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Engineering Economics & Contract Management Flashcards

7 cards from real CPE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Engineering Economics & Contract Management flashcards as text

  1. In engineering economics, the 'MARR' (Minimum Attractive Rate of Return) represents:

    Answer: The minimum return a company requires to justify an investment

    The MARR is the lowest acceptable return rate set by an organization based on its cost of capital, opportunity costs, and risk tolerance.

  2. Which procurement method requires the owner to select the designer and contractor separately?

    Answer: Design-Bid-Build (DBB)

    Design-Bid-Build uses sequential, separate contracts for design and construction, with the owner contracting designer and general contractor independently.

  3. The future worth of $10,000 invested for 5 years at 8% compounded annually is closest to:

    Answer: $14,693

    FW = $10,000 × (1.08)^5 = $10,000 × 1.4693 = $14,693.

  4. A 'pay-if-paid' clause in a subcontract:

    Answer: Makes the general contractor's obligation to pay contingent on receiving payment from the owner

    A pay-if-paid clause shifts the risk of owner nonpayment to the subcontractor, making receipt of owner payment a condition precedent to the GC's obligation to pay.

  5. Which depreciation method is mandated for US federal income tax purposes under the Modified Accelerated Cost Recovery System (MACRS)?

    Answer: Double-declining balance switching to straight-line

    MACRS uses the double-declining balance method switching to straight-line when straight-line yields a larger deduction, based on asset class recovery periods.

  6. A contractor discovers that a subcontractor's default will delay the project. Under standard contract provisions, the general contractor should first:

    Answer: Notify the owner and provide the subcontractor written notice of default with a cure period

    Standard contract provisions require the GC to provide written notice of default and a reasonable cure period before termination, protecting both parties' rights.

  7. In cost engineering, the 'law of diminishing returns' applied to project resources means:

    Answer: Beyond an optimal point, adding more resources yields progressively smaller productivity gains

    The law of diminishing returns states that after a certain optimal level, each additional unit of resource (e.g., workers) contributes less incremental output than the previous unit.