CPC CPC Construction Business Management & Finance 2

Question 1

What is a 'performance bond' and who benefits from it on a construction project?

Accepted Answer

A surety bond guaranteeing the contractor will complete the project per contract; the owner is the obligee

Answer

A performance bond is a three-party agreement where the surety guarantees that if the contractor defaults, the surety will complete the project or compensate the owner.

Question 2

How is 'overhead' typically allocated to individual construction projects in job costing?

Accepted Answer

Distributed as a percentage of direct labor costs, revenue, or total direct costs

Answer

Overhead allocation rates are typically calculated as a percentage of direct labor, revenue, or total direct costs so that each project bears a fair share of indirect costs.

Question 3

What is the 'contractor's all-risk' (CAR) insurance policy designed to cover?

Accepted Answer

Physical loss or damage to the works, plant, equipment, and third-party liability during construction

Answer

CAR insurance provides broad all-risk coverage for the construction works in progress, contractor's plant/equipment, and third-party bodily injury and property damage.

Question 4

Which method of project delivery places design and construction responsibility under a single contract with one entity?

Accepted Answer

Design-Build (DB)

Answer

In Design-Build, a single entity is responsible for both design and construction, allowing design and construction phases to overlap and simplifying owner-contractor relationships.

Question 5

What is a 'mechanic's lien' and when can a contractor or supplier file one?

Accepted Answer

A statutory claim against a property securing payment for labor or materials; when the contractor or supplier is not paid

Answer

Mechanic's liens are statutory security interests against property that attach when contractors, subcontractors, or suppliers furnish labor or materials and are not paid.

(CPC) Certified Professional Constructor Practice Test

(CPC) Certified Professional Constructor Practice Test

CPC CPC Construction Business Management & Finance 2