CCC CCC Contract Management & Procurement 1 — Questions and Answers
Question 1: In cost control, which contract type places the greatest financial risk on the contractor?
- Firm Fixed-Price (FFP) (Correct answer)
- Cost-Plus-Fixed-Fee (CPFF)
- Time and Materials (T&M)
- Cost-Plus-Award-Fee (CPAF)
Correct answer: Firm Fixed-Price (FFP)
Under a Firm Fixed-Price contract, the contractor bears all cost overrun risk since the price does not change regardless of actual costs incurred.
Question 2: What is the primary purpose of a contract baseline in cost control?
- To define the initial agreed scope, schedule, and cost against which performance is measured (Correct answer)
- To establish contractor profit margins
- To outline dispute resolution procedures
- To list all approved change orders
Correct answer: To define the initial agreed scope, schedule, and cost against which performance is measured
The contract baseline serves as the approved reference point for scope, schedule, and cost, enabling controllers to measure and report variances.
Question 3: Which procurement method is most appropriate when the scope of work is well-defined and price competition is desired?
- Competitive sealed bidding (Invitation for Bid) (Correct answer)
- Sole-source negotiation
- Request for Proposal (RFP) with best-value selection
- Cost-reimbursable ordering
Correct answer: Competitive sealed bidding (Invitation for Bid)
Competitive sealed bidding (IFB) is used when scope is clear, allowing award to the lowest responsive, responsible bidder.
Question 4: A cost controller reviewing a subcontract notices the subcontractor is billing for materials not yet delivered. This is an example of:
- Front-loading or overbilling (Correct answer)
- Retainage recovery
- Liquidated damages
- Contract novation
Correct answer: Front-loading or overbilling
Billing for materials not yet delivered is front-loading, which inflates early cash draws and distorts cost-to-complete projections.
Question 5: What is retainage in construction contracts?
- A percentage of each progress payment withheld until project completion to ensure contract fulfillment (Correct answer)
- A daily penalty for schedule delays
- A fee paid to the owner for late submittals
- A bonus paid for early completion
Correct answer: A percentage of each progress payment withheld until project completion to ensure contract fulfillment
Retainage is typically 5–10% withheld from progress payments as security that the contractor will complete all punch-list items.
Question 6: When evaluating a change order claim, a cost controller should first verify:
- That the claimed work is outside the original contract scope (Correct answer)
- The subcontractor's profit margin
- The owner's available contingency balance
- The contractor's bonding capacity
Correct answer: That the claimed work is outside the original contract scope
Confirming the work is outside the contractual scope of work is the prerequisite step before evaluating cost or schedule impacts of any change order.
CCC CCC Contract Management & Procurement 1
In cost control, which contract type places the greatest financial risk on the contractor?