CCA Construction Contract Types and Risk Management 3

Question 1

When auditing a unit price contract, which risk is most important to monitor as the project progresses?

Accepted Answer

Quantity overruns that significantly increase the total contract value

Answer

Unit price contracts pay per unit of work completed, so quantity overruns can drive total project cost far above the engineer's estimate, creating budget exposure for the owner.

Question 2

Under the Spearin Doctrine, an owner who provides defective plans and specifications to a contractor is responsible for:

Accepted Answer

Losses resulting from contractor reliance on those defective documents

Answer

The Spearin Doctrine holds that when an owner supplies design documents, it impliedly warrants their adequacy, making the owner liable for damages caused by defects in those documents.

Question 3

In a Construction Manager at Risk (CMAR) contract, the construction manager typically provides a Guaranteed Maximum Price at which project phase?

Accepted Answer

Completion of design development or construction documents

Answer

The CM at Risk typically provides a GMP once design is sufficiently complete (usually at 60-100% construction documents) to accurately price the work.

Question 4

Which insurance type protects an owner against losses arising from contractor-caused property damage during construction?

Accepted Answer

Contractor's general liability insurance

Answer

Commercial general liability insurance covers third-party bodily injury and property damage caused by the contractor's operations, protecting the owner from those claims.

Question 5

What is the purpose of a liquidated damages (LD) clause in a construction contract?

Accepted Answer

Pre-establish the daily monetary damages for late project completion

Answer

Liquidated damages clauses establish a predetermined daily rate for late delivery, avoiding the difficulty of proving actual damages from project delays.

(CCA) Certified Construction Auditor Practice Test

(CCA) Certified Construction Auditor Practice Test

CCA Construction Contract Types and Risk Management 3