Term
| Why is a construction project unique? |
|
Definition
| Because each is tailored to suit its environment, arranged to perform its own particular function, and designed to reflect personal tastes and preferences |
|
|
Term
| What is the correlation between a high level of construction activity and periods of economic prosperity? |
|
Definition
| Largest single production industry in U.S. Correlation is simultaneous. |
|
|
Term
| What are the two broad classes of owners? |
|
Definition
|
|
Term
| What is the principal job of an A/E? |
|
Definition
| Design. Secondarily, sometimes administration of project on behalf of the Owner. |
|
|
Term
| What is the difference between “agency construction management” and “at-risk construction management?” |
|
Definition
| CM includes services ranging from merely coordinating construction to broad-scale responsibilities over project planning and design, design document review, construction scheduling, value engineering, cost monitoring, and other management services. “Agency CM” involves CM as agent for the Owner for a fee and without risk. “At-risk CM” usually involves the CM in place of a prime contractor. |
|
|
Term
| What makes a contractor a “prime” contractor? |
|
Definition
| In contract with the Owner; all Owner contracts are considered prime. Prime contractor brings together all of the diverse elements and inputs of the construction process into a single, coordinated effort. |
|
|
Term
| What is the definition of a “subcontractor?” |
|
Definition
| A contractor with a contract with the prime contractor (or below) to do some phase of the work onsite. Can be specified portion of work, or may be unspecified (e.g., build the project office) |
|
|
Term
| What are the four broad categories of construction? |
|
Definition
| Residential, commercial (building), Heavy/highway (Engineering), and Industrial |
|
|
Term
| What is the difference between “short-term financing” and “long-term financing?” |
|
Definition
Short term to pay the construction costs (“construction financing”)
Long term to finance the cost of the land and building over many years |
|
|
Term
| What are the two basic ways an owner may use to select a contractor? |
|
Definition
| Competitive bidding and Negotiated |
|
|
Term
| How does Fast-Track work? |
|
Definition
| “Fast-tracking” refers to the overlapping of design and construction. Design of later stages while earlier stages under construction. |
|
|
Term
| Who usually performs “general conditions construction” work on a project? |
|
Definition
| The prime contractor provides temporary heat, access to the project, hoisting, weather protection, guardrails, stairways, fire protection, job fencing, drinking water, sanitary facilities, job security, job signage, trash disposal, and job parking |
|
|
Term
| Competitive bidding is said to accomplish what two things from contractors? |
|
Definition
| Encourages efficiency and innovation |
|
|
Term
| What is competitive negotiation? |
|
Definition
| Proposals state the relative importance of price and technical merit and list technical evaluation criteria and relative weights. Contractors within competitive range get input on how to improve the technical approach and then resubmit proposals |
|
|
Term
| Most negotiated contracts are of what type? |
|
Definition
Lump –Sum
Unit Price
Cost-plus-a-fee or Cost-Reimbursable |
|
|
Term
| Who determines the percentage in a Cost Plus a Percentage of Cost contract? |
|
Definition
|
|
Term
| Who is the “prime contractor” in a force account (day labor) construction project? |
|
Definition
| The Owner acts as prime contractor by “subbing out the work.” |
|
|
Term
| What is meant by “set-aside?” |
|
Definition
| An amount of work (a percentage of a project sometimes) “set aside” for small and disadvantaged business enterprises (“DBE’s”) |
|
|
Term
| How does weather affect construction bidding? |
|
Definition
| With serious shortages of skilled workers during the warm-weather months and extensive unemployment during the cold-weather months |
|
|
Term
| What are two of the main reasons for licensing? |
|
Definition
| To protect public health and safety |
|
|
Term
| What is a “permanent license surety bond?” |
|
Definition
| A permanent guarantee while licensed as a contractor |
|
|
Term
| Building codes are enforced by the use of what? |
|
Definition
| Permits, inspections, and testing reports |
|
|
Term
| What are four alternative traditional business forms used by construction contractors? |
|
Definition
(1) Proprietorship
(2) Partnership
(3) Corporation
(4) Limited Liability Company (LLC) |
|
|
Term
| Approximately what percent of all construction companies in the United States are proprietorships? |
|
Definition
| 700,000 construction companies made up of 77% proprietorships, 6% partnerships, 17% corporations. What about LLC’s? |
|
|
Term
| What is the simplest form of business entity? |
|
Definition
|
|
Term
| What is a general partnership? |
|
Definition
| Association of two or more entities to carry on a business for mutual profit |
|
|
Term
| Does a partnership contract have to be in writing? |
|
Definition
| Not in most states. However, even in states where it does have to be in writing, the IRS can classify an entity as a partnership for tax purposes if it acts like one. In LA, to own immovable property the partnership must be in writing. Also, to get a contractor’s license it has to be in writing. |
|
|
Term
| Is a general partner an agent of the partnership? |
|
Definition
| Yes, he or she can bind the partnership in contract. And, the general partner is liable for partnership debts. |
|
|
Term
| Who gets paid last in a partnership dissolution: a commercial lender or a partner lender? |
|
Definition
| A partner lender. First, commercial lender. Then, partner lender. Last, the partners for ownership. |
|
|
Term
| What is a sub-partnership? |
|
Definition
| An agreement of a general partner with an outsider whereby the outsider will share in some designated way that general partner’s profits or losses derived from partnership activities. |
|
|
Term
| What is a limited partnership? |
|
Definition
| A partnership with at least one general partner, and limited partners who contribute cash or property and shares in the profits, but provides no services and has no say in management. |
|
|
Term
| What are three of the principal advantages of using a corporation business form? |
|
Definition
(1) Limited liability of its shareholders, (2) perpetual duration,
(3) ease of raising capital,
(4) multiple ownership,
(5) owners pay taxes only on
dividends received (but corporation cannot deduct the dividends). |
|
|
Term
| What is a foreign corporation? |
|
Definition
| A corporation chartered in another state or country. |
|
|
Term
| What right of a stockholder is protected by preemptive rights? |
|
Definition
The right to maintain ownership position by being able to buy a proportional
number of shares in a share offering. |
|
|
Term
| Are directors of a corporation considered to be agents of the company? |
|
Definition
No, but directors are liable for the decisions made as a director. Directors
elect officers who may be agents of the company. |
|
|
Term
| What is the principal advantage of using an S corporation instead of a C corporation? |
|
Definition
Flow through of profits and losses to the shareholders for tax purposes (even
when no money is actually passed through). C corporation pays taxes at its
level, and then passes through money (or not) via dividends that are not
deductible to the corporation (hence the name double taxation). |
|
|
Term
|
Definition
| Employee Stock Ownership Plan |
|
|
Term
| What entity offers the limited personal liability feature of a corporation with the passthrough tax benefits of a partnership? |
|
Definition
Limited liability company that elects to be taxed as a partnership or S
corporation. LLC may also elect to be taxed as a C corporation. |
|
|
Term
| How does a joint venture differ from a partnership? |
|
Definition
| Joint venture is for one project. |
|
|
Term
| What are two of the reasons a construction company needs to be well organized? |
|
Definition
| Organization is a means to achieve company objectives that involve a number of separate and diverse activities, including estimating, bidding, contract negotiation, procurement, project planning and scheduling, construction methods, equipment management, insurance, bonds, material control and storage, accounting, payrolls, field cost control, labor relations, project safety, supervisor training, etc. |
|
|
Term
| What is the first consideration company ownership should establish? |
|
Definition
| Establishing the fundamental purpose of the enterprise, defining the overall scope of operations, setting long-term objectives, and establishing a general plan of action |
|
|
Term
| What are the differences between “authority,” “responsibility,” and “duty?” |
|
Definition
“Authority” is the ability to act or make a decision without the necessity of obtaining approval from a superior. Authority may be delegated.
“Responsibility” implies the accountability of a supervisor for an assigned function or duty.
“Duty” is a specifically defined task that cannot be delegated to another. |
|
|
Term
| Development of an effective company organization involves how many steps? |
|
Definition
|
|
Term
| How detailed should a list of duties be in a construction company? |
|
Definition
| Whatever is appropriate considering the size of the company and the number of employees involved |
|
|
Term
| The list of duties for any given position is referred to as what? |
|
Definition
|
|
Term
| Organization charts show what two principal things? |
|
Definition
| Every position of responsibility and all lines of supervision and authority |
|
|
Term
| The assignment of employees to each of the company positions is known as what? |
|
Definition
|
|
Term
| Why are periodic meetings so important to the communications process? |
|
Definition
| Provide opportunities to exchange ideas, resolve misunderstandings, and decide on future courses of action. Helps establish team spirit. |
|
|
Term
| More complete descriptions of the total workings, details, and interrelationships of a company are found where? |
|
Definition
| The Manual of Policies and Procedures (the “company manual”) |
|
|
Term
| A company’s human resources policies are found in what? |
|
Definition
| The Employee Handbook, including Employment Status, Benefits, Timekeeping and Payroll, and Work Rules and Conduct. |
|
|
Term
|
Definition
| The process of assigning specific responsibilities and authorities to individual employees commensurate with their training and experience. |
|
|
Term
| What are three of the relevant concepts that assist in fostering a positive environment and a favorable work atmosphere? |
|
Definition
| A positive environment and favorable work atmosphere created by: (1) motivation, (2) personal development, (3) training of replacements, and (4) decision making. |
|
|
Term
| What kind of construction projects are usually designed by an architect? |
|
Definition
| Residential and building (commercial) construction by an architect. Heavy/highway (engineered) and industrial (and aspects of building (commercial) construction by an engineer |
|
|
Term
| Contractor input into design is common on what type of construction contracts? |
|
Definition
| Is normal on design-construct, construction management, and design- manage, where the team concept prevails. Also on some negotiated contracts. |
|
|
Term
| What are the three options in selecting a design firm? |
|
Definition
(1) Negotiation with firm of choice
(2) Design competition
(3) Submissions from interested designers, with selection based on professional qualifications alone;
(4) Submissions that include designation of fees, which become a part of the evaluation criteria; and
(5) Bids for professional services and selection on the basis of price alone. |
|
|
Term
| What are the basic services provided by an A/E? |
|
Definition
(1) Ascertaining the needs and desires of the owner,
(2) developing the design,
(3) preparing the bid or negotiation documents,
(4) aiding in the selection of the contractor, and
(5) making an estimate of construction costs |
|
|
Term
| What are three of the ways that an A/E may be compensated for its services? |
|
Definition
(1) Percentage of construction cost (most used),
(2) multiple of salary cost (a form of cost-plus),
(3) multiple of salary cost plus nonsalary expense,
(4) fixed lump-sum,
(5) total expense plus professional fee (a form of cost-plus), and
(6) hourly or per diem charge. |
|
|
Term
| In what phase of the construction project does the A/E act as an independent contractor? |
|
Definition
|
|
Term
| When can third-party liability of an A/E arise? |
|
Definition
| If bodily injury or property damage is caused by the negligence or failure in duty of the designer |
|
|
Term
| When does liability for negligence lawsuits arise? |
|
Definition
| At substantial completion or acceptance of the work by the owner |
|
|
Term
| Name three areas where a contractor may provide input during design. |
|
Definition
(1) Labor availability and costs
(2) Material availability
(3) Alternative work methods and procedures
(4) Delivery times
(5) Local work practices
(6) General site planning |
|
|
Term
| What three important functions do the drawings and specifications serve? |
|
Definition
(1) The nature and extent of the construction to be done,
(2) the materials to be provided, and
(3) the quality of the workmanship required. |
|
|
Term
| What is the purpose of an Advertisement for Bids? |
|
Definition
| Public notice to all contractors that those interested (and qualified) are being sought to submit proposals for construction of a project. |
|
|
Term
| What is an Invitation to Bid? |
|
Definition
| Notification to preselected contractors to submit a proposal on a project. |
|
|
Term
| What is a Project Manual? |
|
Definition
| Bid and contract documents altogether in one book. |
|
|
Term
| What is the purpose of Instructions to Bidders? |
|
Definition
| To make sure that all bidders are bidding exactly under the same conditions. |
|
|
Term
| The Conditions of the Contract define and describe what? |
|
Definition
| The administrative and operational elements of the contract. |
|
|
Term
| What are five typical sections of the drawings? |
|
Definition
| Plot plan, foundation, architectural, structural, electrical, mechanical, and plumbing |
|
|
Term
| What are Open Specifications? |
|
Definition
| For materials described by the characteristics and attributes of materials and equipment to be incorporated in the project in generic terms which establish the quality required in the material by the designer. |
|
|
Term
| What are Closed Specifications? |
|
Definition
| When the quality requirement established by the designer is established by listing a specific band-identified project. |
|
|
Term
| What is a Base-Bid Material Specification? |
|
Definition
| The contract documents name products to be used in a base bid, but the contractors can offer alternate items. |
|
|
Term
|
Definition
| A modification to the bid documents or to the contract documents issued by the designer during the bidding period. |
|
|
Term
| What is an Owner-Designated Alternative? |
|
Definition
| Alternate materials or methods included within the original contract documents to provide a means for the owner to consider different alternatives to the original design to include or not as decided by the owner. |
|
|
Term
| What is a Contractor-Designated Alternates? |
|
Definition
| When a contractor offers an alternative materials or methods as part of the bid, to be decided by the owner when selecting the successful bidder. |
|
|
Term
| What is the purpose of the Agreement? |
|
Definition
| To formalize the contract, listing all of the elements of the contract. |
|
|
Term
|
Definition
| Written instrument directing a specific change in the work and stating the exact nature of the change, and the change, if any, in the contract sum and/or contract time. |
|
|
Term
| Why are accurate estimates needed for negotiated bidding? |
|
Definition
| To provide the owner with reliable advance cost information. An accurate estimate requires a detailed study of the bidding documents and the site conditions. |
|
|
Term
| Approximate price estimates are based on what? |
|
Definition
| Gross unit costs best obtained from previous construction work. Or, from RSMeans. |
|
|
Term
| When are lump-sum estimates applicable? |
|
Definition
| Applicable only when the nature of the work and the quantities involved are well defined by the bidding documents. |
|
|
Term
| When are unit-price estimates applicable? |
|
Definition
| When quantities of work items may not be precisely determinable but the nature of the work is well defined. |
|
|
Term
| What is the primary purpose of reporting services? |
|
Definition
| Central source of bidding information. |
|
|
Term
| The number of sets of bidding documents needed by a contractor depends on what? |
|
Definition
| The size and complexity of the project, the time available for preparation of the bid, and the number of subcontractors, material suppliers, and plan services. |
|
|
Term
|
Definition
| Projects, or a portion of a project, reserved for DBE’s |
|
|
Term
| How does prequalification differ from post-qualification? |
|
Definition
| Qualification is based on experience, competence, and financial criteria. Pre- qualification establishes which contractors will be allowed to bid. Post- qualification involves submitting qualification information with or after the bid. |
|
|
Term
| What are three of the factors included in the “bidding climate?” |
|
Definition
| Bonding capacity considerations, location of the project, severity of contractual terms, the owner and its financial status, the A/E, the nature and size of the project as it relates to company experience, equipment, and finances, work on hand, probable competition, labor conditions and supply, and the completion date. |
|
|
Term
| What problems are caused by an insufficient bidding period? |
|
Definition
| Many of the best prices may not have been received by the bidder, guesswork may be involved, errors in the bid documents may not get discovered, and the best contractors may decide not to bid |
|
|
Term
| What is the principal reason for a prebid meeting? |
|
Definition
| A meeting among the estimators and the persons who will occupy the principal supervisory positions on the project to explore the alternative construction procedures that might be followed and to make tentati |
|
|
Term
| Who estimates self-performed work? |
|
Definition
| The contractor estimates the work it will self-perform |
|
|
Term
| What are four of the reasons for a job site visit prior to an estimate? |
|
Definition
|
|
Term
| Why must a contractor prepare at least a preliminary construction schedule before preparing the estimate? |
|
Definition
| Because the project duration is a very important consideration in the estimating process. |
|
|
Term
| What is a quantity survey? |
|
Definition
| A takeoff of the quantity of each work item called for on the project. |
|
|
Term
| Why do contractors prefer to do their own quantity surveys instead of using a professional quantity surveyor? |
|
Definition
| Confidence in its own estimators. |
|
|
Term
| Who provides the materials pricing? |
|
Definition
|
|
Term
| What is a materials price summary? |
|
Definition
| A document to show all of the material prices for each work unit. |
|
|
Term
|
Definition
| A fixed amount of money for each bidding contractor to include for a designated item of work. |
|
|
Term
| What two rates must be considered in calculating direct labor costs? |
|
Definition
| Wage and production rates |
|
|
Term
| What are the three principal items included in indirect labor costs? |
|
Definition
| Payroll taxes, insurance costs, and fringe benefits |
|
|
Term
| Equipment cost equals the sum of what two things? |
|
Definition
Ownership cost plus operating cost, if the equipment is owned by the contractor.
