CCA Construction Procurement and Subcontracting 2 — Questions and Answers
Question 1: A construction auditor reviewing subcontracts should verify that they include flow-down clauses that:
- Allow the general contractor to self-perform all work
- Pass applicable prime contract terms (e.g., audit rights, insurance, prevailing wage) to subcontractors (Correct answer)
- Eliminate retainage requirements
- Grant subcontractors ownership rights to project materials
Correct answer: Pass applicable prime contract terms (e.g., audit rights, insurance, prevailing wage) to subcontractors
Flow-down clauses extend key prime contract obligations—such as audit rights, safety standards, and prevailing wage requirements—to subcontractors.
Question 2: Bid shopping in construction procurement refers to:
- Soliciting bids from many vendors
- A general contractor using a subcontractor's bid to pressure other subs to lower their prices after award (Correct answer)
- An owner requesting multiple price proposals
- Comparing bids across multiple projects
Correct answer: A general contractor using a subcontractor's bid to pressure other subs to lower their prices after award
Bid shopping is the unethical practice of using a subcontractor's price as leverage to obtain lower quotes from competitors, undermining competitive integrity.
Question 3: Which internal control helps ensure that a contractor does not award subcontracts to related parties without disclosure?
- Competitive bidding requirement with mandatory conflict-of-interest disclosure (Correct answer)
- Subcontractor bonding requirements
- Prevailing wage compliance monitoring
- Lien waiver collection
Correct answer: Competitive bidding requirement with mandatory conflict-of-interest disclosure
Requiring competitive bids and mandating disclosure of any relationships between the contractor and prospective subcontractors prevents undisclosed related-party transactions.
Question 4: A Disadvantaged Business Enterprise (DBE) or Minority Business Enterprise (MBE) participation requirement on a federally funded construction project is enforced through:
- Contractor self-certification only
- Documentation of solicitation efforts, subcontract awards, and payments to certified firms (Correct answer)
- Owner verbal confirmation
- Post-project auditing of the contractor's tax records
Correct answer: Documentation of solicitation efforts, subcontract awards, and payments to certified firms
DBE/MBE compliance requires documented evidence of good-faith solicitation efforts, awarded subcontracts, and verified payments to certified firms during and after the project.
Question 5: When auditing a construction project, an auditor finds that a subcontract was executed after work was already performed. This condition indicates:
- Efficient project management
- Failure of procurement controls allowing unauthorized commitments (Correct answer)
- A standard fast-track practice
- Owner-directed acceleration
Correct answer: Failure of procurement controls allowing unauthorized commitments
Executing subcontracts after work begins means commitments were made without proper authorization, creating legal exposure and a breakdown in procurement controls.
Question 6: Which procurement document allows an owner to evaluate both technical approach and price when scope cannot be fully defined in advance?
- Invitation for Bids (IFB)
- Request for Proposal (RFP) (Correct answer)
- Purchase order
- Notice to Proceed
Correct answer: Request for Proposal (RFP)
An RFP solicits both technical solutions and pricing, allowing evaluation on best value rather than price alone when scope is partially or flexibly defined.
CCA Construction Procurement and Subcontracting 2
A construction auditor reviewing subcontracts should verify that they include flow-down clauses that: