CPE Contract Management and Project Documentation 3 — Questions and Answers
Question 1: In construction contracting, 'retainage' refers to:
- The fee paid to the estimator for preparing the bid
- A percentage of each pay application withheld until project completion (Correct answer)
- Insurance premiums held in escrow by the owner
- The contractor's profit margin on a lump-sum project
Correct answer: A percentage of each pay application withheld until project completion
Retainage is typically 5–10% of each progress payment held by the owner as security for satisfactory project completion.
Question 2: Which contract type places the greatest financial risk on the contractor?
- Cost-plus-fee
- Time and materials
- Lump sum (fixed price) (Correct answer)
- Cost-plus with guaranteed maximum price
Correct answer: Lump sum (fixed price)
Under a lump-sum contract, the contractor absorbs all cost overruns, making accurate estimation critical.
Question 3: What is the function of a 'punch list' in project closeout?
- A list of subcontractors who submitted bids
- An itemized record of incomplete or deficient work to be corrected before final payment (Correct answer)
- A log of change orders approved during construction
- A schedule of material deliveries expected at project end
Correct answer: An itemized record of incomplete or deficient work to be corrected before final payment
The punch list documents remaining deficiencies that the contractor must remedy to achieve final acceptance from the owner.
Question 4: A contractor's daily field report should document all of the following EXCEPT:
- Weather conditions on site
- Labor count and activities performed
- The owner's internal budget figures (Correct answer)
- Equipment on site and hours worked
Correct answer: The owner's internal budget figures
The owner's internal budget is not a field condition and has no place in the contractor's daily site report.
Question 5: The purpose of a 'Notice to Proceed' (NTP) is to:
- Authorize the contractor to begin work on a specified date (Correct answer)
- Formally accept the contractor's bid
- Signal that the permit has been denied
- Release retainage to the contractor
Correct answer: Authorize the contractor to begin work on a specified date
The NTP is the owner's written authorization that establishes the official start date for the contract period.
Question 6: A construction contract's 'differing site conditions' clause primarily protects the contractor when:
- Material prices rise unexpectedly after award
- Subsurface or concealed conditions differ materially from what the contract indicated (Correct answer)
- The design is changed by the architect mid-project
- A subcontractor becomes insolvent
Correct answer: Subsurface or concealed conditions differ materially from what the contract indicated
This clause entitles the contractor to additional compensation or time when actual subsurface conditions vary significantly from those represented in the contract documents.
Question 7: Final lien waivers are typically exchanged at project closeout to:
- Transfer project ownership to the contractor
- Confirm that all subcontractors and suppliers have been paid and release lien rights (Correct answer)
- Extend the contractor's warranty period
- Assign the performance bond to the owner
Correct answer: Confirm that all subcontractors and suppliers have been paid and release lien rights
Lien waivers confirm that parties in the payment chain have received their money and will not file a mechanic's lien against the property.
CPE Contract Management and Project Documentation 3
In construction contracting, 'retainage' refers to: