Construction Management Exam 1

yeah

Who establishes the need for a project?

The Owner.

With a conceptual design, how can a conceptual cost estimate be made?

Historical Data.

The US national average square foot cost that can be found at different sites needs to be adjusted for which ones of the following factors? [Size, Location, Time, Oil Prices]

Size, Location, and Time.

The construction cost index in 2013 and 2015 was 7880 and 8549, respectively. Estimate the square foot cost of a building in 2015 and 2016, if its cost was $100/sq.ft. in 2013?

$108.49 and $113

Which of the following documents are included in the bid package? [Proposal Form, General Conditions, Bid Bond, Technical Specifications, Special Conditions]

Proposal Form, General Conditions, Technical Specifications, and Special Conditions.

Once the selected the contractor signs a contract he gets his certified check or bid bond back. True or False?

True.

If the unit price on the proposal form for rock excavation is $10/cyd of rock and records indicate that a total of 200 cyd of rock was excavated, how much will the contractor be paid?

$2000.

If the contractor gets bankrupt during the construction, the owner may use the [?] bond to complete the work.

Performance

Which of the following information would be included in the notice to bidders document? Multiple Choice.

- When and where the bids need to be submitted
- Where the bid package can be obtained from
- General description of the project
- Address of the construction site

All except the address.

The document used to submit the bid price to the owner is called a [?] form.

Proposal

General conditions contain generic information on subjects like bonds and insurance, contractor's responsibilities, changes in the work, and others. True or False?

True.

Generic articles of the selected general conditions document can be changed using the [?] conditions document.

Special, or Supplementary.

The Miller Act establishes the level of bonding required for federally funded projects and requires performance bonds to cover 100% of the contract amount. True or False?

True.

If the general contractor cannot pay its subcontractors for their work, how can the owner pay these subcontractors?

Payment Bond.

The amendement of a contract to allow a change in budget, scope, and/or schedule is called what?

Change Order.

What document indicates to the contractor that they must begin work?

Notice to Proceed, or Award of Contract.

Which of the following documents determines the zero day of the project for scheduling purposes?

Notice to Bidders
Proposal Form
Formal Contract
Notice to Proceed

Notice to Proceed

What is a contingency, and its purpose?

Money assigned by the owner to cover unexpected costs.

The Design-Bid-Build framework involves selecting any bidder of the owner’s choosing. True or False?

False, the lowest bidder must be selected.

In the case of a faulty design halting construction, the contractor may sue the designer. True or False?

False - the contractor and designer are not bound by contract, and each must sue the owner.

If an accepted bidder cannot afford to submit a Performance and Payment Bond, they must…

Pay their Bid Bond.

The Performance and Payment Bonds are typically worth what percentage of the bid price, each?

100%

Contractors are allowed to withdraw or modify their proposals during the bidding period. True or False?

True.

The typically 30-90 days period after the bid opening where the contractors are bound by their bids is called the [?] period.

Acceptance

The contractor should not start doing any work on site until a formal contract is signed with the owner.

False. Work should begin as soon as the Notice to Proceed is received.

Standard forms published by various agencies that include definitions and responsibilities of all the parties involved in construction are called [?] conditions.

General Conditions.

If the owner wants to modify the liquidated damages clause of the AIA general conditions document, what does he/she need to do?

- Issue the modification using the supplementary conditions
- Put the modified clause in the technical specifications
- Issue an addenda
- Request a change order

Issue the modification using the supplementary conditions.

Time extensions issued in the form of signed change orders are added to the beneficial occupancy date stated in the signed contract documents. True or False?

True.

Which of the following are not one of the procedures used at the end of the project?

- Inspection (walk trough)
- Prepare punch list
- Final inspection
- Sign change orders

Sign change orders

Design error or omissions cannot be used as a basis for change orders even if corrections increase the cost of construction. True or False?

False.

The procedure that allows the contractor to propose changes to the design with the approval of designer is called [?] engineering.

Value Engineering.

Which of the following would not be considered an excusable delay?

Acts of God
Labor strikes
Delays in the approval of shop drawings
Death of one or more of the contractors

Delays in the approval of shop drawings.

The amount hold back from the payments, to give the contractor an incentive to finish the job on time, is called…

Retainage
Progress payment
Escrow
Liquidated damages

Retainage

Arbitration is a more serious method of dispute resolution compared to mediation. True or False?

True.

If a subcontractor or vendor does not get paid during the project, he/she may file a [?] against the property.

Mechanic’s Lein

A time extension may be granted if work pauses in Kansas City due to snow in January.

False. This is reasonably forseeable.

What is the typical cost of rework in a project, compared to the total project cost?

10%.

Which of the following are not true for competitively bid contracts? Multiple Choice.

Lowest responsible price is used
Phased construction is possible
Contractor carries most of the risk
Two step process with an RFQ is used

Phased construction is not possible, and a two step process with an RFQ is not used.

Which of the following is included in a lump sum bid price? Multiple Choice

Direct cost of construction
Indirect job costs
Home office overhead
Change orders

All except Change Orders.

Lump sum competitive contracts do not allow the owner to change the design once the construction starts. True or False?

False.

Measurement of completed units on site is the basis for payment in unit price contracts. True or False?

True.

If the guide quantities on the proposal are suspected to be lower than actual quantities, the contractor may submit higher unit prices to increase his profit. True or False?

False.

If the owner agrees to make a mobilization payment at the beginning of a project, the contractor will…

decrease the bid price because he/she won't pay for mobilization
decrease the bid price because he/she won't have to borrow money
decrease the bid price because the loan he/she will have to get will get less
increase the bid price if he/she unbalanced the bid

Decrease the bid price because the loan he/she will have to get will get less.

