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ARE 5.0 Practice Management

Sole Proprietorship
The business is owned by an individual
General Partnership
Two or more people (general partners) share in the management, profits and risk of the business
Limited Partnership
Has at least one general partner (invests in the business, manages it and are financially responsible for it) and at least one limited partner (investor who receives a portion of the profits but has no say in the management of the company)
C Corporation
An association of individuals (stockholders, directors and officers) that exists as a legal entity apart from its members
Owners of the corporation in proportion to the number of shares they own
Have the fiduciary duty to act in the best interest of the stockholders and are responsible for broad policy decisions
Carry out the day-to-day management of the corporation
S Corporation
A corporation that chooses to allocate it’s income and losses directly to shareholders in proportion to their holdings. Limited to small business corporations with less than 100 shareholders.
Professional Corporation
Similar to other corporations except that liability for malpractice is limited to the person responsible for the act.
Limited Liability Company (LLC)
Business structure that combines the advantages of a partnership or sole proprietorship with the limited liability of a corporation. (Aka LLP Limited Liability Partnership)
Joint Venture
A temporary association of two or more persons or firms for the purpose of completing a specific project or achieving a specific goal
Teaming Agreement
Defines the roles, responsibilities and contractual relationships that will be established if the firms are awarded the project and the joint venture is formed. (Aka Memorandum of Understanding)
Memorandum of Understanding
Defines the roles, responsibilities and contractual relationships that will be established if the firms are awarded the project and the joint venture is formed (Aka Teaming Agreement)
Standard of Care
The level of skill and diligence that a reasonably prudent architect would exercise in the same community, in the same time frame, and given the same or similar facts and circumstances
Departmental Organization
Staff is organized into departments, each of which specializes in a different function. A project moves from one department to another in its route from start to finish (Horizontal Organization or Flat Organization)
Studio Organization
Staff is organized in groups called studios. Each studio is responsible for completing an entire project (Vertical Organization or Tall Organization)
Contracting with another company to do some of the work needed for a project
Support Staff
Employees other than the professional staff and senior management
Business License
Allows the business to practice and usually serves as a basis for taxation
Certificate of Authorization (COA)
Some states require a firm to obtain this in order to offer services to the public
Human Resources Management
Involves the entire range of hiring, compensating, managing and terminating employees, along with the legal responsibilities of having employees (personnel management)
Formal Employee Contract
Spells out the employee’s responsibilities, work duties and compensation, as well as the firms benefits, work conditions, termination procedures and policies
Independent Contractor
Person hired for a specific project. They control where and how they perform their work and provide their own supplies and equipment
Job Description
Defines the duties and responsibilities of the person holding a specific job title
Personnel Policy Manuel
A positive statement of the firms commitment to employees, clients and the public at large
Any kind of payment made to employees for work – a base salary + benefits
Flexible Benefit Package
Required statuary benefits are provided, and employees can choose their additional benefits from a menu of options
Performance Evaluation
A formal review performed by a manager to assess each employees performance
National Labor Relations Act
Allows private sector employees to organize into trade unions and protects union employees from unfair labor practices (Wagner Act)
Equal Pay Act
Requires equal pay for employees with the same work duties, responsibilities and experience
Employee Eligibility Verification
Requires employers to verify the employee’s right to work in the United States
Wages and Fair Labor Standards Act (FLSA)
Establishes min wage, overtime, record keeping and child labor standards in both the private sector and in the government employment
Occupational Safety and Health Act of 1970 (OSHA)
Requires employers to provide a safe work environment
Health Insurance Portability and Accountability Act of 1996 (HIPPA)
Protects the privacy of health information
Employee Retirement Income Security Act (ERISA)
Sets min standards for pension plans in the private sector for employers who have a pension plan program
Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA)
Requires employers with 20 or more employees to continue group medical coverage if employment is terminated, hours are reduced, employment is changed, or in the event of death, divorce or other significant life events
Civil Rights Act of 1991
Prohibits discrimination on the basis of sex, race, color, religion or national origin
Age Discrimination in Employment Act of 1967 (ADEA)
Prohibits age discrimination in employment for for persons age 40 or over
Family and Medical Leave Act (FMLA)
Requires that companies give an employee up to 12 weeks of unpaid leave for child, spousal, or parental care
General Ledger Accounting
Keeping track of money flowing into and out of the business and is needed for day-to-day operations, banking, taxes and auditing
Project Cost Accounting
Tracks revenue, expenses and profit by individual projects
Accounts Payable
Amounts owed to the suppliers of goods or services that have not been paid
Accounts Receivable
Money that others owe to the business through invoices for services
Any type of tangible or intangible resource that can be measured in monetary terms, including current, fixed and other assets
Chart of Accounts
A list of the various accounts a business uses to keep track of money, along with corresponding account numbers used for data processing
Current Assets
Resources of a business that are converted into cash within one year
Direct Labor
All labor of technical staff, principals and support staff that is directly chargeable to projects
Direct Personnel Expense
The expense of employee salaries plus the cost of mandatory and discretionary expenses and benefits such as payroll taxes and health insurance
Discretionary Distribution
Voluntary distrubution of profits to owners and nonowners, such as performance bonuses, profit sharing and incentive compensation
Fixed Assets
Resources that the firm uses and retains for a long period of time, such as equipment and property
Gross Revenue
All the revenue generated by a business during a stated period of time
Indirect Labor
All labor not charged to a specific project or revenue-producing account such as administration, general office time and marketing
Claims by people outside the business and claims by the owners of the business against the total assets of the business
Net Operating Revenue (Net Revenue)
The money that remains from billing after deducting fees and expenses, reimbursable expenses and non-reimbursable project-related expenses
Other Assets
Misc resources such as securities and copyrights
Expenses incurred to keep a business operating whether or not any revenue is being generated, such as rent, software leases and fees for power and phone
Cash Accounting
Revenue and expenses are recognized at the time the business receives the cash or pays a bill
Accrual Accounting
Revenue and expenses are recognized at the time they are earned or incurred, whether or not cash changes hands
Modified Accrual Basis Method
Records fee revenue, expenses billed to the client and invoices to the firm by outside consultants – does NOT include the amounts of fees that have been earned but not yet billed to the client
Double Entry Bookkeeping
All transactions are listed chronologically in a journal – they are then posted to a ledger where transactions are grouped into individual accounts
Accounting Reports
Generated from the basic info entered in journals and ledgers
Balance Sheet
Summarizes all assets and liabilities and shows the financial position of a business
Net Worth
The total assets less the total liabilities
Owners Equity
The money invested in a business by the owners or stockholders
Profit and Loss Statement
Lists all the income and expenses of a business for a certain period of time (Income Statement)
Cash Flow Statement
Shows actual inflows and outflows of cash or cash equivalents
Cash Equivalents
Short term investments that can be quickly converted into cash, such as short-term certificates of deposit
Financial Management
Includes active planning, monitoring and controlling of financial information as well as acting on that information
Profit + Expenses = Revenue
Equation for financial planning in profit-oriented business
Project Progress Report
Shows the hours and labor costs for each phase of a project, both for the current reporting period and the total to date, and compares these numbers with the estimated hours and costs
Office Earnings Report
Summarizes each of the firms projects in terms of the amount of revenue it has generated, the expenses it has incurred, unbilled services, percentage of completion and profit or loss to date
Aged Accounts Receivable Report
Shows the status of all invoices for all projects, whether or not they have been paid, and the “age” of each invoice, which is the time from the invoice date to the payment date or to the current date if still unpaid
Time Analysis Report
Lists each employee along with the number of hours he or she has spent on direct labor, indirect labor, vacation time, sick leave and holidays
Chargeable Ratio
= the time spent on direct labor / total time
(Utilization Rate)
Current Ratio
Total current assets / total current liabilities
Net Profit Before Tax
The percentage of profit based on net revenue minus total annual revenue minus consultants fees and reimbursable expenses
Overhead Rate
Total office overhead / total direct labor
Quick Ratio
A refinement of the current ratio including only cash and cash equivalents plus accounts receivable plus revenue earned but not billed divided by total current liabilities
Revenue per Technical Staff
The amount of net revenue produced per technical staff member, or those staff members most directly involved with charging direct time and producing jobs
Revenue per Total Staff
Amount of net revenue produced per staff member per year, including principals and part-time employees
Annual net operating revenue / total number of employees
Billing Rate
An hourly rate per staff member working on a project
Net Multiplier
Net revenue of the firm /Cost of direct labor
Break-Even Rate
Total cost of operations / Total money spent on direct labor
Direct Personnel Expense (DPE)
Costs of providing taxes, benefits and the like and are included with the employee’s base salary
The legal responsibility for injury to another person or damage to property
The failure to use due care to avoid harming another person or damaging property
Statute of Limitations
Sets a time limit within which a claim can be made
Statute of Repose
Similar to statute of limitations, except that, the time limit is usually much shorter and does not begin until the problem is first discovered
Architects are, in theory, protected from claims by parties with whom they have no direct contractual relationship
Indemnification Clause
Holds harmless both owners and architects for any damages, claims or losses resulting from the performance of any work on the project with whom the architects have no contractual relationship
Professional Liability Insurance
Protects architects in case one of their actions causes bodily injury, property damage, or other damage. Covers problems resulting from things such as incorrect specs, mistakes on drawings and negligence
General Liability Insurance
Protects against claims of property damage, liability and personal injury caused by architects or their employees
Property Insurance
Protects the architect’s buildings contents against natural disasters such as fire, theft and flood
Personal Injury Protection
Protects architects against charges of slander, libel, defamation of character, misrepresentation and other torts
A civil wrong, as contrasted with a criminal act, which causes injury to another person
Auto Insurance
Covers liability and property damage to vehicles owned by the business
Workers Compensation
Protects employees in the event of injuries caused by work related activities
Project Delivery
The entire sequence of events that is needed to provide an owner with a completed building
Design Bid Build
The owner has two separate contracts with an architect and contractor. Architect designs the project, project is sent to bid, and then the contractor who wins the bid constructs the project
Design Build
The owner contracts with one entity (a person or firm) to provide both design and construction services, that entity then subcontracts portions of the work to others as needed
Combines the advantages of the traditional design-bid-build process (someone to represent the owners interests throughout the process with a fixed cost) and the design build approach (a single source responsibility for construction)
Design-Assist Contracting
Specialty subcontractors or trades are included early in the design and construction document phases to help with the development of complex or unique portions of the building
Integrated Project Delivery (IPD)
All participants collaborate closely from the projects earliest conceptualization to move in. Owner has multiple agreements with independent design and construction firms
Multi-Party Agreements
A single agreement executed by the owner, architect, contractor and other key project participants for the design, construction and commissioning of a project
Single-Purpose Entities (SPE)
An independent limited liability company newly created for the sole purpose of planning, designing and constructing a particular project
Broad principles of conduct in the AIA Code of Ethics
Ethical Standards
Specific goals toward which members should aspire according to the AIA Code of Ethics
Rules of Conduct
Specific, mandatory statements that members must follow in the AIA Code of Ethics
Canon 1 General Obligations
Which canon indicates members should maintain and improve their knowledge and skill, seek to raise architectural standards, respect and seek to improve society and the environment and not discriminate?
Canon 2 Obligations To The Public
Which canon indicates members should uphold the law, never try to influence a public official with a payment or accept payment intended to influence judgement, promote and serve the public interest and strive to improve public appreciation of architecture?
Canon 3 Obligations to the Client
Which canon indicates members should serve their clients competently and professionally, exercised unbiased judgement, avoid conflicts of interest, be truthful in professional communications and maintain client confidentiality?
Canon 4 Obligations to the Profession
Which canon indicates members should uphold the integrity and dignity of the profession, practice with honesty and fairness, not sign and seal documents for which they do not have responsible control, not knowingly make false statements and be honest about their qualifications?
Canon 5 Obligations to Colleagues
Which canon indicates members should respect the rights of their colleagues, provide associates and employees with suitable working conditions and fair compensation, nurture fellow professionals through their education and careers and give credit to others for their professional work?
Canon 6 Obligations to the Environment
Which canon indicates members should be environmentally responsible, promote sustainable design, advocate sustainable buildings and site design and use sustainable practices within their firms and encourage clients to do the same?
Invitation to Bid
Used when contractors must be prequalified to bid on a project
A written or graphic document, issued by the architect during the bid period prior to the execution of the contract, that modifies or interprets the bidding documents by addition, deletion, clarification or correction
Instructions to bidders
Outlines the procedures and requirements that the bidders must follow in submitting bids, how the bids will be considered and submittals required of the successful bidder
Bid Security
This is required to ensure that the successful bidder will enter into a contract with the owner
Performance Bond
A statement by a surety company that obligates complete construction of the project in the event that the contractor defaults on his/her obligations
Control Estimate
The sum of the CM’s estimate of the cost of the work plus the CM’s fee in a CMc project delivery method
Agency Review
In IPD, the standard building code check by the authority having jurisdiction (AHJ) as well as any other reviews by permitting agencies
In IPD, the process of selecting suppliers and finalizing prices from any remaining subcontractors and vendors that are not part of the IPD process
A request included in the bidding documents asking the contractor to supply a price for some type of variation from the base bid
Unit prices
In bid documents these are set costs for certain portions of work, based on an individual quantity.
A set amount of money estimated by the architect to cover a particular material or piece of equipment when the cost for it cannot be determined precisely at the time of the bid or negotiated proposal
Value Engineering
The process of analyzing a particular material, assembly, system, or even an entire design to see whether the same functional requirements can be met in a less expensive way, or whether a product or system of higher quality can be found for the same cost. (Value analysis)

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