CCM Construction Cost and Time Management 5 — Questions and Answers
Question 1: A CM is evaluating a value engineering proposal that reduces first cost by $200,000 but increases annual maintenance costs by $30,000 over a 10-year life cycle. Using a simple payback approach, the net benefit is:
- A net saving of $200,000
- A net loss of $100,000
- A net saving of $100,000 but requires life-cycle cost analysis to confirm (Correct answer)
- A net loss of $30,000 annually
Correct answer: A net saving of $100,000 but requires life-cycle cost analysis to confirm
Simple payback shows $200K savings vs. $300K additional maintenance over 10 years = net loss; however, time value of money (life-cycle cost analysis) is required for a complete evaluation.
Question 2: What is 'free float' in CPM scheduling?
- Float shared among all activities on a path
- The time an activity can be delayed without delaying the early start of any successor (Correct answer)
- Total allowable delay before the project is late
- Float available only on critical path activities
Correct answer: The time an activity can be delayed without delaying the early start of any successor
Free float is the amount of time an activity can be delayed without affecting the early start date of any of its successor activities.
Question 3: A cost-plus-incentive-fee (CPIF) contract has a target cost of $1M, target fee of $100K, and a 80/20 share ratio. If actual cost is $900K, what is the contractor's fee?
- $100,000
- $120,000 (Correct answer)
- $80,000
- $180,000
Correct answer: $120,000
Under-run = $1M − $900K = $100K; contractor's share = 20% × $100K = $20K; fee = $100K + $20K = $120,000.
Question 4: During project execution, the owner requests an acceleration of the schedule. Which factor should the CM evaluate FIRST before committing to the new completion date?
- Contractor bonuses for early completion
- Impact on critical path activities and associated cost premiums (Correct answer)
- Owner's reasons for requesting acceleration
- Effect on subcontractor relationships
Correct answer: Impact on critical path activities and associated cost premiums
The CM must first analyze which critical path activities will require crashing or fast-tracking and calculate the associated cost premiums before committing to an accelerated schedule.
Question 5: Which document formally establishes the approved project budget and serves as the basis for Earned Value Management?
- Project Charter
- Performance Measurement Baseline (PMB) (Correct answer)
- Work Breakdown Structure (WBS)
- Schedule of Values
Correct answer: Performance Measurement Baseline (PMB)
The Performance Measurement Baseline (PMB) is the integrated scope, schedule, and cost plan against which project execution is measured in an EVM system.
Question 6: A contractor submits a Time Impact Analysis (TIA) for a two-week owner-caused delay. What must the TIA demonstrate to support a schedule extension request?
- That the contractor lost money due to the delay
- That the delay affected a critical path activity and extended the project completion date (Correct answer)
- That the contractor notified the owner within 7 days
- That resources were idled during the delay period
Correct answer: That the delay affected a critical path activity and extended the project completion date
A TIA must show, through network analysis, that the delay event impacted a critical path activity and that this impact extended the project's predicted completion date.
Question 7: What is the primary purpose of a 'contingency reserve' in a project budget?
- To cover the contractor's profit if costs exceed estimates
- To address identified risks with quantified cost impacts (known unknowns) (Correct answer)
- To fund scope additions requested by the owner
- To absorb inflation escalation over the project duration
Correct answer: To address identified risks with quantified cost impacts (known unknowns)
Contingency reserve is budget included in the cost baseline to cover identified risks (known unknowns) whose probability and impact have been quantified during risk analysis.
CCM Construction Cost and Time Management 5
A CM is evaluating a value engineering proposal that reduces first cost by $200,000 but increases annual maintenance costs by $30,000 over a 10-year life cycle.
Using a simple payback approach, the net benefit is: