CCM Cost Management 5 — Questions and Answers
Question 1: A construction manager conducts a 'constructability review' during design. What is the primary cost management benefit?
- It allows the owner to reduce the project scope
- It identifies construction issues early when changes are least expensive to make (Correct answer)
- It replaces the need for contractor bids
- It establishes the final project schedule baseline
Correct answer: It identifies construction issues early when changes are least expensive to make
Constructability reviews during design catch potential construction problems early, when design changes cost far less than field changes.
Question 2: What does 'bid shopping' refer to in construction procurement, and why is it considered unethical?
- Requesting bids from multiple vendors to ensure competitive pricing
- Revealing a subcontractor's bid to competitors to drive down prices after award (Correct answer)
- Evaluating bids based on criteria other than lowest price
- Purchasing materials from multiple suppliers to reduce lead times
Correct answer: Revealing a subcontractor's bid to competitors to drive down prices after award
Bid shopping undermines fair competition by using one subcontractor's price to pressure others, damaging trust and often reducing quality.
Question 3: On a large construction project, what is the purpose of a 'project control budget' separate from the contract value?
- It is the amount paid to the construction manager as a fee
- It is an internal working budget including cost targets and contingencies used to manage costs proactively (Correct answer)
- It represents the owner's financing limit for the project
- It is the amount reserved for future change orders only
Correct answer: It is an internal working budget including cost targets and contingencies used to manage costs proactively
The project control budget is the internal management tool that sets cost targets for each work package, enabling proactive cost control.
Question 4: Which earned value metric best indicates whether a project will finish on time?
- Cost Performance Index (CPI)
- Schedule Performance Index (SPI) (Correct answer)
- Cost Variance (CV)
- Budget at Completion (BAC)
Correct answer: Schedule Performance Index (SPI)
SPI = EV / PV measures schedule efficiency; an SPI below 1.0 indicates the project is behind its planned schedule.
Question 5: A construction manager must allocate shared equipment costs across multiple project work packages. Which method is most appropriate?
- Charge all equipment costs to the largest work package
- Use an equitable allocation basis such as hours used or area served by each work package (Correct answer)
- Treat all equipment as indirect cost and exclude from work package budgets
- Assign equipment costs randomly to balance work package budgets
Correct answer: Use an equitable allocation basis such as hours used or area served by each work package
An equitable allocation basis (such as usage hours) ensures shared equipment costs are fairly distributed across work packages benefiting from the equipment.
Question 6: What is a 'should-cost' estimate in construction project management?
- The final contract price agreed upon after negotiations
- An independent estimate of what a project should reasonably cost, used to evaluate contractor bids (Correct answer)
- The lowest bid received from competing contractors
- The construction manager's fee for managing the project
Correct answer: An independent estimate of what a project should reasonably cost, used to evaluate contractor bids
A should-cost estimate is an independent owner's estimate used to benchmark and evaluate contractor or subcontractor bid prices.
Question 7: During project closeout, what is the significance of a 'final cost reconciliation' in construction management?
- It establishes the scope of work for the next project phase
- It compares final actual costs to the approved budget and documents variances for lessons learned (Correct answer)
- It calculates the contractor's profit margin for tax purposes
- It determines the warranty obligations for completed work
Correct answer: It compares final actual costs to the approved budget and documents variances for lessons learned
Final cost reconciliation closes the financial accounts, documents budget-to-actual variances, and captures lessons learned for future projects.
CCM Cost Management 5
A construction manager conducts a 'constructability review' during design.
What is the primary cost management benefit?