Construction Business and Law Notes

Overhead Estimation

  • The best method for estimating overhead is to use historical data.

New Hire Reporting

  • New hire information must be reported to the new hire operations center within 20 days.
  • The new hire reporting group must be notified within twenty days of hiring a new employee.

Licensing Board

  • The purpose of the licensing board is to protect the public.

SUDA Rate

  • The beginning SUDA rate is 1.2%.
  • A new employer's SUDA rate is 1.2%.

Employment Questions

  • Become familiar with questions that an employer may ask a potential employee.

General Contractor License

  • A general contractor's license is required for contractors who bill projects costing more than 30,000$.

FLSA Requirements

  • Become familiar with FLSA requirements.

Minimum Wage and Overtime Violations

  • The penalty for willful violation of minimum wage and overtime requirements is 1,100 per violation.
  • Employers who knowingly violate the minimum wage or overtime requirements are subject to a penalty of 1,000 per violation.

I-9 Form

  • The I-nine form must be completed within three days of employment. It proves an employee is a legal alien and must be retained for five years.

ADA Requirements

  • ADA requirements apply when there are 15 or more employees. ADA requirements do not apply to employers with fewer than 15 employees.

Federal Lead Regulations

  • Failure to comply with federal lead regulations has a maximum penalty of 25,000 per day.

OSHA Records

  • OSHA records should be retained for five years.

Business Organizations

  • Become familiar with advantages and disadvantages of the different business organizations.
  • Question: Which business organization would continue to exist after the demise of the owner? Answer: Corporation.

Workman's Compensation Insurance

  • Workman's compensation insurance is required if the employer has three or more employees.
  • The employer pays for workman's compensation coverage.

Lead Paint

  • Lead paint has not been produced since 1978.

Safety and Profit

  • Increased safety results in more profit.

Emergency Action Plan

  • An employer is not required to have a formal emergency action plan unless he has more than 10 employees.
  • A formal emergency action plan is not required if the employer has 10 or fewer employees.

OSHA Injury Records

  • An employer is not required to keep OSHA injury records unless he has more than 10 employees.
  • OSHA injury records are not required if the employer has 10 or fewer employees.
  • Key OSHA reports for five years. The maximum OSHA fine is 70,000

Employee vs. Independent Contractor

  • Become familiar with the IRS guidelines to determine if a worker is an employee or an independent contractor.
  • Form SSH should be filed to determine if a worker is an employee or an individual contractor.

Methods of Depreciation

  • Become familiar with the different methods of depreciation.

General Partnerships

  • General partnerships require formal agreement between the partners.
  • Partnerships are automatically dissolved if one of the partners leaves the partnership.
  • General partnerships need a formal agreement.
  • All partners are liable for the total debt of the partnership.
  • Each partner of a general partnership is totally liable for all debts of the partnership.

Source Documents

  • Source documents include any item that proves that a transaction took place.
  • Examples of source documents are check stubs and copies of invoices.

Financial Statements and Accounting Terminology

  • Become familiar with the different financial statements and the associated accounting terminology.

Statement of Cash Flows

  • The statement of cash flows examines the cash generation and distribution activities of the firm.

Financial Ratios

  • Become familiar with the different financial ratios.

Cash Method of Accounting

  • The cash method of accounting does not match revenues with expenses.
  • While using the cash method of accounting, no attempt is made to match revenues with expenses.

Social Security Rate

  • The Social Security rate for employees is 6.2%.
  • The social security rate is 6.2%, and the Medicare rate is 1.45%.

W-4 Form

  • The W-four form must be completed prior to making a federal withholdings deposit.

Limited Partner Liability

  • A limited partner's liability is equal to the amount they invest.
  • Limited partners are only liable for the amount that they invest in the partnership.

Labor Liens

  • Labor liens are filed against real estate.
  • A lien must be filed within one hundred and twenty days of last furnishing labor and materials.
  • A request for a judgment to enforce the lien must be filed within one hundred and eighty days of the last furnishing of labor and materials.
  • A lien is filed with a clerk of the superior court in the county where the real property is located.

Federal Identification Numbers

  • Federal identification numbers are assigned by the IRS.

Types of Taxes

  • Be familiar with the different types of taxes.

Employer's Tax Guide

  • Another name for the employer's tax guide is Circular E.

FUTA Taxes

  • Report FUTA taxes using form nine forty.
  • The feudal rate is eight tenths percent and is paid with form nine forty.

1099 Form

  • Use form ten ninety nine to report payments to subcontractors.

Business Plan

  • Preparation of a business plan is the single most important task to ensure the success of a business.
  • Become familiar with the elements of a business plan.

Business Names

  • Business names must be registered.

Business Structures

  • Become familiar with the advantages and disadvantages of the different business structures.

Insurance Policies

  • The different types of insurance policies offered a contractor are: workman's compensation, motor vehicle coverage, property insurance, and general liability.
  • Become familiar with the different types of insurance coverage.
  • Become familiar with the different types of insurance coverage, specifically what is included in comprehensive general liability coverage.

Completed Operations Coverage

  • Completed operations coverage covers defective products when they are out of your hands or completed work away from your premises.

Parties to a Bond

  • The three parties to a bond are the contractor, the owner, and the bonding company.
  • Be familiar with the different types of bonds.

Bid Bonds

  • Bid bonds guarantee that the contractor will enter the contract with the owner for the bid amount.

Bidding

  • Bidding is not considered a construction management activity.
  • Bidding is not considered part of contract management.
  • Bid documents include the following: Invitation to bid, instruction to bidders, and bid forms.
  • Become familiar with the list of items that are considered bid documents.

Estimate Components

  • The four parts of an estimate are: labor, equipment, material, and overhead.
  • Labor should be estimated by the type of activity.

CGL Insurance Exclusions

  • CGL insurance does not include vehicle liability, workman's compensation, or employer's liability.

Construction Project Estimation

  • The most accurate method to estimate a construction project is the quantity survey method, which is also known as the detail survey method.
  • The most accurate method to estimate a construction project is the quantity takeoff method.
  • A computerized cost system is used to shorten the time required to produce an estimate.

Theft Minimization

  • Theft can be minimized by keeping material inventory levels as low as possible.
  • Controlling deliveries helps minimize theft loss.

Project Overhead

  • Project overhead is also known as job overhead, and also as direct cost.

Construction Project Scheduling

  • The two methods to schedule a construction project are the bar chart and the critical path method, also known as CPM.
  • Become familiar with both methods of scheduling a construction project.

Critical Path Method Terminology

  • The term float is used with the critical path method.

Purpose of Governmental Agencies

  • The purpose of all governmental agencies is to protect the public.

MSDS Sheets

  • The distributor of chemicals used in construction should provide the MSDS sheets.

Water Quality

  • Sediment is the main factor that affects water quality.
  • Construction runoff is 10 to 20 times more than agricultural runoff.

Clean Water Act

  • Phase two of the Clean Water Act covers construction activities from one to five acres.

Dust Elimination

  • Use of water is the best method to eliminate dust on a construction project.

Employer Guidelines

  • Refer to Chapter seven for federal employer guidelines and Chapter 12 for state employer guidelines.

Fair Labor Standards Act

  • The Fair Labor Standards Act covers minimum wage, overtime pay, child labor, and record keeping only.

Federal Deposit

  • A federal deposit includes all federal income tax withheld, plus the employer's and the employee's contribution for social security and Medicare.
  • Form 8,109 is turned into the federal depository along with the deposit.

Payments to Government Agencies

  • All payments to government agencies that fall due on Saturday are actually due on the next business day.

Work Week

  • A work week includes one hundred and sixty eight hours.

Exempt Employee

  • An exempt employee is exempt from abiding by the Fair Labor Standards Act for overtime requirements.

Labor Burden

  • Be familiar with the items included as labor burden.

Contingency

  • Know the definition of contingency and become familiar with project overhead and company overhead.

Markup vs. Margin

  • Understand the difference between markup and margin.

Job Cost System

  • Learn the benefits of using a job cost system.

Written Contract

  • Note the advantages of a written contract.

Working Capital

  • Working capital is defined as current assets minus current liabilities.

Debt Equity Ratio

  • The debt equity ratio is calculated by dividing the total liabilities by the net worth.

Profit Margin

  • The formula for calculating the profit margin is: divide the net profit by the total revenues.
  • Profit Margin = \frac{Net Profit}{Total Revenues}

Required Elements of a Contract

  • The required elements of a contract are agreement and consideration.

Offer Elements

  • Become familiar with the items that are included in an offer.

Breach of Contract

  • Become familiar with the cause of breach of contract, the provisions to limit risk in a contract, and an indemnification clause of a contract.

Percent of Completion Method

  • The percent of completion method used with long term contracts depends on an accurate estimate.

Types of Contracts

  • Become familiar with the different types of contracts and with the different contracting methods.

Basic Accounting Equation

  • The basic accounting equation is: assets equal liabilities plus net worth.
  • Assets = Liabilities + Net Worth $$

Change Order

  • Be familiar with the steps required to produce a change order.

Contract Interpretation

  • If the intent of a statement in a contract cannot be interpreted, the judgment is made against the party who wrote the contract.

Business Trusts

  • Business trusts are created to hold or protect property or beneficiaries.

Negotiation

  • Negotiation is not considered part of a formal contract.

Formal Contract

  • The main reason for having a formal contract is to prevent disputes.
  • Construction contracts do not have to be in writing to be enforceable.

Gantt Chart Weakness

  • The primary weakness of the Gantt method of scheduling is that it does not show the dependency of activities to each other.
  • The primary weakness of a bar chart or a Gantt chart schedule is that it does not show any dependencies.

Counter Offer

  • A counter offer avoids an offer.

Project Manager Responsibilities

  • Become familiar with the responsibilities of a project manager.