question 264

» In the Design-Build Contract, what is The Work? How is this different from the A201? What is The Project?

Answer 264

- **The Work includes, the design and construction of the project** - In the A201 **The Work refers to the construction only** - The A201 is a contract for construction, the **A141 is a contract for design and construction** - In the A141 The Project is the sum of all the design and construction work - Architect is part of the Design-Build Entity, **so they do not act on behalf of the Owner** - Tasks that the Architect would have done for the Owner in a traditional Design-Bid-Build delivery method are now the responsibility of the Owner

Question 265

» In a Design-Build project, who reviews submittals? How long do they have to review them? How is this different from the A201?

Answer 265

- In an A141 project the Owner reviews submittals. In the A201 it’s the Architect’s job on behalf of the Owner - Per the A141, approval of submittals by the Owner “shall not be unreasonably delayed”

Question 266

» In a Design-Build project, Who signs Construction Change Directives on behalf of the Owner? What about applications for payment?

Answer 266

- In the A141 the Owner alone signs Construction Change Directives. In the A201 the Owner and Architect sign them - in the A201 the Contractor has some safety with the Architect acting as a third party to determine costs. In the A141 the Owner can direct the work to be done AND set the cost of it...though the actual language in the A201 and A141 isn’t too different. The key points are the same.

Question 267

» In a Design-Build project, What fee structure should be used with the A141? (percent of construction, cots +, etc.)

Answer 267

- Any fee structure can be used with a Design-Build contract - Just remember that Design-Build projects are not competitively bid...that doesn’t happen until after Construction Drawings are complete, and in this delivery method the Design-Build entity has already been hired.

Question 268

» In a Design-Build project, How is Substantial Completion determined? How does this differ from the A201?

Answer 268

Substantial completion in the A141 is the same as in the A201. The only difference is the Design-Build entity will inform the Owner when they believe they have reached Substantial Completion and the Owner does the inspection.

Question 269

Sketch the relationships between Owner, Architect and Contractor for a Design-Build project in which the Design-Build entity does not have in-house design or construction teams. List the contracts that should be used. Make sure to include consultants and subcontractors.

Answer 269

Question 270

» What is indemnification? Who indemnifies whom against what, according to the A201?

Answer 270

- indemnification is to protect another against loss or damage - In the A201 the Contractor **indemnifies the Owner and the Architect against claims that arise from the Contractor’s negligence. Note that this indemnification** does not apply to damage to The Work, but to all other people and property.

Question 271

» What is subrogation? Which party (AOC) does this protect?

Answer 271

- Subrogation has to do with insurance - The A201 covers this in §11.3. The Owner and the Contractor provide waivers of subrogation basically to everyone who has ever lived - These waivers mean that if there is damage, and that damage is covered by insurance, one party can’t then also sue the party that caused the damage. - So an owner sets a fire on their own property that damages the contractor’s equipment. The contractor’s equipment is covered by insurance, so the contractor can’t also sue the owner for that damage

Question 272

» What is Consolidation? What is Joinder? To which dispute resolution method are these related?

Answer 272

- Consolidation and Joinder are related to Arbitration. - Consolidation : you can combine multiple arbitrations in which you are involved, as long as they are about the same issue - Joinder : the addition of other parties to the arbitration if they are materially involved in the issues. A contractor may want to join a subcontractor involved in the dispute. The new party has to agree to the joinder.

Question 273

» What’s the difference between binding and non-binding? Which dispute resolution methods are binding?

Answer 273

- Binding means you are legally required to comply with the result. Non-binding means you aren’t. - Per the A201, mediation is non-binding. Arbitration and Litigation are binding

Question 274

» What is betterment? How does this protect the Architect?

Answer 274

- Betterment is a defense Architects may use against Errors and Omissions Claims - The principle is that if the drawings had been correct, the Owner would have paid for that portion of the Work anyway. - If an Architect forgets to show tile flooring in a space, the Owner probably can’t get the Architect to pay for the additional work AND the cost of materials since the Owner would have had to pay for those materials anyway.

Question 275

Can they sue? The Owner purchases loss of use insurance that covers fire damage. The electrical subcontractor burns the entire project down intentionally because they didn’t receive payment for work. The Architect could have prevented the electrician from burning the place down, but didn’t. Can the Owner sue the Contractor? Can the Owner sue the Architect?

Answer 275

No. See §11.4. If the Owner has loss of use (and a few other types) of insurance, they must waive all rights against the Contractor and the Architect, no matter how the damage was caused. - subrogation

Question 276

Can they sue? The Owner decides they don’t want to use up all the extra space needed for an ADA compliant bathroom and directs the Architect to reduce the size of the bathrooms on the Construction Drawings. The project gets built with the smaller bathrooms. an the Architect be sued by someone who uses the building?