Why may a mobilization payment by the owner decrease the financing cost of a project?

Typically the owner's cost of borrowing money is lower compared to the contractor
Due to increased value of an earlier payment
Because of inflation
Delayed payments won't have to be paid back

Typically the owner's cost of borrowing money is lower compared to the contractor.

Qualification based selection of contractors is an advantage of negotiated contracts and allows lowest possible price. True or False?

False.

Which of the following types of contracts require the contractor to carry the risk of increased costs

cost + percentage fee
cost + fixed fee
Target price with profit sharing
GMP

GMP

In a cost + percent fee type contract, the contractor has no incentive to keep the cost low. True or False?

True.

In a cost + fixed fee type of contract, the contractor would not mind increasing construction time and cost since costs are completely paid by the owner. True or False?

False.

In a cost + fixed fee and profit sharing scheme with a target price, the contractor will have to cover the cost of construction if it goes above the target price. True or False?

False.

In a contractor-led design build project delivery, the owner signs a contract with the designer after the he/she signs a contract with the contractor. True or False?

False.

In construction manager at risk project delivery, the construction manager becomes the general contractor at the 100% completion of the design by submitting a GMP. True or False?

False.

In DBB with multiple primes, the general contractor signs the contracts with subcontractors to allow phased construction. True or False?

False.

What project delivery method grants the owner the highest control and risk?

DBB with Multiple Primes

What project delivery method grants the owner the lowest control and risk?

P3 (Public-Private Partnership)

Which of the following delivery methods allows contractor's input during the design phase? Multiple Choice

DBB
DB
CMAR
Construction Manager Agency

DB and Construction Manager Agency.

In design build project delivery method the design-builder is typically selected using a two step process with an RFQ and RFP. True or False?

True.

Which of the following project delivery methods allow phased construction (fast track project delivery)? Multiple Choice.

DBB
DBB with Multiple Primes
DB
CMAR

All but DBB.

Which of the following is not a valid organizational structural for design build project delivery?

Contractor led design builder
Designer led design builder
Joint Venture
Multiple Primes

Multiple Primes

Which of the following are not an attribute of a joint venture?

Gathers financial and technical resources of two or multiple companies for a project
Exists for a fixed period of time defined by the duration of a project
Owner signs a single contract with the joint venture although the joint venture comprises of multiple companies
Joint ventures are not considered legal entities therefore contracts have to be signed by all members of joint ventures for validity

Joint ventures are not considered legal entities therefore contracts have to be signed by all members of joint ventures for validity

Which of the following is not affected by the legal structure of a construction company?

Taxation
Liability
% of successful bids
Ability to raise capital

% of successful bids

Which of the following structures can be owned by a single person?

Proprietorship
Partnership
Limited Partnership
Corporation

Proprietorship

Which of the following is not a valid attribute of a proprietorship?

No separation between individual and firm assets
Creditors cannot come after personal property of the owner
Credit is limited by personal assets of the owner
No separate taxation of the company

Creditors cannot come after personal property of the owner

Choose the correct attributes of a Partnership. Multiple Choice

 

Risk is divided between the partners equally

Profits and control is divided among general partners based on degree of ownership

There is no limit on liability for partners

Limited partners can increase assets of the company although they have no voice in management

Signature of all partners is necessary for a binding contract

Death of a partner ends the partnership unless there are clauses in the charter that makes arrangements for this situation

All except “Risk is divided between the partners equally” and “Signature of all partners is necessary for a binding contract”

Which of the following are not true for a corporation? Multiple Choice.

 

Chartered in a state with issuances of shares of stock

Number of total shares and number of shares hold by partners are arbitrary and does not establish level of ownership

Book value of a share is the net worth of corporation divided by the number of issued shares

Value of shares of publicly traded company depends strictly on the value of assets of the company

Corporations can raise capital by selling further stock

“Number of total shares and number of shares hold by partners are arbitrary and does not establish level of ownership”, and “Value of shares of publicly traded company depends strictly on the value of assets of the company.”

Which of the following is not true for a corporation?

They are subject to double taxation

The liability is limited to the corporation's assets

Death of a stockholder ends a closely held corporation

S-corporations are not subject to double taxation

Death of a stockholder ends a closely held corporation

Payments made by corporations to their stockholders from their after tax income are called [?].

Dividends.

Taxable income of corporations is calculated by subtracting their direct and indirect expenses from their revenues. True or False?

True.

The amount remaining after subtraction of direct expenses from total revenues is called [?].

Gross Profit.

Depreciation of an equipment decreases the tax of a corporation as much as a tax credit equal to the depreciation. True or False?

False.

If a company posts a Net Operating Loss (NOL) in given year, they are allowed to get back some or all of the taxes they paid in the last three years which is called carrying the loss back. True or False?

True.

When a walkthrough is performed and a punch list is made, items may be added to the punch list in future walkthroughs if more problems are found.

False.

Contracts may waive the right to sue in favor of arbitration.

True.

Describe the Construction Manager at Risk (CMAR) project delivery method.

A construction manager advises during preconstruction, then becomes the general contractor when construction begins.

CMAR is typically agreed upon at what time?

30% Design Completion

If the owner cannot agree with the designer on a final price or design, the owner may pay for the work done and use the developed design with somebody else. True or False?

True, via the Off-Ramp Clause.

A partnership ends upon the death of a partner, unless the initial charter is arranged otherwise. True or False?

True.

In a corporation, the CEO assumes ownership of all assets and liability. True or False?

False. The corporation is its own entity.

When calculating depreciation, Straight-Line is most commonly used in taxes, while MACRS is used to reflect the asset’s true life.

False. MACRS is used in taxes, while straight-line best reflects the asset’s true life.