NASCLA Accredited Examination for Commercial General Building Contractor — Questions and Answers

Question 1: Under the percentage-of-completion method, when is revenue recognized?

At the beginning of the project when the contract is signed
Only when the project is 100% complete
Proportionally as work progresses based on project completion percentage (Correct answer)
When the final payment is received

Correct answer: Proportionally as work progresses based on project completion percentage

Under the percentage-of-completion method, revenue is recognized in proportion to the project's completion percentage, matching income with the corresponding period's work.

Question 2: What is the primary difference between a 'pay-when-paid' and a 'pay-if-paid' clause?

Pay-if-paid requires faster payment than pay-when-paid
They are legally identical in all states
Pay-when-paid applies only to subcontractors; pay-if-paid applies only to suppliers
Pay-when-paid sets a timing condition; pay-if-paid (if enforceable) eliminates the obligation to pay if the owner never pays (Correct answer)

Correct answer: Pay-when-paid sets a timing condition; pay-if-paid (if enforceable) eliminates the obligation to pay if the owner never pays

Pay-when-paid creates a timing condition (pay after receiving payment); pay-if-paid, if enforceable, extinguishes the GC's payment obligation entirely if the owner never pays — many states ban pay-if-paid clauses.

Question 3: If a property owner pays the general contractor in full but the general contractor fails to pay subcontractors, in most states:

The state will seize the property and distribute funds to subcontractors
Unpaid subcontractors may still file mechanic's liens against the owner's property if they followed proper procedures (Correct answer)
The owner has no further obligation and cannot be subject to liens
The owner must pay double to the subcontractors as a penalty

Correct answer: Unpaid subcontractors may still file mechanic's liens against the owner's property if they followed proper procedures

In most states, unpaid subcontractors who properly preserved their lien rights can still lien the owner's property even if the owner paid the general contractor in full.

Question 4: How many cubic yards of concrete are required to pour the slab and thickened edge? A slab of grade 75' wide x 45' long x 4" thick, with a thickened edge 16" wide by 16" thick measured from the top of the slab.

Less than 50 cubic yards
More than 56 cubic yards
50 to 53 cubic yards (Correct answer)
53 to 56 cubic yards

Correct answer: 50 to 53 cubic yards

Explanation: Slab Calculation: 75' wide x 45' long x 0.33' thick = 1,113.75 cf Thickened Edge: 75' x 1.33' wide x 1' thick x 2 sides = 199.5 cf 45 - (1.33 + 1.33) = 42.34 length 42.34 × 1.33 wide x 1' thick x 2 side = 112.62 cf (1,113.75 + 199.5 + 112.62) / 27 = 52.81 cubic yards

Question 5: What does the term 'liquidated damages' mean in a construction contract?

Damages awarded for liquid spills on a job site
Compensation for equipment that is damaged with liquids
A predetermined amount of money paid for each day a project is delayed beyond the completion date (Correct answer)
Penalties assessed for substandard material quality

Correct answer: A predetermined amount of money paid for each day a project is delayed beyond the completion date

Liquidated damages are a pre-agreed daily penalty specified in the contract that the contractor must pay for each day the project extends beyond the agreed completion date.

Question 6: Which element is NOT required to make a construction contract legally enforceable?

Notarization by a public notary (Correct answer)
Consideration
Legal capacity of the parties
Offer and acceptance

Correct answer: Notarization by a public notary

Notarization is generally not required for construction contracts to be legally enforceable; the key elements are offer, acceptance, consideration, and legal capacity.

Question 7: Which act prohibits contractors from discriminating in hiring based on race, color, religion, sex, or national origin?

Equal Pay Act
Americans with Disabilities Act
Davis-Bacon Act
Civil Rights Act of 1964, Title VII (Correct answer)

Correct answer: Civil Rights Act of 1964, Title VII

Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on race, color, religion, sex, or national origin for employers with 15 or more employees.

