CMCA Contracting and Vendor Management 4 — Questions and Answers
Question 1: A roofing contractor requests a 50% deposit before starting a $200,000 replacement project. What is the BEST practice for the association?
- Pay the full amount upfront to secure scheduling
- Negotiate a smaller deposit and tie remaining payments to project milestones (Correct answer)
- Refuse any deposit and pay only upon full completion
- Pay the deposit from the operating account regardless of reserve balance
Correct answer: Negotiate a smaller deposit and tie remaining payments to project milestones
Milestone-based payment schedules protect the association by linking disbursements to verifiable progress, reducing the risk of paying for incomplete work.
Question 2: What is the PRIMARY purpose of requiring a contractor to obtain a performance bond on a large capital improvement project?
- To lower the contractor's insurance premiums
- To guarantee the contractor will complete the work if they default (Correct answer)
- To protect the contractor from owner-initiated changes
- To allow the association to avoid workers' compensation requirements
Correct answer: To guarantee the contractor will complete the work if they default
A performance bond protects the association by guaranteeing project completion by a surety company if the contractor defaults or fails to finish the work.
Question 3: An association manager notices that a vendor's scope of work in an ongoing contract has informally expanded well beyond original terms without contract amendments. This is known as:
- Contract assignment
- Scope creep (Correct answer)
- Subcontracting violation
- Material breach
Correct answer: Scope creep
Scope creep occurs when work expands beyond the contracted scope without formal amendments, often leading to cost overruns and disputes.
Question 4: Which document should a manager obtain from a vendor BEFORE making final payment on a construction project to protect against mechanic's lien claims?
- Certificate of insurance
- Conditional lien waiver upon final payment (Correct answer)
- Vendor W-9 tax form
- Proof of licensure renewal
Correct answer: Conditional lien waiver upon final payment
A conditional lien waiver upon final payment releases the vendor's right to file a mechanic's lien once the final payment clears, protecting the association's property.
Question 5: A contract clause states that disputes must be resolved through binding arbitration. What does this mean for the association?
- The association can still sue the vendor in court first
- Disputes will be decided by a neutral arbitrator rather than a court, and the decision is final (Correct answer)
- The vendor accepts all liability before arbitration begins
- The association waives the right to seek damages entirely
Correct answer: Disputes will be decided by a neutral arbitrator rather than a court, and the decision is final
Binding arbitration means disputes are resolved by a neutral third party outside court, and the arbitrator's decision is enforceable and generally not appealable.
Question 6: When a contractor uses subcontractors on a community association project, who remains primarily responsible to the association for the subcontractors' work quality?
- Each individual subcontractor independently
- The general contractor who holds the prime contract (Correct answer)
- The association's property manager
- The board of directors
Correct answer: The general contractor who holds the prime contract
The general contractor holding the prime contract is responsible to the association for all work, including that performed by subcontractors.
Question 7: An association's governing documents require board approval for contracts exceeding $5,000. The manager signs a $7,500 service contract without board approval. This is BEST described as:
- Acceptable if the service was necessary
- An unauthorized act that may expose the manager and association to liability (Correct answer)
- A valid contract since the manager has general authority
- A minor procedural error with no legal consequence
Correct answer: An unauthorized act that may expose the manager and association to liability
Executing a contract above the board-approved threshold without authorization violates the manager's scope of authority and may create personal and association liability.
CMCA Contracting and Vendor Management 4
A roofing contractor requests a 50% deposit before starting a $200,000 replacement project.
What is the BEST practice for the association?