Answer 276

Yes. Indemnification is for the damage resulting from errors and omissions. You can’t be indemnified against illegal actions. Knowingly violating the ADA would not count.

Question 277

Can they sue? The Owner decides they don’t want to use up all the extra space needed for an ADA compliant bathroom so they change the Architect’s drawings, without the Architect knowing, after the project has received building permits. The project gets built with the smaller bathrooms. Can the Architect be sued by someone who uses the building?

Answer 277

No. See §7.3.1 of the B101. If the Owner uses the Architect’s Instruments of Service without their knowledge they grant the Architect and the Consultants indemnification for any damages that result from that use.

Question 278

BACKLOG

Answer 278

- Backlog refers to the list of current projects that will carry over to the following year, as well as the dollar value of anticipated revenues from projects contracted but as yet unearned. Backlog does not guarantee future profits - Signs of a healthy backlog: : Ability to obtain business from new clients : Repeat clients : History of growth - Signs of an unhealthy backlog: : Inability to obtain business from new clients : Lack of repeat clients : Lack of growth coupled with poor profit

Question 279

Backlog question HF Copper & Associates’ profit plan for the coming year indicates a net operating revenue of $925,000, based on a target net profit of 20 percent. If the firm’s backlog is $469,000, how much does the firm need to generate in net operating revenue in order to meet its projections?

Answer 279

- $925,000- $469,000=$456,000 Note: The 20% profit margin does not factor into this equation

Question 280

Employee compensation

Answer 280

- Employee compensation consists of the sum of **direct benefits (such as base salary, allowances, bonus, and commission)** - **indirect benefits (such as insurance, pension plans, and vacations)** that an employee receives from an employer.

Question 281

operating expenses

Answer 281

- Expenses incurred in conducting normal business operations. - Operating expenses may include **wages, salaries, and administrative and marketing/business development costs**, but **excludes interest, depreciation, and taxes**.

Question 282

profit

Answer 282

- **Fees for services minus the operating expense associated with performing such services**. - Normally the bottom line of the income statement, which is also called profit or loss statement. - **Start with income, subtract all costs of services and all expenses (overhead), and that produces profit before tax**. - **Subtract tax to get net profit**.

Question 283

hourly not-to-exceed (NTE) proposal

Answer 283

- A type of cost proposal where the architect invoices the owner for all costs of **basic services incurred on the project, up to a predetermined fixed limit that will not be exceeded**. - Generally, the **most fair for both parties**; gives the owner predictability for budgeting and the architect some flexibility in fee.

Question 284

hourly fee proposal

Answer 284

- A type of cost proposal where the architect invoices the owner directly for all costs of basic services incurred on the project (assessed hourly) **with no fixed limit**. - **The owner is not able to completely predict the cost of service.**

Question 285

fixed fee proposal

Answer 285

- A type of cost proposal where the fees for the architect’s services are predetermined, giving the owner more predictability in the soft costs of the project. - **The architect typically is more at risk in this scenario**, as it is difficult to accurately predict the amount of effort that may be required over the life of a project.

Question 286

balance sheet

Answer 286

- A financial statement of an individual, company, or organization that shows **assets and liabilities** (money owed) at a specific date.

Question 287

financial year

Answer 287

- A 12-month period of business activity. - A firm’s financial year can run over any 12-month period it chooses, although the most common year-ends are **March 31, June 30, and December 31**.

Question 288

gross margin

Answer 288

- Gross margin is sales less cost of sales, and profit (or loss) is gross margin less operating expenses and taxes. The result is profit if positive, loss if negative. - **(Example: If a company makes profits of $500,000 for 11 months and then has a loss of $600,000 in the final month, the profit and loss account will show a loss of $100,000.)**

Question 289

profit/loss statement

Answer 289

- Shows the final outcome of the **firm’s financial performance** over the past financial year. - An income statement is a financial statement that shows **sales, cost of sales, gross margin, operating expenses, and profits or losses.**

Question 290

direct personnel expense (DPE)

Answer 290

- Salaries and wages attributable to a specific project, plus benefits such as employment taxes, insurance, sick leave, holidays, vacations, pensions, and similar contributions and benefits.

Question 291

professional liability insurance

Answer 291

- Insurance that financially protects an architect against claims for **damages resulting from professional negligence**. - **Also called errors and omissions insurance.**

Question 292

builder’s risk insurance

Answer 292

- A form of insurance taken on a project that covers **the project property for loss or damage during construction**.