Question 8: What is a 'certificate of insurance' and why is it required?

A list of all past insurance claims filed by the contractor
A government document confirming a contractor's license status
A receipt for insurance premium payments
A document from an insurer verifying that coverage exists, required by owners before contractors can start work (Correct answer)

Correct answer: A document from an insurer verifying that coverage exists, required by owners before contractors can start work

A certificate of insurance is a summary document issued by an insurer that verifies coverage types, limits, and effective dates, typically required by project owners before work begins.

Question 9: What is a 'prequalification' process in construction procurement?

A meeting held before construction begins
A test required before obtaining a contractor's license
A government review of construction plans before permit issuance
An owner's evaluation of a contractor's qualifications, financial stability, and experience before allowing them to bid (Correct answer)

Correct answer: An owner's evaluation of a contractor's qualifications, financial stability, and experience before allowing them to bid

Prequalification is a process where owners evaluate contractors on financial strength, bonding capacity, experience, safety record, and references before permitting them to submit bids.

Question 10: Under most state contractor licensing laws, what is the primary purpose of requiring contractors to hold a valid license?

To limit competition in the construction market
To generate state revenue
To protect the public from unqualified contractors (Correct answer)
To standardize contractor pricing

Correct answer: To protect the public from unqualified contractors

Contractor licensing laws exist primarily to protect the public by ensuring contractors meet minimum competency and financial responsibility standards.

Question 11: An 'indemnification clause' in a construction contract requires one party to:

Split all project costs equally
Provide free labor for warranty repairs
Maintain a separate escrow account for damages
Indemnify (protect) the other party from certain losses or liabilities (Correct answer)

Correct answer: Indemnify (protect) the other party from certain losses or liabilities

An indemnification clause is a contractual promise by one party to compensate the other for specified losses, claims, or damages arising from the project.

Question 12: What does 'FICA' stand for, and what does it fund?

Financial Insurance and Credit Act — funds small business loans
Federal Insurance Contributions Act — funds Social Security and Medicare (Correct answer)
Federal Incorporated Contractors Act — funds contractor licensing
Federal Income Contribution Act — funds federal highway construction

Correct answer: Federal Insurance Contributions Act — funds Social Security and Medicare

FICA stands for the Federal Insurance Contributions Act, requiring both employees and employers to contribute to Social Security (6.2%) and Medicare (1.45%) through payroll taxes.

Question 13: Which provision requires a contractor to resolve disputes through binding arbitration rather than litigation?

Arbitration clause (Correct answer)
Indemnification clause
Liquidated damages clause
Retainage clause

Correct answer: Arbitration clause

An arbitration clause requires disputes to be submitted to a neutral arbitrator whose decision is binding, often faster and less costly than court litigation.

Question 14: Which type of insurance covers bodily injury and property damage claims made by third parties against a contractor?

Errors and omissions insurance
Commercial general liability (CGL) insurance (Correct answer)
Builder's risk insurance
Workers' compensation insurance

Correct answer: Commercial general liability (CGL) insurance

Commercial general liability (CGL) insurance protects contractors from third-party claims for bodily injury, property damage, and personal injury arising from their operations.

Question 15: What is the difference between 'gross profit' and 'net profit' for a contractor?

There is no meaningful difference between the two
Gross profit is revenue minus direct job costs; net profit is gross profit minus overhead expenses (Correct answer)
Gross profit includes taxes; net profit does not
Gross profit is total revenue; net profit is cash on hand

Correct answer: Gross profit is revenue minus direct job costs; net profit is gross profit minus overhead expenses

Gross profit equals revenue minus direct job costs (labor, materials, subs), while net profit is gross profit minus all overhead and administrative expenses.

