CGM Budget & Financial Management Flashcards

What is the primary risk of consistently underbidding a grounds maintenance contract to win business?

Answer: Inability to deliver the required quality or scope without financial loss

Underbidding means revenues will not cover costs, forcing the contractor to cut corners or absorb losses to honor the contract.

Which procurement method requires grounds managers to obtain at least three competitive quotes before purchasing?

Answer: Informal competitive bidding (three-quote rule)

The informal competitive bidding or three-quote rule is a common public procurement requirement ensuring fair pricing for smaller purchases.

A grounds department is evaluating two mowers: one costs $25,000 with $2,000/year maintenance, and another costs $18,000 with $4,500/year maintenance. After how many years does the cheaper mower become more expensive?

Answer: 3 years

The $7,000 upfront savings erodes at $2,500/year ($4,500 - $2,000), so after 2.8 years (≈3 years) the lower-cost mower costs more overall.

What is an encumbrance in a public-sector grounds management budget?

Answer: Funds committed by a purchase order or contract but not yet paid

An encumbrance reserves budget funds when a purchase order is issued, preventing those dollars from being spent elsewhere before the invoice is paid.

Which approach best helps a grounds manager justify a budget increase for preventive maintenance programs?

Answer: Presenting multi-year data showing lower total repair costs when preventive maintenance is performed

Multi-year data demonstrating that preventive maintenance reduces total repair expenses provides compelling, evidence-based justification for the investment.

In grounds management contracting, what is the purpose of a performance bond?

Answer: To guarantee the contractor will complete the work per contract terms or the bond covers resulting losses

A performance bond is a surety instrument that protects the project owner if the contractor fails to fulfill contractual obligations.