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Practice Management Flashcards

1
Q

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

A

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

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2
Q

AIA A101

A

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

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3
Q

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

A

stakeholders, directors, and officers

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4
Q

Name some advantages and disadvantages in design bid build

A

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

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

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5
Q

What is an architect’s primary duty?

A

Protect the public’s health, safety, and welfare

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6
Q

AIA A201

A

A201 – General Conditions of the Contract for Construction

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7
Q

AIA A701

A

A701 – Instructions to Bidders

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8
Q

AIA B101

A

B101 – Standard Form of Agreement Between Owner and Architect

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9
Q

AIA C401

A

C401 – Standard Form of Agreement Between Architect and Consultant

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10
Q

AIA A305

A

A305 – Contractor’s Qualification Statement

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11
Q

AIA G701

A

G701 – Change Order

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12
Q

AIA G702

A

G702 – Application and Certificate for Payment

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13
Q

AIA G703

A

G703 – Continuation Sheet

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14
Q

AIA G704

A

G704 – Certificate of Substantial Completion

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15
Q

Legal concept of agency

A

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

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16
Q

Why can IPD be good for complex projects?

A

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

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17
Q

Sole proprietorship pros and cons

A

Ease of setup

Owner personally liable for debts and losses

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18
Q

General partnership pros and cons

A

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

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19
Q

S corporation

A

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

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

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20
Q

LLC

A

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

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21
Q

Standard of care

A

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

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

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22
Q

National Labor Relations Act

A

Allows private sector employees to organize in trade unions

Applies to all employers

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23
Q

Equal Pay Act

A

Equal pay for employees with same duties, responsibilities and experience

Applies to all employers

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24
Q

Employee Eligibility Verification

A

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

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25
FLSA
Wages and Fair Labor Standards Act Establishes minimum wage, overtime, pay, record keeping, child labor standards for public and private employment Applies to all employers
26
OSHA
Occupation Safety and Health Act Applies to all employers
27
HIPAA
Health Insurance Portability and Accountability Act Protects privacy of individually identifiable health information Applies to all employers
28
ERISA
Employee Retirement Income Security Act Sets minimum standards for pension plans in private sector Applies to all employers who have a pension plan program
29
COBRA
Consolidated Omnibus Budget Reconciliation Act Allows for continuation of group medical coverage Applies to employers of 20 or more
30
Civil Rights Act
Applies to employers of 15 or more
31
ADEA
Age Discrimination in Employment Act Prohibits age discrimination for persons 40 and over Applies to employers of 15 or more
32
FMLA
Family and Medical Leave Act Require employers to give up to 12 weeks for child spousal or parental care Applies to employers of 50 or more
33
General obligation bond
When a state or local government wants to finance the acquisition or construction of public facilities, they issue a general obligation bond. Shareholders (the investors in the bond) are guaranteed to be repaid using future tax revenues.
34
ABI
“AIA’s monthly Architecture Billings Index (ABI) is a leading economic indicator for nonresidential construction activity, with a lead time of approximately 9–12 months. The index is derived from AIA’s Work-on-the-Boards survey, which has gathered data on shifts in billings from architectural firm leaders for over 20 years. An Architecture Billings Index (ABI) score of over 50 represents that architecture firms, on average, reported to have increased work activity as compared to the previous month. Each of the below economic phases will likely have ABI scores in following ranges: Contraction:40-45 Late contraction: 45-50 Late expansion: 50-55 Early phase recovery: 55-65
35
Mechanic’s lien
a claim on property by anyone who has furnished material or labor for the construction of a building on that property.
36
accounts payable
amounts owed to the suppliers of goods or services that have not yet been payed
37
How often are AIA documents released?
Every ten years on the 7
38
accounts receivable
money that others owe to the business
39
assets
any type of tangible or intangible resource that can be measured in monetary terms
40
chart of accounts
a list of the various accounts a business uses to keep track of money, along with corresponding account numbers
41
current assets
resources of a business that are converted into cash within one year
42
direct labor
all labor of technical staff, principals and support staff that is directly chargeable to projects
43
direct personnel expense
expense of salaries plus cost of mandatory and discretionary expenses and benefits
44
discretionary distribution
voluntary distribution of profits to owners and non owners
45
fixed assets
resources that the firm uses and retains for a long period of time such as equipment and property
46
gross revenue
all revenue generated by a business during a stated period of time
47
indirect labor
all labor not charged to a specific project or revenue producing account
48
liabilities
claims by people outside the business and claims by the owners of the business against the total assets of the business
49
net operating revenue
the money that remains from billing after deducting fees and expenses
50
cash accounting versus accrual accounting
acrual: revenue and expenses recognized at the time they are earned or incurred cash: revenue and expenses recognized at time the business receives money or pays a bill businesses above a certain size are required by IRS to use accrual accounting
51
balance sheet
summary of all assets and liabilities total assets must equal total liabilities plus net worth where net worth equals total assets minus total liabilities
52
profit and loss statements
lists all income and expenses of a business for a certain period of time
53
cash flow statement
shows actual inflows and outflows of cash or cash equivalents
54
project progress report
show hours and labor costs for each phase of a project as well as direct costs such as consultants, overhead allocations and reimbursable expenses
55
office earnings report
summarizes each of the firm's projects in terms of revenue, expenses incurred, unbilled services, percentage of completion and profit to date
56
aged accounts receivable report
status of all invoices for all projects and time from invoice date to payment date
57
time analysis report
lists each employee with hours spent on direct and indirect labor and PTO
58
chargeable ratio / utilization rate
time spent on direct labor divided by total time (direct plus indirect and PTO) overall should be 65%, technical staff 75-85%
59
current ratio
total current assets divided by total current liabilities
60
net profit before tax
total annual revenue minus expenses
61
overhead ratio
total office overhead or indirect expenses divided by total direct labor should be 1.3-1.5
62
quick ratio
total cash assets plus accounts receivable plus revenue earned but not billed, divided by total current liabilities
63
revenue per technical staff
total net revenue divided by technical staff (or those providing direct labor)
64
revenue per total staff
total net revenue divided by all staff (including principals, part time employees)
65
DPE
direct personnel expense - multiplier for billing rates that includes taxes, benefits, etc along with base salary
66
three ways duty for architect is established
by contract, written or oral by legislative enactment such as building code conduct - implied duties
67
three conditions for negligence
legal duty must be established must be shown that architect breached that duty must be shown that breach of duty was cause of damage or injury
68
privity
concept by which architects are protected from claims by parties with whom the have no direct contractual relationship
69
copyright
architect owns copyright for drawings, specs and graphics unless architect is an employee of the building owner of specifically assigns the copyright to the owner
70
AIA B101 architect's insurance requirements
professional liability general liability automobile liability workers compensation insurance
71
AIA A201 contractor's insurance requirements
workers compensation insurance damages from bodily injury, sickness or death bodily injury to people other than employees damages other than to the work because of destruction of tangible property damages related to use of motor vehicles injury or damage occuring after the job is complete and contractor has left the site contractual liability personal injury (including slander, libel, false arrest)
72
early expansion
The time period when the economy is recovering from the most recent economic downturn
73
statue of repose
There is some mistake or flaw that is in repose (asleep) waiting to be discovered after construction has been completed. If it’s not found in time then the architect and contractor cannot be held liable for it.
74
revenue bonds (AKA rate-supported) bonds
Revenue bonds are municipal bonds that finance income-producing projects and are secured by a specified revenue source. Typically, revenue bonds can be issued by any government agency or fund that is run in the manner of a business – those entities having both operating revenues and expenses
75
bridging
Owner hires architect or engineer (AE) to be adviser/project manager AE puts together documents, owner puts it out for bid, AE reviews final documents Advantage of competitive bidding, fixed cost, single source responsibility for construction
76
CMa cost method and pros/cons
Helps with understanding the feasibility of the project Helps with scheduling and following deadlines for the construction Helps with keeping the construction within budget with the construction manager’s cost estimates No competitive bidding of overall project Cost methods: Fixed price- stipulated sum or lump sum- owner not responsible for any overruns and doesn’t share in savings Cost plus fee with GMP- owner pays cost plus agreed fee with guaranteed max- client gets cost savings if any
77
general obligation bonds
When a state or local government wants to finance the acquisition or construction of public facilities, they issue a general obligation bond. Shareholders (the investors in the bond) are guaranteed to be repaid using future tax revenues.
78
CMc
CMc usually bases cost estimates on partially completed drawings usually around DD. Setting the GMP before the design is fully resolved and completed puts the CMc at risk The owner-CMc agreements would have two pre-construction and construction phases The project price is set using either cost of work plus fees or cost of work plus fee with or without GMP
79
Restrictive covenant
A restrictive covenant is a provision in a deed limiting the use of the property and prohibiting certain uses
80
Deed restriction
Deed restrictions are written into a property’s deed and can take the form of conditions, covenants, and restrictions (sometimes called “CCRs”). The property’s past or present owner, developer, builder, neighborhood, or homeowners association usually imposes them.
81
Design build
The contractors may hire subcontractors to do parts of the work The client contracts with one party that does the design and construction The contractor may have in house design team or may hire a designer or architect Pros: single source of responsibility Fixed price given earlier in the project Often faster and less expensive Cons: Owner has less control esp relative to quality
82
Professional liability insurance typically covers:
negligence property damage caused by the architect’s actions erroneous specifications and mistakes in drawings
83
Three tiers AIA code of ethics
Canons (broad principles of conduct); Ethical standards (more specific goals toward which each should aspire); Rules of conduct (mandatory requirements).
84
Break even rate
The break-even rate = overhead rate + assigned unit cost of 1.0 for hourly salaries.
85
CMa arch responsibilities
Arch and CM provide joint CA services CM schedules and coordinates contractor, prepares change orders and directives Arch must advise and consult with both owner and CM Arch decisions are final when consistent with contract docs
86
Control estimate
Sum of CMc estimate of cost of work plus CM fee. Establishes date of substantial completion
87
AIA docs series
``` A - owner contractor B - owner architect C - other D - misc E - exhibits G - CA and project management ```
88
Design build requirements for success
Owner must understand or have experience with design build Owners project criteria must be clearly and completely stated Owner may hire consultant to analyze needs and develop program - they may put out RFP Key contractors should be selected early Contract should allow for adjustments in cost and time Trust and willingness to work together
89
Main AIA contract design build
A141 between owner and design builder
90
IPD
Integrated project delivery- like design build but owner has multiple agreements with different design and construction firms ``` Phases: Conceptualization Criteria design Implementation documents Agency review buyout Construction Close out ``` Early phases take more time but later phases take less
91
SPE
Single purpose entity- independent limited liability company established for a particular project
92
Market trough
The time period at which the economic output of an economic cycle is at its lowest point

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