Question 16: A 'force majeure' clause in a construction contract protects a contractor from penalties when delays are caused by:

Events beyond the parties' control, such as natural disasters (Correct answer)
Poor project planning by the contractor
Labor disputes the contractor could have prevented
Material shortages due to contractor's late ordering

Correct answer: Events beyond the parties' control, such as natural disasters

Force majeure clauses excuse contract performance delays caused by unforeseeable events outside either party's control, such as hurricanes, earthquakes, or pandemics.

Question 17: Which of the following would a 'conditional lien waiver' indicate?

The lien has been unconditionally released upon signing
The contractor waives all future lien rights on all projects
The subcontractor releases rights for past and future work unconditionally
The lien release is conditioned upon the receipt of a specific payment — if payment doesn't clear, the lien rights are preserved (Correct answer)

Correct answer: The lien release is conditioned upon the receipt of a specific payment — if payment doesn't clear, the lien rights are preserved

A conditional lien waiver releases lien rights only upon the condition that a specified payment is actually received and clears, protecting the recipient if the payment fails.

Question 18: What is the primary purpose of requiring 'as-built drawings' at the end of a construction project?

To meet OSHA documentation requirements
To document actual field conditions and deviations from original plans (Correct answer)
To allow the contractor to reuse designs on other projects
To satisfy aesthetic requirements of the architect

Correct answer: To document actual field conditions and deviations from original plans

As-built drawings record the actual locations, dimensions, and configurations of installed systems and structures, reflecting any field changes made during construction.

Question 19: What is a 'materialman's lien'?

A lien filed by a materials testing laboratory
A lien filed by the equipment rental company for damaged machinery
A lien filed by a supplier of materials against the property to which the materials were incorporated (Correct answer)
A lien filed by a worker for unpaid wages

Correct answer: A lien filed by a supplier of materials against the property to which the materials were incorporated

A materialman's lien (a type of mechanic's lien) is filed by a material supplier who provided materials incorporated into the project but was not paid.

Question 20: What is the purpose of a 'notice to proceed' in a construction contract?

It is a lien filed before work begins
It notifies the public of upcoming construction
It is the official written authorization from the owner for the contractor to begin work (Correct answer)
It informs the contractor of building code violations

Correct answer: It is the official written authorization from the owner for the contractor to begin work

A notice to proceed is a formal written document from the owner authorizing the contractor to begin work and typically establishing the official project start date.

Question 21: Under the EPA's Lead-Based Paint Renovation, Repair, and Painting Program Rules, only certified contractors can perform renovation, repair, and painting projects that disturb lead-based paint in homes, childcare facilities, and schools built before what year?

2008
1994
2016
1978 (Correct answer)

Correct answer: 1978

Explanation: Under the EPA's Lead-Based Paint Renovation, Repair, and Painting Program Rules, only certified contractors can perform renovation, repair, and painting projects that disturb lead-based paint in homes, childcare facilities, and schools built before 1978. This regulation aims to protect individuals, especially children, from the hazards of lead exposure, which can have serious health effects. Understanding regulatory requirements is crucial for contractors to ensure compliance with environmental and safety standards in construction projects.

Question 22: What form must employers use to verify an employee's eligibility to work in the United States?

W-9
1099-NEC
I-9 (Correct answer)
W-4

Correct answer: I-9

The I-9 Employment Eligibility Verification form must be completed for all new hires to verify their identity and authorization to work in the U.S.

Question 23: What does a negative cash flow mean for a construction company?

The company is spending more cash than it is receiving, which can cause financial difficulty (Correct answer)
The company has too many long-term assets
The company is highly profitable
The company has excessive receivables

Correct answer: The company is spending more cash than it is receiving, which can cause financial difficulty

Negative cash flow means cash outflows exceed inflows during a period, which can threaten the company's ability to pay suppliers, employees, and subcontractors.

Question 24: What does 'underbilling' indicate in construction accounting?

A contractor has underestimated material costs
A contractor has billed more than the work completed
A contractor has completed more work than it has billed for, representing earned but uncollected revenue (Correct answer)
A subcontractor has underpaid their workers

Correct answer: A contractor has completed more work than it has billed for, representing earned but uncollected revenue

Underbilling occurs when the contractor has completed more work than it has invoiced, meaning earned revenue has not yet been billed — a common cash flow risk.

