Construction Contracts Test Questions with All Correct Answers

Construction Contracts Test Questions with All Correct Answers Contract Types: Lump-Sum - Answer-contractors agrees to perform a stipulated job of work in exchange for a fixed sum of money extra costs are taken out of contractors pocket be sure and have contingency funds owners prefer Contract Types: Unit-Price - Answer-based on estimated quantities of defined items of work and costs per unit amount of each of these work items total sum of money paid to contractor for each work item remains an indeterminable factor until completion of the project payment based on units of work actually done and measured in the field quantities of work cannot be accurately fore case at time of bidding or negotiation Contract Types: Cost-Plus - Answer-is usually not the first choice of owners contracts negotiated by Owner and GC total cost not known until completion contract will be amplified with more defined drawings Scope Contract - when drawings and specs are not complete Target Estimate - contractor's estimate based on preliminary drawings What are the two types of contracts for Cost-Plus contracts? - Answer-Scope Contract - when drawings and specs are not complete Target Estimate - contractor's estimate based on preliminary drawings What are the four Important Considerations for Cost-Plus contracts? - Answer-1. Definite and mutually agreeable subcontract-letting procedure should be arranged 2. Agreement on Contractor's Fee 3. Accounting Methods 4. List of reimbursable job costs to the Contractor Special Reimbursement Costs - Answer-Two Categories to be mindful of: 1. Contractor's General Overhead 2. Construction Equipment Contractor's Fee - Answer-must consider size of project, contractor's resources, and allowance for non-reimbursable costs (i.e. general overhead) Contract Types: Cost- Plus-Percentage-of-Cost - Answer-contractor's favorite a % of the cost of construction does not promote minimization of costs Contract Types: Cost-Plus-Fixed-Fee - Answer-favored by owners contractor's fee is established as a fixed sum of money promotes saving cost by contractor Contract Types: Incentive - Answer-motivates contractor to minimize costs and time bonuses and/or penalties (examples: bonus for each day of early completion and penalty for late completion, Contractor keeps 25% of saved costs) Contract Types: Guaranteed Maximum Cost - Answer-contractor guarantees cost will not exceed a total price $$$ above GMC out of GC's pocket Letter of Intent - Answer-aka Letter Contract letter is prepared for the signatures of both parties and state their intent to enter into a suitable construction contract at a later date when signed, the letter is binding on both parties and furnishes the contractor with sufficient authority to proceed with construction in the interim before the contract is formally executed includes settlement costs in the event the formal contract is never executed limits contractor to certain procurement and construction activities Contract Documents - Answer-Invitation to Bid Instructions to Bidders General Conditions Supplementary Conditions Technical Specifications Drawings Addenda Proposal Bid Bond Agreement Performance Bond Labor and Material Payment Bond The Agreement - Answer-document formalizing construction contract single instrument bringing together all contract segments by reference functions for the formal execution of contract includes completion time, liquidated damages, payments to contractor, and list contract documents Progress Payments - Answer-contractor must make application for a progress payment a prescribed number of days before it is due, or upon completion of designated phases of the work