FCC Estimating, Bidding & Financial Management 4 — Questions and Answers
Question 1: Under Florida's public procurement rules, a 'sealed bid' process requires that all bids be:
- Submitted electronically only
- Opened privately by the owner's legal counsel
- Opened publicly at the date and time specified in the solicitation (Correct answer)
- Reviewed by a committee before opening
Correct answer: Opened publicly at the date and time specified in the solicitation
Florida public bid law requires sealed bids to be opened publicly at the designated time to ensure transparency and fairness.
Question 2: Which document establishes the scope, schedule, and compensation basis agreed upon between a contractor and owner before work begins?
- Notice to Proceed
- Request for Proposal
- Prime Contract (Correct answer)
- Certificate of Substantial Completion
Correct answer: Prime Contract
The prime (or general) contract is the legally binding agreement that defines scope, price, schedule, and rights between the owner and contractor.
Question 3: A contractor is calculating break-even volume. Fixed annual costs are $300,000 and the contribution margin ratio is 30%. What annual revenue is needed to break even?
- $90,000
- $390,000
- $1,000,000 (Correct answer)
- $1,300,000
Correct answer: $1,000,000
Break-even revenue = Fixed costs ÷ Contribution margin ratio = $300,000 ÷ 0.30 = $1,000,000.
Question 4: What is the primary purpose of a 'Notice of Commencement' in Florida construction projects?
- To notify the contractor to begin work
- To establish the project in public records and protect lien rights (Correct answer)
- To inform subcontractors of the project start date
- To release the performance bond
Correct answer: To establish the project in public records and protect lien rights
Florida's Notice of Commencement (F.S. 713.13) is recorded in public records to identify the project, owner, and lender, forming the basis for the construction lien law framework.
Question 5: When a contractor uses the 'percentage of completion' accounting method, revenue is recognized:
- Only when the project reaches substantial completion
- Proportionally as work is performed based on costs incurred (Correct answer)
- At the end of each calendar year
- When the owner makes each scheduled payment
Correct answer: Proportionally as work is performed based on costs incurred
The percentage-of-completion method recognizes revenue and profit in proportion to the stage of project completion, typically measured by costs incurred.
Question 6: A general contractor receives three subcontractor bids for electrical work: $80,000, $95,000, and $62,000. The $62,000 bid appears unusually low. What is the BEST practice?
- Automatically use the lowest bid to win the project
- Investigate the low bid for missing scope before relying on it (Correct answer)
- Disqualify the low bid without review
- Average all three bids and use that figure
Correct answer: Investigate the low bid for missing scope before relying on it
An unusually low sub-bid may indicate missing scope, errors, or future claims; the GC should verify the sub's scope matches before incorporating it.
Question 7: What does 'Gross Profit Margin' measure in a construction company's financial performance?
- Revenue minus all operating expenses including overhead
- Revenue minus direct project costs, expressed as a percentage of revenue (Correct answer)
- Net income after taxes as a percentage of equity
- Cash collected minus cash paid in a period
Correct answer: Revenue minus direct project costs, expressed as a percentage of revenue
Gross profit margin = (Revenue − Direct job costs) ÷ Revenue × 100, showing how much revenue remains after direct costs to cover overhead and profit.
FCC Estimating, Bidding & Financial Management 4
Under Florida's public procurement rules, a 'sealed bid' process requires that all bids be: