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They offer a bird’s eye view of construction sites. They provide breathtaking photographic opportunities for architects looking to showcase their work. And they’re fun to fly. However, while they may be intriguing tools for architects and engineers, drones open up the design firms that use them to many possibly unanticipated risks. These days, obtaining a drone is as simple as stopping at your local WalMart, but all drones are not created equal, nor are all drone pilots equally skilled and certified.

Victor O. Schinnerer’s Risk Management Blog recently offered an overview of this issue. Should your design firm use a drone in your administration of contracted services? Read on:

“Professional service firms have to be aware that the use of drones is not a simple transition in the process of observing the work on a project site. As with web cameras, drone cameras often produce far more images than are used in the evaluation of a project. If not properly denoted in a contract, the scope of the firm’s services could include the use of all the available images as part of the firm’s duty to observe and evaluate the project as part of construction contract administration duties.

“Additionally, while licensed drone operators are undoubtedly careful about having general liability insurance that protects others from their negligence in aerial activities, and follow the FAA’s rules and guidelines, many firms using drone photography are doing so as amateurs. Turning hobby activities into commercial uses is likely to be unlawful, dangerous, and uninsured.”

Continue reading Drone use can put firms at risk beyond their knowledge by Frank Musica

Raising the Federal Gas Tax: A Debate

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America’s federal highway system–once a source of great national pride–is disintegrating. Why? For one thing, it’s been 20 years since the Federal Gas Tax was last raised. President Ronald Reagan increased the tax to just over 18 cents a gallon, reminding the American people that the federal highway system required an ongoing source of income for maintenance. The Highway Trust Fund–where the Federal Gas Tax is collected–provides funding for road, bridge, and mass transit projects across the country. Today, it’s running out of money. Should this tax be raised?

It’s an important question, and if you’re not sure where you fall on the issue, here’s a fun place to start…

Intelligence Squared US hosted a debate in October wherein a panel of four experts, two on either side, addressed this motion: Raise the Federal Gas Tax to fund infrastructure.

“There are many arguments for a leaner fund, among them, the idea that scaling back the program would force government to prioritize projects and eliminate waste. But proponents of the tax say that it still plays a vital role in supporting infrastructure, and that perpetual shortfalls have led to construction delays and uncertainty. Should Congress raise the federal gas tax?”

Listen to the podcast for free either on the website or download via iTunes.

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The appropriate classification of employees is a frequent source of confusion for design firms, usually coming up around the renewal of a firm’s Workers’ Compensation policy. It is an issue ripe with risk on an Employment Practices level. Recent court rulings in Arizona and Utah have resulted in construction firms paying hundreds of thousands of dollars in back wages, damages, and penalties.

As explained on the Schinnerer Risk Management Blog:

In an age of rising benefit costs and other constraints on the operations of professional service firms, some firms are turning to a range of tactics to reclassify workers to take them off the formal payroll and, therefore, lower their costs and administrative burdens. However, doing so may subject the employer to state and federal employment law fines and penalties.

All this is happening against the backdrop of a broader shifting of risk from employers to workers, who are shouldering an increasing share of responsibility for everything from health insurance premiums to retirement income to job security. While the future might present a model where everyone is truly an independent contractor and neither those actually providing services nor those using the services have any continuing or controlling interest in each other, such a situation does not currently exist and any firm that thinks it can avoid employment responsibilities, tax obligations, or employment practices liability needs to carefully consider alternatives to hiring workers.

Regulators and courts have increased their scrutiny of the relationship between business entities and independent contractors. Alleged misclassification of workers has been one of the primary battlegrounds of this shift, leading to high-profile lawsuits.

For decades, some professional service firms have shifted work from employees to independent contractors to cut their overhead and labor costs and, at times, to qualify for special government procurement assistance. Often, this has been accomplished by relabeling workers and slightly altering the conditions of their work. And some professional service firms have simply ignored regulatory and tax guidance and “informally” used the services of professionals and clerical workers as “consultants” or “leased personnel” or “temps.”

Now, however, businesses—including design firms and construction contractors—are turning to other kinds of employment relationships, such as setting up workers as owners of limited liability companies (LLCs) in an attempt to shield the businesses from tax and labor statutes. In response, some state and federal agencies are aggressively clamping down on such arrangements, passing local legislation, filing briefs in workers’ own lawsuits, and closely tracking the spread of what they see as questionable employment models.

Visit the Schinnerer Risk Management Blog to continue reading.

If you have questions about the appropriate classification of your employees prior to your next workers’ compensation renewal, contact your local a/e ProNet broker. We’re happy to help!

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Signs of recovery in the American housing market–in architecture, engineering, construction, real estate–are increasing. Yet, in 2014, the market saw a new, disappointing record:

The number of homeowners under the age of 35 hit its lowest point ever.

Home ownership has long been synonymous with the American Dream. But where are the young people in this game? Some have turned to alternative housing solutions.

Pacific Standard magazine recently blogged the experience of Luke Iseman, a 31-year-old graduate of the Wharton business school, who lives in a white shipping container on a small lot in West Oakland. Driven from the traditional urban housing market as a renter by exorbitant rates in San Francisco, and holding more than $60,000 of student loan debt, Iseman is putting his burgeoning business savvy to good use for himself and others with the establishment of an alternative housing start-up called Boxouse. Continue reading “Boxouse: Young Americans Turn to Alternative Housing”

Blog Love: ArchNewsNow – Nuts & Bolts

nutes_and_boltsNuts+Bolts is a “an exclusive ArchNewsNow monthly series to provide A/E professionals with practical tips for a more successful, profitable practice.” All ten articles currently listed are worth a read, and we hope the series is slated to continue. The authors are architects, consultants, insurance professionals, and financial advisers, all of whom offer a timely perspective on the state of the design industry. After perusing the library, here are four posts with the potential to help you and your firm in a risk management capacity:

#1 Nuts + Bolts: Mission Possible: Increase Your Value Without Lowering Your Fees

In this economic climate – or even in a good market – it may be tempting to lower your fees to stay competitive. However, lowering your price is not something you should immediately consider when faced with reduced revenue. As an alternative, you should seek to inject as much value into your services as possible. This will allow you to increase the intrinsic worth of your services, encouraging your clients to pay an appropriate fee for quality, not just quantity. But if you’re convinced that lowering your fees is a solid strategy that will boost your bottom line, think again. Here are a few reasons not to.

#2 You Can’t SELL If You Can’t TELL

You went to architecture school to become a good communicator…right? I’ll take a risk and say that chances are you probably didn’t. But if you want to be a great architect, engineer – or any other kind of professional – you need to know how to communicate clearly and effectively. You simply can’t avoid it. You communicate every day, whether you are meeting with colleagues in your office, talking to a client on your cell phone, e-mailing a consultant, or tweeting your followers. While we live in the digital age, and communication may seem to flow easily, there’s a lot more room for error. We’ve all had that gut-wrenching feeling of hitting the “send” button on an e-mail that had the wrong content or went to the wrong person.

#6 Changing Habits: The Secret to Successful Time Management

No time to grow your business? Learn to set aside time, clearly identify goals, and change bad habits, and you’ll transform your business development efforts from a waste of time into a productive enterprise. Most budding architects are initially attracted to the design side, rather than the business side, of their profession. As a result, many architects never develop the skills necessary to build their businesses. But just as design and project management are part of your daily routine, you should set aside time for business development as well. How do you make time for business development when you’ve been avoiding it or aren’t sure how to fit it into your day-to-day practice? The trick is to fundamentally and permanently change your habits. This sounds daunting, but you can achieve it if you follow these practical steps.

#8 Best Friends Don’t Make the Best Partners

In popular culture (and at most architecture schools) the architect is often portrayed as a lone figure, from Howard Rourke in Ayn Rand’s seminal work, The Fountainhead, to Frank Lloyd Wright, to Frank Gehry. Most people perceive architects to be creators working alone in the dark. Contrary to popular belief, it takes more than a single artist to make a great building. Most architects know that. What’s less obvious is that, in reality, most successful architectural practices are not sole practitioners but partnerships.

About the Authors of the Nuts+Bolts Series:

Michael S. Bernard, AIA, Principal, Virtual Practice Consulting

Mary Breuer leads Breuer Consulting Group

Founder of integrated communications firm Hausman LLC, Tami Hausman

Donna L. Maltzan is a business development trainer, facilitator, consultant and coach

Michael M. Samuelian, AIA, AICP, vice president at Related Companies

Stanley Stark, FAIA, LEED AP, a New York City-based architect who has held senior leadership positions with major firms including HLW, HDR, and Francis Cauffman

Steve Whitehorn, managing principal of Whitehorn Financial Group, Inc., the creator of The A/E Empowerment Program®

Podcast Love: The Entrepreneur Architect

2015Since 12:01 a.m. on Thursday morning, some of us have resolved to run a 5K by Easter, or to hike a few of Colorado’s famous “Fourteeners,” or to try every brewpub in Portland before 2015 is out. Some have decided to spend more quality time with our families, or learn how to use a food processor, or solve the NYT Sunday crossword at least once without help. These are all excellent personal goals for the new year. In case you’re looking for similar inspiration for New Year’s Resolutions for your business, we thought we’d point you to Mark LePage’s The Entrepreneur Architect Podcast.

The following is an excerpt from the blog post accompanying a recent episode titled Top 10 Ways Architects Can Earn More Money:

“As a requirement for licensure, registered architects are responsible for the health, safety and welfare of every occupant in every project we design. Like any small business, architects must pay the typical operating expenses required to remain buoyant, such as utilities, professional service fees, consultants’ fees, insurances and several other overhead expenditures. But wait… for architects, there’s more. To protect us from the liabilities inherent in our responsibilities as licensed professionals, most architects also purchase an additional Professional Liability insurance policy costing several thousand dollars each year.