Question 25: What is the primary goal of a Safety Data Sheet (SDS) in construction?

Providing information on hazardous materials (Correct answer)
Evaluating employee training needs
Documenting project progress
Estimating project costs

Correct answer: Providing information on hazardous materials

Explanation: Safety Data Sheets (SDS) in construction provide detailed information about hazardous materials used on-site, including their properties, handling procedures, and safety precautions to protect workers from potential risks.

Question 26: How long must employers retain completed I-9 forms for a terminated employee?

1 year after termination or 3 years after date of hire, whichever is later (Correct answer)
Until the employee's next employer requests the records
5 years after the date of hire regardless of termination
2 years after the date of termination

Correct answer: 1 year after termination or 3 years after date of hire, whichever is later

Federal law requires I-9 retention for 3 years from the date of hire OR 1 year after termination, whichever date is later.

Question 27: A 'no-damage-for-delay' clause in a construction contract means:

Delay damages are automatically covered by the surety bond
The contractor is exempt from liquidated damages
The owner pays double for any delays
The contractor cannot claim additional compensation for delays caused by the owner (Correct answer)

Correct answer: The contractor cannot claim additional compensation for delays caused by the owner

A no-damage-for-delay clause limits the contractor's remedy for owner-caused delays to a time extension only, not additional monetary compensation.

Question 28: The Fair Labor Standards Act (FLSA) requires that non-exempt employees be paid overtime at what rate for hours worked over 40 in a workweek?

2 times the regular rate
1.5 times the regular rate (Correct answer)
1.75 times the regular rate
1.25 times the regular rate

Correct answer: 1.5 times the regular rate

The FLSA mandates time-and-a-half (1.5×) the regular rate of pay for all hours worked beyond 40 in a single workweek for non-exempt employees.

Question 29: Which of the following is a direct job cost in construction accounting?

Office rent
Labor wages paid to workers on a specific project (Correct answer)
Business insurance premiums
Accounting fees

Correct answer: Labor wages paid to workers on a specific project

Direct job costs are expenses directly attributable to a specific project, such as labor wages, materials, subcontractors, and equipment used exclusively on that job.

Question 30: How does recording a mechanic's lien affect the property owner's ability to sell or refinance the property?

It automatically transfers ownership to the contractor
It clouds the title, making it difficult to sell or refinance until the lien is resolved or bonded off (Correct answer)
It triggers a mandatory inspection by the building department
It has no effect on the owner's ability to sell

Correct answer: It clouds the title, making it difficult to sell or refinance until the lien is resolved or bonded off

A recorded mechanic's lien creates a cloud on the property title, which must typically be resolved, paid, or bonded before the owner can sell or obtain new financing.

Question 31: A 'change order' in a construction contract is best described as:

A subcontractor's request to change payment terms
An architect's directive that overrides the owner's wishes
A court order requiring changes to building plans
A written agreement modifying the original contract scope, cost, or schedule (Correct answer)

Correct answer: A written agreement modifying the original contract scope, cost, or schedule

A change order is a written document signed by the owner and contractor that modifies the original contract's scope of work, price, or completion date.

NASCLA Accredited Examination for Commercial General Building Contractor

The NASCLA Accredited Examination tests commercial general building contractor knowledge across business law, project management, contracting requirements, and technical construction topics. It is accepted by 17 participating states for multi-state contractor licensing reciprocity.

115

Questions

330 min

Time Limit

70%

To Pass

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These practice questions were written with AI tools. They are not real exam questions. Exam facts are checked against the official sources listed below. Not reviewed by a subject-matter expert. Editorial policy

Sources & references

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test-takers.psiexams.com — Fees, exam format, passing score, time limit, exam information · verified Oct 2026
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