CEC CEC Risk Management & Contingencies 2

Question 1

Which contract type transfers the most cost risk to the contractor?

Accepted Answer

Lump sum (fixed price)

Answer

A lump sum contract fixes the contract price, making the contractor responsible for all cost overruns beyond the agreed amount.

Question 2

Escalation risk in a multi-year construction project is best managed by the estimator through:

Accepted Answer

Applying published escalation indices and including escalation allowances in the estimate

Answer

Published escalation indices (e.g., ENR cost indices) provide a data-backed basis for projecting future material and labor price increases, which should be built into the estimate.

Question 3

In risk management, the expected monetary value (EMV) of a risk event is calculated as:

Accepted Answer

Probability × Impact cost

Answer

EMV equals the probability of a risk occurring multiplied by its financial impact, giving a dollar-weighted measure for comparing and prioritizing risks.

Question 4

A 'risk register' in construction estimating serves primarily to:

Accepted Answer

Document identified risks, their likelihood, impact, and assigned owners for the project

Answer

A risk register is a structured log of project risks including probability, potential cost impact, mitigation strategies, and the party responsible for each risk.

Question 5

Which of the following is a risk transfer mechanism commonly used in construction contracts?

Accepted Answer

Requiring subcontractors to carry and name the GC as additional insured on their insurance policies

Answer

Requiring subcontractors to name the general contractor as an additional insured transfers a portion of liability risk from the GC to the subcontractor's insurance.

(CEC) Construction Estimator Certification Practice Test

(CEC) Construction Estimator Certification Practice Test

CEC CEC Risk Management & Contingencies 2