CHC CHC Cost Management & Contract Administration 1 — Questions and Answers
Question 1: A preliminary cost estimate prepared during schematic design is known as:
- A bid
- An order-of-magnitude estimate (Correct answer)
- A guaranteed maximum price
- A final budget
Correct answer: An order-of-magnitude estimate
An order-of-magnitude estimate is a rough preliminary estimate prepared early in design when project scope is not yet fully defined, typically within +50%/-30% accuracy.
Question 2: The CSI MasterFormat divides construction costs into:
- Five project phases
- Numbered divisions organized by work type (Correct answer)
- Alphabetical trade categories
- Geographic regional categories
Correct answer: Numbered divisions organized by work type
CSI MasterFormat organizes construction specifications and cost data into numbered divisions based on work type, providing a universal standard framework for estimating.
Question 3: What percentage contingency is typically applied to healthcare construction cost estimates at the schematic design phase?
- 1–2%
- 5%
- 15–25% (Correct answer)
- 50%
Correct answer: 15–25%
A contingency of 15–25% is typical at schematic design for healthcare projects due to the complexity of the work and undefined scope at early stages.
Question 4: In healthcare construction budgeting, 'hard costs' refer to:
- The cost of land acquisition
- Architectural and engineering professional fees
- Physical construction labor, materials, and installed equipment (Correct answer)
- Permitting and legal fees
Correct answer: Physical construction labor, materials, and installed equipment
Hard costs are direct construction costs including labor, materials, and equipment physically incorporated into the completed project.
Question 5: Soft costs in a healthcare construction project budget include:
- Concrete and structural steel
- Mechanical and electrical equipment
- Design fees, permitting, and owner's project management costs (Correct answer)
- Subcontractor labor and materials
Correct answer: Design fees, permitting, and owner's project management costs
Soft costs are indirect project costs such as professional design fees, permits, owner's representative fees, and financing costs.
Question 6: In a Guaranteed Maximum Price (GMP) contract, cost savings below the GMP typically:
- Are kept entirely by the contractor
- Are shared between the owner and contractor per the contract terms (Correct answer)
- Must be returned to a government agency
- Are applied automatically to future project phases
Correct answer: Are shared between the owner and contractor per the contract terms
In a GMP contract, savings below the guaranteed maximum are shared between the owner and contractor according to the agreed-upon split defined in the contract.
CHC CHC Cost Management & Contract Administration 1
A preliminary cost estimate prepared during schematic design is known as: