PC Contract and Project Management 2 — Questions and Answers
Question 1: A contractor receives a change order request that would add $12,000 to the contract. The owner asks the contractor to begin work immediately before signing the change order. What is the most prudent course of action?
- Begin work immediately to maintain good owner relations
- Refuse work until the signed change order is received (Correct answer)
- Begin work but document the request in writing to the owner
- Require a verbal agreement from the owner's representative
Correct answer: Refuse work until the signed change order is received
Work should never begin on changed scope without a signed change order, as verbal agreements are difficult to enforce and payment may be disputed.
Question 2: Which contract clause typically allows the owner to order changes to the scope of work without voiding the contract?
- Liquidated damages clause
- Changes clause (Correct answer)
- Force majeure clause
- Indemnification clause
Correct answer: Changes clause
A changes clause (or changes in work clause) gives the owner the right to direct changes within the general scope without invalidating the contract.
Question 3: On a lump-sum electrical contract, the contractor discovers that the specifications contain an error that increases material costs by $8,000. Who typically bears this cost?
- The contractor, since they submitted a fixed price
- The owner, as errors in their provided documents are their responsibility (Correct answer)
- Split equally between contractor and owner
- The design professional who created the specifications
Correct answer: The owner, as errors in their provided documents are their responsibility
When the owner provides defective specifications, the owner bears responsibility for resulting cost increases under the Spearin Doctrine.
Question 4: A project schedule shows a total float of zero on the critical path. What does this indicate?
- The project is ahead of schedule
- Any delay on critical path activities will delay project completion (Correct answer)
- The project has extra time built into the schedule
- Non-critical activities have been completed early
Correct answer: Any delay on critical path activities will delay project completion
Zero total float on the critical path means any delay to those activities will directly delay the project's completion date.
Question 5: Under a unit price contract for electrical conduit installation, which party bears the risk of quantity variations?
- The contractor, because they bid the unit prices
- The owner, because total cost changes with actual quantities installed (Correct answer)
- Both parties share the risk equally
- The surety company that issued the performance bond
Correct answer: The owner, because total cost changes with actual quantities installed
Under unit price contracts, the owner bears the risk of quantity variations since payment is based on actual quantities measured in the field.
Question 6: What is the purpose of a Notice to Proceed (NTP) on a construction contract?
- It authorizes the contractor to submit a bid
- It officially instructs the contractor to mobilize and begin work on a specific date (Correct answer)
- It confirms that the contractor's bond has been accepted
- It grants the owner permission to occupy the building
Correct answer: It officially instructs the contractor to mobilize and begin work on a specific date
A Notice to Proceed is a formal written notice from the owner that authorizes and directs the contractor to begin work, establishing the contract start date.
Question 7: A subcontract contains a 'pay-when-paid' clause. Under most US state interpretations, what does this mean?
- The subcontractor is never paid if the owner doesn't pay the general contractor
- Payment to the subcontractor is conditioned on receipt of owner payment, creating a timing mechanism (Correct answer)
- The subcontractor must wait indefinitely for payment if the owner is in financial distress
- The clause is generally unenforceable and the GC must pay within 30 days regardless
Correct answer: Payment to the subcontractor is conditioned on receipt of owner payment, creating a timing mechanism
Most courts interpret pay-when-paid clauses as a timing mechanism giving the GC a reasonable time to collect, not as a permanent defense against payment.
PC Contract and Project Management 2
A contractor receives a change order request that would add $12,000 to the contract.
The owner asks the contractor to begin work immediately before signing the change order.
What is the most prudent course of action?