CME CME Municipal Finance & Contract Administration 2

Question 1

What does a performance bond guarantee on a public construction contract?

Accepted Answer

Completion of the project according to contract terms if the contractor defaults

Answer

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.

Question 2

What is a payment bond on public construction projects and why is it required?

Accepted Answer

A surety bond protecting subcontractors and material suppliers from nonpayment by the prime contractor

Answer

A payment bond (required by the Miller Act on federal projects) ensures that subcontractors and suppliers are paid, preventing mechanics' liens on public property.

Question 3

What is the purpose of 'retainage' in public construction contracts?

Accepted Answer

A percentage of progress payments withheld to ensure contract completion and quality

Answer

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.

Question 4

What is a 'change order' in the context of public construction contract administration?

Accepted Answer

A written agreement modifying the contract scope, price, or schedule for work additions, deletions, or unforeseen conditions

Answer

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.

Question 5

What is 'design-build' project delivery and its primary advantage for municipalities?

Accepted Answer

A single entity is responsible for both design and construction, providing single-point accountability and often faster delivery

Answer

Design-build contracts one firm for both design and construction, reducing coordination gaps, shortening schedules through overlapping phases, and providing single-point responsibility.

(CME) Certified Municipal Engineer Practice Test

(CME) Certified Municipal Engineer Practice Test

CME CME Municipal Finance & Contract Administration 2