“Then, there’s that little thing called profit.  Every business, including architecture firms (yes, its true!), must earn a profit. It’s one of the rules to “the game”. In order to continue pursuing our success as architects, we must not only cover our expenses and take home a salary, we must make enough to reinvest into the business.

“Most sole proprietors and small firms I know, struggle to meet the minimum requirements of operation. Forget about profit.

“Simply stated… Architects just don’t make enough money.

“On this episode of The Entrepreneur Architect Podcast, I am sharing my top 10 ways architects can earn more money.”

New year; new bottom line. We hope this resource helps you in your endeavors this year. All the best to our readers in 2015!

About the Podcaster:

Mark R. LePage, AIA, a licensed architect in the State of New York, is the Partner in Charge of Operations at Fivecat Studio Architecture, a leading residential architecture firm located in Westchester County, New York (about 40 minutes north of New York City). Mark and his wife, architect Annmarie McCarthy, launched Fivecat Studio in 1999 at the age of 29 with no money and no clients. Together they have grown the regional firm to a staff of six, managing projects worth more than $10 million. Mark is the founder of Entrepreneur Architect, this online education resource inspiring architects to build better businesses. He launched the blog in 2007 as a personal project to document ideas for business success. In 2012, Mark relaunched Entrepreneur Architect at EntreArchitect.com and introduced the The Entrepreneur Architect Podcast. Working to become an influential force in the profession, Mark’s mission is to teach sole proprietors, small firm architects and students the importance of business success in the profession of architecture.

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The following is a re-post from the Southeast Construction Law Blog:

Contractors, subcontractors, and A&E firms all face differing levels of liability on construction projects. Managing that exposure is a key to maintaining profitability and ensuring your business is protected.

One issue I consistently see in my practice is companies taking too much liability for their scope of work on a project. For example, what should the liability of a subcontractor be who has a small $25,000 subcontract on a $15 million project? Should the subcontractor be liable for any and all damages?

Many subcontract agreements state that subcontractors are responsible for “any and all costs” caused by a subcontractor’s delay or interference with any portion of the work. While each party should be liable for damages it causes, this determination is never as clear as it seems.

General contractors (and sometimes owners) often control the timing, means, and methods of how a subcontractor performs its work. In those situations, it is difficult for me to explain to a subcontractor that it is liable for everything it does on site. Even so, many subcontractors’ feet are held to the fire for delay costs in the hundreds of thousands or millions of dollar range when their contract was initially very small.

Architecture and engineering firms face a similar dilemma. Many times A&E firms are brought into lawsuits in the millions of dollars when their scope of work may have been small. I have seen a civil engineer sued for $12 million when it performed a $1,600 staking job on a project.

In addition, A&E firms face a different challenge. Even if an architect or engineer prevails on the claim, the A&E firm has likely spent thousands of dollars in attorney’s fees, all chargeable to the A&E under the deductible in the Professional Liability Insurance policy. Continue reading “Are You Accepting Too Much Liability on Your Construction Project?”

Measuring the Success of Your A/E Firm

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We recently stumbled upon Using Four Metrics to Analyze Performance of a Professional Services Firm, an article by June Jewell, President and CEO of Acuity Business Solutions.

An excerpt:

Sometimes the day to day demands of running a professional services business can be overwhelming, especially for creative and technical entrepreneurs and project managers that do not have a financial background. Trying to stay on top of administrative responsibilities, hiring and managing staff, and keeping clients happy can make it difficult to really understand how the firm is performing. Many leaders also struggle to understand and analyze reports and financial statements, and determine where to focus their attention to ensure success.

While there are many important metrics and reports that you can look at each month to gauge your company’s health and profitability, you can get a pretty good understanding of the performance of the business by looking at just four metrics – the Win Rate, Utilization Rate, Project Profit Margin, and the Average Collection Period (or Days Sales Outstanding). By looking at just these four key performance indicators, you can simplify the process of analyzing how projects are being executed and managed, and help your project managers and leaders focus their attention where it will get the most benefit.

Jewell goes into a brief explanation of each of these four metrics, so we invite you to visit her blog and read on. Some of the information might not be new to you, but it’s always good to get a reminder. Jewell is also the author of a new book: Find the Lost Dollars: 6 Steps to Increase Profits in Architectural, Engineering and Environmental Firms. You can download a free chapter on her website.

(Psst! This is anecdotal evidence that Twitter can be excellent resource for design professionals. Have you followed @aeProNet yet?)

There are probably many ways for architects to showcase their individual and firm portfolios on the interwebs, but Archilovers has to be one of the best!

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This social media network, similar to Facebook, offers architects the unique opportunity to manage an individual profile alongside a professional firm profile. Its online library of contemporary architecture projects is extensive and easily searchable. Alongside the work of internationally renowned architects, you’ll see the accomplishments of smaller design offices and individual designers featured with equal pride.

But Archilovers wants to change the way architecture and design are communicated and consumed. That’s why projects can also be organized (and searched) by Elements, Materials, and Themes! Continue reading “Archilovers: A Fresh, Innovative, International Network for Architects”