CME Municipal Finance & Contract Administration Flashcards
6 cards from real CME practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CME Municipal Finance & Contract Administration flashcards as text
What does a performance bond guarantee on a public construction contract?
Answer: Completion of the project according to contract terms if the contractor defaults
A performance bond provides the municipality with financial assurance that the project will be completed per contract terms even if the prime contractor defaults or becomes insolvent.
What is a payment bond on public construction projects and why is it required?
Answer: A surety bond protecting subcontractors and material suppliers from nonpayment by the prime contractor
A payment bond (required by the Miller Act on federal projects) ensures that subcontractors and suppliers are paid, preventing mechanics' liens on public property.
What is the purpose of 'retainage' in public construction contracts?
Answer: A percentage of progress payments withheld to ensure contract completion and quality
Retainage (typically 5–10%) is withheld from progress payments and released upon substantial completion, providing leverage to ensure the contractor finishes all work and corrects defects.
What is a 'change order' in the context of public construction contract administration?
Answer: A written agreement modifying the contract scope, price, or schedule for work additions, deletions, or unforeseen conditions
Change orders are formal contract amendments executed by the owner and contractor to authorize and compensate for changes in scope, differing site conditions, or other contract modifications.
What is 'design-build' project delivery and its primary advantage for municipalities?
Answer: A single entity is responsible for both design and construction, providing single-point accountability and often faster delivery
Design-build contracts one firm for both design and construction, reducing coordination gaps, shortening schedules through overlapping phases, and providing single-point responsibility.
What is a 'differing site conditions' (DSC) clause in public construction contracts?
Answer: A contract provision allowing the contractor to seek additional compensation when actual subsurface conditions differ materially from contract representations
DSC clauses protect contractors from absorbing costs when actual subsurface conditions are materially different from those indicated in contract documents, encouraging realistic bids.