CPE Material Pricing & Escalation 2

Question 1

A contractor purchases steel at $800/ton in January with delivery in June. If the steel escalation index rises from 210 to 231 during that period, what is the estimated June price per ton?

Accepted Answer

$880/ton

Answer

Applying the 10% index increase (231/210 = 1.10) to $800 yields $880/ton.

Question 2

Which pricing method locks in material costs at the time of bid but may expose the owner to escalation risk on long-duration projects?

Accepted Answer

Lump-sum fixed price

Answer

A lump-sum fixed price fixes the contractor's bid, so any post-bid escalation becomes the owner's indirect exposure when the contractor cannot absorb it.

Question 3

The Producer Price Index (PPI) for construction materials is most directly used to:

Accepted Answer

Adjust historical material costs to current dollars

Answer

The PPI tracks changes in selling prices received by domestic producers, making it the standard tool for inflating or deflating historical material costs.

Question 4

A project's concrete cost was $120,000 two years ago when the PPI for concrete was 185. The current PPI is 204. What is the inflation-adjusted current cost estimate?

Accepted Answer

$132,324

Answer

Current cost = $120,000 × (204/185) = $120,000 × 1.1027 ≈ $132,324.

Question 5

Which of the following best describes a price escalation clause in a construction contract?

Accepted Answer

A provision allowing contract price adjustment if material costs change beyond a defined threshold

Answer

Escalation clauses define trigger thresholds and formulas for adjusting contract prices when material costs deviate significantly from bid-time values.

(CPE) Certified Professional Estimator Practice Test

(CPE) Certified Professional Estimator Practice Test

CPE Material Pricing & Escalation 2