CRC CRC Business & Financial Management 2

Question 1

A contractor's bid bond protects the project owner in what scenario?

Accepted Answer

If the winning bidder refuses to enter into the contract

Answer

A bid bond guarantees the owner that if the contractor wins the bid but declines to sign the contract, the bond will cover the difference between their bid and the next acceptable bid.

Question 2

Which type of contractor's license bond protects clients who suffer financial loss due to contractor fraud or failure to complete work?

Accepted Answer

Surety bond

Answer

A surety bond (often a license and permit bond) protects consumers from financial harm caused by a contractor's fraudulent or negligent acts.

Question 3

What is 'retainage' in a residential construction contract?

Accepted Answer

A percentage of each progress payment withheld until project completion

Answer

Retainage is typically 5–10% of each progress payment that the owner holds back as security until the project is substantially complete and all conditions are met.

Question 4

A contractor receives a 'Notice to Owner' (NTO) from a subcontractor. What action should the contractor take?

Accepted Answer

Acknowledge it and ensure the subcontractor is paid to protect lien rights

Answer

An NTO establishes a subcontractor's right to file a mechanic's lien; the general contractor must ensure payment is made to protect the owner's property from a lien.

Question 5

Which document formally authorizes changes to the scope, cost, or schedule of a construction contract?

Accepted Answer

Change order

Answer

A change order is a written amendment to the original contract, signed by both parties, that officially modifies the scope, price, or schedule.

(CRC) Certified Residential Contractor Practice Test

(CRC) Certified Residential Contractor Practice Test

CRC CRC Business & Financial Management 2