CEC Subcontractor & Vendor Management 3 — Questions and Answers
Question 1: A vendor quotes a material price with a 90-day validity period. The project schedule shows delivery needed in 120 days. The estimator should:
- Use the quoted price and hope it holds
- Request a price extension or add an escalation contingency (Correct answer)
- Ignore the quote and use historical pricing
- Reduce the quoted price by 10% as a buffer
Correct answer: Request a price extension or add an escalation contingency
When delivery falls outside a quote's validity period, the estimator must either secure a price extension or include a material escalation contingency to protect the budget.
Question 2: A 'pay-when-paid' clause in a subcontract means:
- The GC must pay the sub within 30 days regardless
- The GC's obligation to pay the sub is conditioned on first receiving payment from the owner (Correct answer)
- The sub must pay vendors before the GC pays the sub
- Payment timing is at the discretion of the sub
Correct answer: The GC's obligation to pay the sub is conditioned on first receiving payment from the owner
Pay-when-paid clauses make owner payment a condition precedent to the GC's obligation to pay subcontractors, shifting payment timing risk to the sub.
Question 3: During bid analysis, the estimator discovers two subcontractor bids have identical pricing down to the dollar. This MOST likely indicates:
- Both subs are very efficient estimators
- Possible bid shopping or collusion that should be investigated (Correct answer)
- The pricing is market-accurate and both should be accepted
- One sub simply copied the other's scope and pricing is irrelevant
Correct answer: Possible bid shopping or collusion that should be investigated
Identical bids from competing subcontractors are a red flag for bid rigging or collusion, which violates competitive bidding ethics and potentially anti-trust laws.
Question 4: What is the primary purpose of a subcontractor prequalification process?
- To negotiate lower pricing before bid day
- To assess financial stability, experience, and safety record before inviting bids (Correct answer)
- To replace the need for performance bonds
- To determine the sub's preferred payment schedule
Correct answer: To assess financial stability, experience, and safety record before inviting bids
Prequalification screens subcontractors on financial strength, relevant experience, safety history, and bonding capacity to reduce the risk of default or poor performance.
Question 5: A subcontractor's Schedule of Values submitted with their first pay application shows front-loaded values. The estimator reviewing it should:
- Approve it to maintain good subcontractor relations
- Reject all pay applications until the sub completes the project
- Require rebalancing to reflect actual cost distribution before approving (Correct answer)
- Increase retainage to compensate
Correct answer: Require rebalancing to reflect actual cost distribution before approving
Front-loading inflates early payment amounts beyond actual work value, creating GC exposure if the sub defaults; rebalancing the schedule of values ensures payments match work in place.
Question 6: When a subcontractor requests a change order for extra work that was not directed in writing, the GC estimator should:
- Deny all claims without written direction
- Review the contract's notice requirements and evaluate the merit of the claim (Correct answer)
- Approve automatically to maintain schedule
- Deduct the amount from retainage
Correct answer: Review the contract's notice requirements and evaluate the merit of the claim
While written direction is typically required, the estimator must assess contract notice provisions and evaluate whether the extra work has merit before approving or denying the claim.
Question 7: Sole-sourcing a material or vendor means:
- Obtaining three competitive quotes and selecting the lowest
- Selecting a single vendor without competitive bidding (Correct answer)
- Requiring all subs to use the same supplier
- Splitting a purchase order across multiple vendors equally
Correct answer: Selecting a single vendor without competitive bidding
Sole-sourcing involves awarding a purchase to one vendor without competitive bidding, often justified by proprietary products, specialty expertise, or urgent timelines.
CEC Subcontractor & Vendor Management 3
A vendor quotes a material price with a 90-day validity period.
The project schedule shows delivery needed in 120 days.
The estimator should: