ARE 5.0 Practice Management Exam Prep

For those who are in the midst of taking the ARE, and may have failed a section or one of the exams, I think just know that a lot of people have failed exams, and that's the reason you get to take them over and that, you know, you can chalk it up to a bad day, and I think it's, I think, take the time to feel bad and down about it, because it is, you worked very hard to do something and it's always hard when you're not successful. But then, you gotta pick a day to kind of reset the clock, and if it's one section that you didn't pass, you know that that's what you need to focus on, and it does make studying and preparing for the exam a little bit easier. One of the best pieces of advice that I received, when I was in the midst of taking the ARE, was that the licensing exam is not a exam of your design skills or design talent, that it is a licensing exam focused on the things that are required for architects to know, in order to practice and serve the public.

We'll discuss every objective on the Practice Management exam through a series of lectures, which will be interspersed with a visit to an Oklahoma City-based architecture firm, ADG. There, we'll talk with a variety of employees, from a designer studying for the ARE, to the firm's principal, about their roles at the firm and how they contribute to successfully managing an architectural practice. You'll then have opportunities to recall what you learned in each video through short quiz breaks and longer quizzes after each section.

A number of pieces we were able to retain of the old building that remind us of this building's history, its relationship to the neighborhood in Oklahoma City, and it's really kind of a good teaching tool for younger architects. I mentioned that this was an assembly plant last for remanufacturing auto parts, and through an adaptive reuse project, turned into a hotel and our offices. That's something that ADG's been involved with for a long time throughout our history.

In Objective 1.4, which makes up about 3% of the exam, you'll gain a comprehensive understanding of the standard of care and why it's important. You'll learn about the exact wording in the standard AIA contracts, and the importance of not adjusting the standard of care, either contractually or by your actions. A classic question for this objective might describe a project where a dispute has taken place, and ask what the most appropriate project to compare it to would be, given the standard of care.

Perhaps the firm leadership identifies the hiring need and describes it to the HR department, who then perform all of the necessary steps to present a few qualified candidates to the leadership team for them to make a decision on who to extend offers to. In our practice, we often evaluate the makeup of our current team to see if there are any additional team members that would help make us stronger, especially when we're looking at new projects and new clients that we want to attract. After one such evaluation, we recognized that we could use a team member that had a strong interior architecture background as we were receiving a number of RFPs for projects that included a large scope in interiors.

So obviously at the beginning of a project, the end of the project, there's kind of a bell curve to the amount of staffing that you need on a project and here at ADG, because we do have that design team, they usually have a few people one or two at the beginning of the project where they're really developing schematic design, concepts, but as we move into DDs and into CDs that's where we kind of ramp up our staffing and our production. You just need to draw that many more sheets and that many more sections and plans. As we get into CA, that really starts to kind of fall off as we have a CA department.

The utilization rate can help determine which staff member might be a good fit for a project by comparing the rates of staff members with similar roles. If four project architects have utilization rates ranging from 75 to 80% and one has a utilization rate of 60%, the one with the lower rate may be a good candidate for the project, assuming they have all of the necessary experience and skills to meet the requirements. Be sure to consider staff members who are working on projects that may be coming to an end soon.

We make employees feel valued here by offering again, the flex time, the work from home, the outside get-togethers, the weekly meetings, the human resources meetings with those employees just to keep touch with them, make sure we're touching bases with them as often as we can. As a growing company we like to hire within. So start out here as an intern architect from college and hopefully they stay with us long enough all the way up to program management, project manager, and goodness, maybe a partner.

Often, the lighting design is incorporated directly into the architectural drawings, rather than providing a separate set of drawings as is typical for structural and MEP engineers Acoustical consultants or engineers may also be considered for certain project types. A concert hall is a good example, but many residential buildings are also designed with the help of an acoustical specialist to ensure sound from each apartment doesn't carry. This is critical in mixed-use buildings.

Some jurisdictions even forbid derivative titles, such as 'architectural associate.' These regulations protect anyone seeking the services of an architect so they can be confident that someone using the term is licensed and registered to practice architecture. So why might someone use the term 'architect' to describe themselves, or the term 'architecture' to describe their services if they're not allowed to? The simplest example is someone who intends to defraud the public a talented designer who hasn't gone through the licensure process, but nonetheless intends to offer architectural services to the public.

For claims-made policies, the insurance company will cover any claim that arises during the coverage period, even if the architect didn't have the insurance in place when the actual error occurred. For example, if an architect designed a building two years before obtaining a claims-made insurance policy, and then six months later is sued for errors in the drawings, the claims-made policy will cover the defense of that claim and any damages. By contrast, an occurrence-based policy covers the architect only against acts that occur while the policy is in place.

The client is then a certificate holder, which means that your broker or insurance company will update the client if the policy is renewed, changed, or canceled. While the certificate holder has no rights to the insurance policy, being named an additionally insured third party on a policy means that the insurance company will defend you in addition to the insured. This is particularly important for architects when considering the general contractor or construction manager's general liability insurance.

While these three types of policies professional liability, commercial general liability, and workers' compensation cover the majority of liabilities that your firm might face, there are a few specialty types of insurance that help firms fill remaining gaps in coverage. Employment practices liability protects a firm if it faces litigation from an employee. Commercial automobile insurance should be obtained if any employees use company cars, rent cars for business purposes, or use their personal vehicles for business purposes.

The biggest one is the professional liability, it's an errors and omissions policy, so that covers anything that we might have done wrong in a drawing, or our specs were a little bit off, anything that's pertained to a project, that's what that's covered under that. We have general liability insurance, which covers anything in our office, physically, if it's, one of you guys come in here and you fall down, or one of our clients or a consultant, something happens to them, that's what that policy covers. We have a valuable papers insurance policy that covers in case of fire, or, you know, floods or something like that, because we store a lot of our plans here in this office and at outside storage, so that covers the replacement of those, what it would cost us to have them reprinted.

As soon as an architectural practice hires their first employee, the firm needs to begin to consider the employment laws that govern their relationship with their employees, and how it might differ from their relationship with independent contractors. The firm should also consider which laws become applicable after a firm reaches a certain size, and evaluate the status of the practice at regular intervals. For the purposes of the ARE, we'll focus on federal laws, but remember, in practice, you'll also need to comply with the specific laws of your jurisdiction.

Some discretionary terms included in our employee handbook include our vacation policy, which in increases over employment time. We have a moonlighting policy which refers to moonlighting and working outside of the office after hours and not for our office. The reason we have a policy regarding moonlighting is because it can expose our office to liability, as it can be unclear whether or not the employee's working under the capacity of the office or as an individual.

The Code of Ethics includes six canons covering the architect's obligations, which are further divided into ethical standards and rules. The ethical standards are structured as goals, whereas the rules are actionable items an architect must abide by. For example, the canon titled "Obligations to the Public" contains a standard that members should uphold the law, and a rule that members shall not knowingly violate a law while practicing architecture.

All 55 jurisdictions in the United States are members of NCARB, which publishes two model documents to standardized rules and regulations across jurisdictions, the Model Rules of Conduct and Model Law and Regulations. The Rules of Conduct focus on ethical issues, while the laws and regulations focus on acquiring and maintaining licensure. Each jurisdiction is free to adjust these model rules and laws.

And if you do, that's great, we'll make sure you can kind of move through that, but, if you'd like to grow and learn maybe about different construction types, or you would like to work on a church, we try to kinda make that happen and move people throughout the office that they're getting exposed to all of those different kind of situations, different disciplines, different construction types, project types. With the different roles that I get to be involved with at ADG, it actually kinda helps me decide which exams I want to aim for. Like when I'm doing more construction evaluation, I've actually looked at taking the CE exam next, because everything is fresh in my mind.

Section 2.1 of C401 or the Standard Form of Agreement Between Architect and Consultant contains the same language as in B101, section 2.2. It says that if the standard of care in the prime agreement, the B101, differs from what is stated in the C401, the standard set in the B101 will govern both relationships. You shouldn't rely on this clause, but rather, ensure that the same standard AIA language is being used in both contracts.

As an architect, you've really got to manage your client's expectations so having something set forth as a standard of care really explains what you're going to do and how you're going to do it. The AIA standard of care has been around for a long time and it's been through litigation and through court processes to be established and how an architect should perform. In Article 3, the contract covers the architect's scope of basic services.

In Objective 2.3, which makes up about 7% of the exam, we'll discuss the factors that affect the level of risk a project poses to the architect, namely the type of client and the type of project. We'll also discuss how to negotiate the contract with a client, and provide examples of common clauses that clients may want to alter in the standard AIA B101. A classic question for this objective might provide a suggested contract revision from the client and ask how the architect should respond.

These firms bring value to their clients' projects by solving more complex architectural problems than an efficiency-based firm might be able to, and they work on a wider range of project types. Experience-based firms leverage the accrued knowledge of its staff to design large and complicated projects of varying sizes and scopes. Their staffing chart is the most balanced of the three firm types: they have a proportional amount of staff members at each level.

The first section of a business plan describes the core purpose of the firm you'd use this section to ascertain the firm's goals and qualifications. The purpose section answers questions like, What are the core competencies of our firm? The business plan for an experience-based firm might answer this question by highlighting the founder's 20 years of experience designing healthcare projects.

ADG works with a wide variety of clients, both public and private institutional clients, we have longstanding relationships with several hospitals and universities in the area, so also a lot of developers, multi-family to hospitality, and even a little bit of industrial work too. Private clients do have some specific concerns that are distinctive from public clients that seem to wrap around how we deliver the project and the value that we bring to the project through the design and the construction, their speed to market concerns balanced with the durability and, often, their ability to sell the project at a later date. We certainly work with private clients that are the end users that they will have the building for a long time, and their concerns are still much around, kind of, the return on investment and the value they're getting out of it, ultimately.

The profit-loss statement and balance sheet provide information on where the firm currently is financially, whereas the annual budget and profit plan describe where the firm should be. Firm leadership can compare these two sets of documents to determine if the firm is on the right path. The profit-loss statement, or PL statement, represents the firm's financial health over a period of time, typically one month.

If we divide the total indirect expenses by direct labor, we arrive at 1.32 a healthy overhead rate. The firm's overhead rate doesn't include direct labor, but instead expresses the cost of running your business in terms of direct labor. The break-even rate builds on the overhead rate by adding in the direct labor costs this rate is the multiple of an employee's salary that you need to charge, plus the direct labor cost needed in order to break even.

The current ratio is a high level look at the balance sheet and is the ratio of two totals from the sheet: total assets divided by total liabilities. In this example, the firm's total assets are $1,187,000 and their total liabilities are $150,000. Divide assets by liabilities to arrive at a current ratio of 7.91.

Just like the PL statement, the last line of the annual budget subtracts fixed and variable expenses from the revenue section and adds the miscellaneous section to this total. The result, the expected net profit, can then be transferred to each month's PL statement in the year-to-date column. For example, the PL statement is for a period ending December 31st, so the year-to-date column will match the totals on the annual budget.

This method has the same benefit as the percentage of construction cost method: changes to the architect's fee due to added scope of the project are automatically accounted for. This method is also commonly used for interior fit-out projects. Perhaps the most common type of fee structure is the stipulated sum, also known as a fixed fee.

Okay, so when we usually do an hourly project it's because the client doesn't really know how much time we're gonna be spending on it and we really like to use those, because that also gives us some comfort that if the client decides to change their mind seven times we're gonna get paid for that and then they're also gonna get what they want at the end of the day. When we're preparing, let's say a normal fee proposal for any type of client, I've had a lot of success working with developers and those can get a little tricky, as they're developers and they obviously want to get as low a fee as possible, but the normal that we go out there with is usually somewhere between 3 and 4%, when we start to talk about what we would be getting for that type of project. A lot of the projects that we're doing are somewhere around 300 apartment units, and it may be around 400,000 square feet.

The previous two sections of C401 describe how the architect is responsible for making sure that the consultant provides the entire scope of work and performs according to the standard of care. If you read only those two sections, it sounds like the architect's entirely responsible for the consultant's work but that would be unfair to the architect. Remember, architects hire consultants to design portions of the project that they're not qualified to design, an admission that the architect is not an expert in those fields but rather a generalist in the design of buildings.

If the owner expects more, the architect should discuss adding that scope of work as a supplemental service. Of course, the architect will probably go through multiple iterations to arrive at one preliminary design, but they're only required to present one to the owner. When the owner approves that design, the architect prepares SD documents.

The architect is responsible to provide estimates of the cost of work at the end of each design phase, and Article 6 describes some parameters for what should be included in that cost, as well as what happens if the estimate doesn't meet the budget or the bids or proposals that are received. The cost of the work is the total cost to the owner to construct the project. The most obvious line item that's included is the actual cost of materials and labor to build what the architect designed.

The owner has the same rights to termination if the architect does not perform according to the contract, and the owner can also choose to terminate the contract for convenience, meaning for no particular reason at all, if they provide seven days' written notice to the architect. If the owner terminates for convenience, a termination fee could be imposed, if it's agreed to in advance while preparing the B101. The owner may also suspend the project.

To continue the previous example, if the client becomes unhappy with the direction of the project midway through schematic design and requests that you provide additional preliminary designs for consideration, you can point to a record of your communication that you'll only be providing one, as well as your documentation that the client approved this preliminary direction before you proceeded to schematic design. Clearly communicate what's included in the contract as a basic service this helps the client understand exactly what they're paying for and will receive in return. A good time to do this is at the time of contract negotiation, when you should review what's included and reiterate what you'll provide at each step in the process.

In traditional projects, the architect and the consultants each create their own set of drawings, so it's clear that they own the copyrights to their respective instruments of service, but since BIM models are created in collaboration with a team of consultants, who really owns the copyright to the work product? It's best practice to have an agreement with your consultants on BIM projects that the individual contributors to the model each own the work product of their respective discipline. The mechanical engineer owns their ductwork design, the landscape designer owns their exterior design, and so on.

Inevitably, during the course of your career, a client will want to either modify some clauses in the B101 or provide their own agreement altogether. In this video, we'll discuss some key clauses to be cautious of when negotiating these agreements. In any contract negotiation, each party brings their respective interests to the table, so it's helpful to first understand the key deal-makers and deal-breakers on each side.

Carefully evaluate potential projects by determining if the client, project type, and project delivery method combine to create an acceptable amount of risk for your firm, an amount that you're comfortable transferring, assuming, and controlling. You should also carefully consider whether your firm has the experience and capacity to execute the project before deciding to move forward and sign any agreements.

In Objective 3.1, which makes up about 5% of the exam, we'll discuss how to gather input about a project from both your client and the community where the project is located. We'll also cover the differences between requests for proposals, qualifications, and services, and provide guidelines on responding to these requests. A classic question for this objective might describe a new firm's strategy of responding to RFPs to obtain new work, and ask which strategies provide the most successful outcomes.

Since the goal of project meetings is receiving client input on ongoing design decisions, an effective agenda will facilitate this discussion and outline the questions the architect needs answered in order to move forward. An effective agenda is not simply a list of topics to be discussed. Providing relevant documents and detailing talking points for each topic will foster a more productive discussion and facilitate documentation.

When you're going out and you're gathering community input, it's really kind of more, what do they wanna see on your building site? Is it good, bad, ugly, any of the above? Each project is different and it depends on what type of people you need to gather community input from.

A request for proposal, or RFP, is a request from a potential client for your team's proposal to complete the scope of work for the project. This proposal is lengthy and will typically include things like your team's project approach, schedule to complete the work, fee structure, and project delivery method. The client may also request qualification information, such as background, experiences, and references.

In our practice, the delivery method that we typically use is a traditional design-bid-build scenario, where we work with our client to design a project for them, and we work through different phases, so schematic design, design development, and then permit documents, in order to provide them with the best opportunity to fully understand their project, as well as then to get a most realistic or accurate construction cost for that project, and so, that has been important to us in terms of being able to give them the most realistic design for the budget that they need to to meet in that method. Another process we employ is to engage a construction manager as advisor early on in the project. This construction manager as advisor provides budgeting information to our client and to our team earlier in the design phase, typically after schematic design, and then during design development, and then at the end of permit documents.

However, it is equally important that the terms and conditions of the owner/contractor agreement align with the owner/architect and architect/consultant agreements to avoid any confusion or potential disputes, even though the architect is not a direct party to the owner/contractor agreement. This is especially true when it comes to defining the roles and responsibilities of each party. Whether agreements are between owner and architect, architect and consultant, or owner and contractor, they define the goals, expectations, roles, and responsibilities of each party.

Most of our clients come to us knowing what type of delivery method that they want to use whether that's stipulated by some other institution or maybe they've just built buildings before and they know, "Hey, I wanna use a CM at-risk, and we already have that contractor and we're moving down the road." But if a client is kind of, "Hey, I don't really know about this." or this is the first time they've done it and we have to walk them through that there are a few different things. You know, are they really concerned about the price? You know, then maybe it's something that we say, "Hey, let's get a CM on board early," and let them kind of make sure that the price is out and get the schedule done.

Likewise, if the scope of services for the owner/architect agreement changes the modifications should be made in the architect/consultant agreement as well. You should also double check the owner/architect agreement for any requirements that might affect your agreement with the consultant, like project timelines, payment schedule, or deliverables. Be sure to review the C401 with the owner and with your legal counsel before it is finalized.

As far as a client referring you for business or getting repeat business from that client, I encourage our project architects and project managers to stay in touch with those clients, ask how the building is, check in on them, see how it's functioning now, and then just simply ask "Do you have anything coming up?" or "Is there anybody that you think we would be a good fit for that you've heard is doing a similar project?" For public relations and communications, we focus a lot on our website, on social media, on working with a client to get published in magazines, with press releases to show up in the news for public projects especially. And we always like to lead with the client so we want to showcase the client, especially if it's a public sector client or a non-profit client. For architecture firms, social media isn't so much about gaining new clients as it is brand awareness, so we're posting about our company culture.

Evidence-based design, or EBD, is a design methodology that uses research, observation, and data to answer a design question through the lens of a particular project, meet client goals, and refine design outcomes. Like the scientific method, EBD asks a question, gathers data, and analyzes the results in a cyclical process to continuously improve designs over the course of several projects. In this video, we'll define evidence-based design, look at the primary steps in the process, consider types of projects that best align with EBD, and consider EBD from a project delivery perspective.

Now, ultimately, we didn't do any of those projects, but it was an interesting opportunity to pursue work in totally different culture, in totally different conditions, in terms of building codes and construction methodologies that are used in different places. I think some of the legal issues that we would've had to deal with are what kind of legal corporate entity might we have to create to do business in China, or any other country? What are the labor laws, tax implications?

In Objective 4.2, which also makes up about 10% of the exam, we'll discuss the integrated project delivery method, and practice methodologies surrounding the use of architectural technology and sustainable design practices. A classic question for this objective might describe a project team who is considering using integrated project delivery, and ask what a potential problem could be with that delivery method. Let's dig in to Section 4!

For example, a firm registered in Jurisdiction C who receives work in Jurisdiction D may need to form an additional legal entity in Jurisdiction D to do that work. The firm now has two legal entities: one in Jurisdiction C and one in Jurisdiction D. These types of filing requirements are becoming increasingly common.

In this video, we'll discuss the relationship between consultants and architects, the impact of varying project delivery methods on consultants and how to select an ideal consultant team. We'll start with the relationship between consultants and architecture firms. Typically, architecture firms hire consultants to perform parts of the basic services that the architect has committed to providing per AIA B101, the Owner/Architect Agreement.

And the way that we're organized is we have kind of a front-end team that we call our design team and they're really handling a lot of the upfront parts of our project, which would be conceptual design, schematic design, programming they kind of take that first pass of, you know, what do we think this thing's gonna look like? At that point, then we have a bunch of our project teams and each one of those has a project manager, and those project teams also include project architects, some intern architects, as well as down to some of our BIM technicians, and they're really the team that does all of the production for the drawing set, so they're really pushing hard through DDs and CDs. And then we're really fortunate here at ADG that we have a construction administration department.

For the fees on a project, BIM kind of allows us to spend a little more time up front with schematic design to make sure that what we're giving the client is a better product. And then later down the road, with construction documents, it is allowing us to move much, much more rapid and keeps time and fees down. The drawback with BIM can be the user.

While our office hasn't yet had the opportunity to complete a project with the integrated project delivery method, there are principles in the integrated project delivery method that we like to use in any of our projects, two of them being early participation by key participants, as well as defining goals early on in the project. We encourage our clients and the design team to establish the project goals early on in the project, and we ask our clients to define what would make this a successful project for them early on, so that we all know what we're working towards. In support of that, we like to establish the key players early, and create a team early of architect, owner, and contractor as much as we can.

There are building technologies that we have helped bring into our area, such as modular construction. We've done a hotel project where all of the guest room units were manufactured several hundred miles away, brought on trucks, and hoisted into place by crane. Those two projects were a Hyatt Place hotel and Marriott AC, and they're in the Bricktown area of Oklahoma City.

We always recommend to the owners that we bring the agents into the design process somewhere once we have the building designed enough so that they can give us some evaluation of the controls and the level of controls that will be most beneficial to the owner, we like to have those commissioning agents involved. Generally, our role in that is more a coordination role and getting the benefit of that commissioning agent and developing our specifications and some of the detailed information that's going to go into the construction documents. That hasn't borne out to be something where we feel we need to charge more for it, but it's part of the value that we're bringing to the client by involving a building commissioning agent.

And finally in Section 4, we discussed practice methodologies: how different legal structures affect the level of risk that owners of a firm take on, as well as their tax treatment, how to manage consultants on design projects, and how integrated project delivery differs from other more common delivery methods. At this point, you should understand the various aspects of managing a firm beyond designing architectural projects, to ensure that you're providing the public with quality services that protect their health, safety, and welfare. PcM is known as a document-heavy exam, where you'll need a thorough understanding of the B101, C401, AIA Ethics, and NCARB Model Rules and Law.