Question 293

AIA A701-1997

Answer 293

Instructions to Bidders.

Question 294

professional fee plus expenses

Answer 294

A pricing method for professional services **that separates the professional fee from reimbursable expenses**

Question 295

overrun

Answer 295

When a project expense exceeds the budgeted amount, often as a result of **poor estimating, inadequate time, or poor project management**.

Question 296

capital improvement

Answer 296

- A project that will **improve the condition or value of an owner’s acquired wealth, property, or assets**.

Question 297

What is the principal advantage to using a corporation as the business model for an architect’s office?

Answer 297

- This type of business structure does not put the **personal assets of the stockholders at risk**.

Question 298

What type of assurance is represented in a cost estimate prepared by the architect?

Answer 298

This document represents the architect’s best professional judgment, but **it is not considered to be a guarantee** to the owner of actual construction costs.

Question 299

A client has replicated a building designed for them. What is the legislation that prohibits this?

Answer 299

- **The Architectural Works Copyright Protection Act** makes it illegal for an owner to do this for buildings designed after December 1, 1990.

Question 300

What would be the situation if the cash flow of a firm did not equal its liabilities?

Answer 300

- The **firm would not be able to meet payroll and pay its bills** if the cash flow is not at least equivalent to this.

Question 301

Risk management in a firm includes several items. Which one relates to the client?

Answer 301

- Simply **knowing the client** (or their reputation) avoids many problems related to this area of firm practice.

Question 302

What is the concept of privity?

Answer 302

- As defined in the American Institute of Architects Document A201, General Conditions of the Contract for Construction, - this is the term that **holds architects harmless** from claims by parties with **whom they have no direct contractual relationship**.

Question 303

What does the net profit before tax include?

Answer 303

Total annual revenue minus consultant fees and reimbursable expenses are part of this number.

Question 304

What is the accounting term for a bill to the firm for office supplies?

Answer 304

A bill for office supplies is a **liability in this part** of the firm’s accounting.

Question 305

What does it imply if a firm is carrying a bill for longer than 90 days?

Answer 305

- The firm is effectively **loaning money interest-free** if this is happening.

Question 306

The owner of an architecture firm might manage firm overhead by controlling what specific costs?

Answer 306

These costs are commonly used to control what aspect of the financial health of a firm. - non-billable labor - non-labor direct expenses - outsourced expenses - postage and delivery - local travel expenses - presentation materials

Question 307

What are the three commonly used, viable defenses when an architect is sued for liability and/or negligence?

Answer 307

betterment statute of limitations statute of repose

Question 308

What, if any, insurance is the owner obligated to have according to the AIA Document A101, Standard Form of Agreement between Owner and Contractor, and Exhibit A, Insurance and Bonds?

Answer 308

These are the insurances that must be held according to this AIA Document. - liability insurance - property insurance

Question 309

If a firm pays an employee $50.00 per hour and the net multiplier of that firm is 3, what is the billing rate for that employee?

Answer 309

A billing rate of $150.00 is determined by this multiplier times the employee rate of $50.00 per hour.

Question 310

What are the four steps to making sure the firm’s accounts receivables are being paid?

Answer 310

- Contract terms, - timely billing, - complete invoices - regular procedures for tracking accounts

Question 311

What are the implied duties of an architect?

Answer 311

- cooperate with contractors - assist the owner with coordinating the work - give relevant information to contractors - ensure that the plans and drawings comply with the requirements of the building code - comply with the standard of care

Question 312

What are the two types of accounting used in an architecture firm?

Answer 312

Cash accounting and accrual accounting are used for this purpose in an architecture firm.

Question 313

What is an overhead rate?

Answer 313

This ratio of total office overhead to total direct labor determines this measure of financial strength of an office.

Question 314

cost-based selection (CBS)

Answer 314

**A competitive contract procurement process** where the **lowest-bidding firm is selected**, in response to a request for proposal.

Question 315

general liability insurance

Answer 315

Insurance that covers some of the common claims brought about in conducting business or working with customers, including expenses related to nonemployee injuries or damage to someone’s property.

Question 316

return on investment (ROI)

Answer 316

The margin on a project or endeavor.

Question 317

project liability insurance

Answer 317

Insurance for a specific project that covers liabilities for claims directly relating to the project.

Question 318

profit before interest and taxes

Answer 318

Also called EBIT, for earnings before interest and taxes. It is gross margin minus operating expenses.

Question 319

stakeholders

Answer 319

All persons with a social, business, financial, or equitable interest or concern in a project.