Construction Management Contract Administration & Procurement 1 — Questions and Answers
Question 1: What document formally establishes the legal relationship between an owner and a general contractor on a construction project?
- Prime contract (Correct answer)
- Subcontract agreement
- Letter of intent
- Purchase order
Correct answer: Prime contract
The prime contract is the legally binding agreement directly between the project owner and the general contractor.
Question 2: Which contract type places the greatest financial risk on the contractor?
- Lump sum (fixed price) (Correct answer)
- Cost plus fee
- Time and materials
- Unit price
Correct answer: Lump sum (fixed price)
Under a lump sum contract, the contractor bears the risk of cost overruns because the price is fixed regardless of actual costs.
Question 3: A Request for Proposal (RFP) differs from a Request for Quotation (RFQ) primarily because an RFP:
- Invites solutions and methodology, not just pricing (Correct answer)
- Requires a fixed-price bid only
- Is only used for public projects
- Eliminates the need for bonding
Correct answer: Invites solutions and methodology, not just pricing
An RFP solicits the vendor's proposed approach and qualifications in addition to pricing, whereas an RFQ focuses solely on price.
Question 4: What is the purpose of a Notice to Proceed (NTP) in construction contracting?
- Officially authorizes the contractor to begin work (Correct answer)
- Transfers ownership of the site
- Releases final payment to the contractor
- Approves shop drawings
Correct answer: Officially authorizes the contractor to begin work
An NTP is the owner's formal written authorization for the contractor to mobilize and commence construction activities.
Question 5: Under the AIA A201 General Conditions, who is responsible for coordinating the work of subcontractors?
- General contractor (Correct answer)
- Owner's representative
- Architect
- Construction manager at risk
Correct answer: General contractor
The general contractor is contractually responsible for managing, scheduling, and coordinating all subcontractor activities on site.
Question 6: A performance bond protects the project owner by:
- Guaranteeing the contractor completes the project per contract terms (Correct answer)
- Covering unpaid suppliers and laborers
- Insuring against worker injuries
- Providing design error coverage
Correct answer: Guaranteeing the contractor completes the project per contract terms
A performance bond ensures that if the contractor defaults, the surety will complete the project or compensate the owner up to the bond amount.
Construction Management Contract Administration & Procurement 1
What document formally establishes the legal relationship between an owner and a general contractor on a construction project?