General Contractor License Project Management and Supervision 4 — Questions and Answers
Question 1: What is 'substantial completion' in a construction contract?
- When 50% of the contract value is earned
- The stage when the work is sufficiently complete for the owner to use it for its intended purpose (Correct answer)
- Final payment to all subcontractors
- Issuance of a temporary certificate of occupancy
Correct answer: The stage when the work is sufficiently complete for the owner to use it for its intended purpose
Substantial completion triggers the start of warranty periods, shifts insurance responsibilities, and is typically when liquidated damages stop accruing.
Question 2: A cost-plus contract with a Guaranteed Maximum Price (GMP) means the contractor:
- Keeps all savings below the GMP
- Is reimbursed actual costs plus a fee, but cannot bill the owner above the GMP without a change order (Correct answer)
- Bears no risk if costs exceed the GMP
- Must use a lump-sum fee regardless of actual cost
Correct answer: Is reimbursed actual costs plus a fee, but cannot bill the owner above the GMP without a change order
In a GMP contract, the contractor is reimbursed for actual costs plus a fee up to the agreed maximum; costs above the GMP are the contractor's responsibility unless changed by owner-approved change orders.
Question 3: Which method is used to measure project performance by comparing earned value to planned value and actual cost?
- Break-even analysis
- Earned Value Management (EVM) (Correct answer)
- Benefit-cost ratio
- S-curve forecasting only
Correct answer: Earned Value Management (EVM)
EVM integrates scope, schedule, and cost to objectively measure project performance using metrics like Schedule Performance Index (SPI) and Cost Performance Index (CPI).
Question 4: If a project's Cost Performance Index (CPI) is 0.85, this means the project is:
- 15% ahead of schedule
- Getting $0.85 of work done for every $1.00 spent — over budget (Correct answer)
- Earning 85% more than planned
- Ahead of budget by 15%
Correct answer: Getting $0.85 of work done for every $1.00 spent — over budget
A CPI below 1.0 indicates cost overrun; the project is spending more than the value of work accomplished.
Question 5: When issuing a Notice to Proceed (NTP) to a subcontractor, the general contractor should ensure:
- The subcontractor has begun work already to save time
- The subcontract is fully executed, insurance certificates received, and any required bonds are in place (Correct answer)
- The NTP is verbal to maintain flexibility
- Permits are not yet required at this stage
Correct answer: The subcontract is fully executed, insurance certificates received, and any required bonds are in place
Issuing an NTP before the subcontract is executed or insurance/bonds are confirmed exposes the general contractor to unprotected liability and contract disputes.
Question 6: A construction manager is best described as differing from a general contractor in that the construction manager typically:
- Self-performs all work with in-house labor
- Provides management services as the owner's agent or at-risk entity rather than holding all trade contracts (Correct answer)
- Is responsible only for safety inspections
- Obtains permits in the owner's name only
Correct answer: Provides management services as the owner's agent or at-risk entity rather than holding all trade contracts
A construction manager may act as the owner's agent (CM-Agency) or hold trade contracts at risk (CM-at-Risk), emphasizing management services rather than self-performance.
Question 7: What is the purpose of a schedule of values in a construction project?
- To list all subcontractors by license number
- To allocate the contract sum across work items, enabling proportional payment requisitions (Correct answer)
- To establish the critical path for scheduling
- To itemize OSHA safety compliance costs
Correct answer: To allocate the contract sum across work items, enabling proportional payment requisitions
The schedule of values breaks the contract price into line items for each portion of work, forming the basis for calculating earned value on each pay application.
General Contractor License Project Management and Supervision 4
What is 'substantial completion' in a construction contract?