Rental cost plus operating cost, if the equipment is rented. |
|
|
Term
| Equipment ownership cost includes what five items? |
|
Definition
| Depreciation, financing cost, taxes, insurance, and storage |
|
|
Term
| How is equipment production rates obtained? |
|
Definition
| By measuring the amount of work done in a certain amount of time for each piece of equipment. |
|
|
Term
| What are three of the typical items included in “project overhead” or “job overhead?” |
|
Definition
| Overhead expenses are costs that do not pertain directly to any given construction work item but are nevertheless necessary for the ultimate job completion. Project overhead are those costs incurred on the project site, including job mobilization, project manager, superintendent, utilities, storage buildings, sanitary facilities, etc. |
|
|
Term
| What are four of the typical items included in “general overhead?” |
|
Definition
| Same as office overhead which are those overhead costs not incurred on the project site, including office rent and utilities, office supplies, salaries of executives and office personnel, etc. |
|
|
Term
| From whom should a prime contractor solicit subcontract bids? |
|
Definition
| From subcontractors with whom he has a history of good work, or if no history then one with a good reputation. |
|
|
Term
| What should a contractor do when a subcontractor submits a bid with stipulations? |
|
Definition
| Consider them if there is time before the prime’s bid is due. |
|
|
Term
| What is an “assigned subcontract?” |
|
Definition
| Certain specialty subcontractors submit bids directly to the owner who then assigns them to the successful prime contract bidder. |
|
|
Term
| What are the three principal items included in “markup?” |
|
Definition
| Profit, general overhead, and contingency |
|
|
Term
| What is the principal reason for a lump-sum recap sheet? |
|
Definition
| To bring together in one document all of the various costs of a project, including materials, labor, equipment, project and general overhead, markup, and profit. |
|
|
Term
| How does a unit-price recap sheet differ from a lump-sum recap sheet? |
|
Definition
| Recapped based on units of work in the contract rather than work items |
|
|
Term
| What is the purpose of a change sheet? |
|
Definition
| To incorporate last-minute price revisions |
|
|
Term
| What is meant by “closing out the estimate?” |
|
Definition
| Checking the estimate for completeness and accuracy, and making sure it is in compliance with the bid stipulations. |
|
|
Term
| How does a proposal differ from a bid? |
|
Definition
| A proposal is the offer which is open for acceptance during the bid review period. |
|
|
Term
| How do public bid procedures differ from private bid procedures? |
|
Definition
| Private procedures are developed by the owner, and can be changed by the owner. Public procedures are from statutes, and can only be changed by addendum, and then are very limited. |
|
|
Term
| In what document does a contractor look to find the proper time and place, format and manner, and deadline for submittal of a bid? |
|
Definition
|
|
Term
| What is a responsive bid? |
|
Definition
| One submitted timely and in the format and manner consistent with the Instructions to Bidders, without exception or qualification. |
|
|
Term
| What is meant by the “bid spread?” |
|
Definition
| The amount of money between the lowest bid and the second-lowest bid. |
|
|
Term
| What is meant by “out of the money?” |
|
Definition
| When the lowest bid is higher than the owner’s budget for the project. |
|
|
Term
| What is meant by the “acceptance period?” |
|
Definition
| Time between the bid submittals and the acceptance by the owner in which the owner reviews the bids. |
|
|
Term
| What are three reasons why an owner might reject all bids? |
|
Definition
Lowest bidder having insufficient finances to handle the project,
lack of experience, unsatisfactory reputation, inadequate personnel or equipment, failure to submit a responsive bid,
and irregularities in the bidding procedure. |
|
|
Term
| What four things are required for a contractor to be able to withdraw its bid under the “doctrine of unilateral mistake?” |
|
Definition
(1) A grave mistake that would be unconscionable to enforce,
(2) relates to a material feature of the contract,
(3) not a violation of a positive legal duty, and
(4) owner put into a status quo position |
|
|
Term
| What four elements of promissory estoppel can bind a subcontractor to its bid? |
|
Definition
(1) Clear and definite offer,
(2) expectation of reliance by prime contractor,
(3) actual reliance and the reliance was reasonable, and
(4) reliance work to detriment of prime contractor |
|
|
Term
| Why can subcontractor listing be a problem when the project has alternates? |
|
Definition
| Can’t identify the subcontractor to use until the alternate is chosen. |
|
|
Term
| Why are contingency allowances sometimes included? |
|
Definition
| For remodeling and other types of work with uncertainties. |
|
|
Term
| What is the usual result of a contract prepared by the owner having a disclaimer? |
|
Definition
| It shifts liability from the owner to the contractor. |
|
|
Term
|
Definition
| When subcontractors file their bids with the bid authority who then assigns them to the successful general contractor. |
|
|
Term
| What is the central purpose of a bid depository? |
|
Definition
| To collect written proposals from subcontractors and material suppliers, and then to convey these proposals to the contractors bidding the project. |
|
|
Term
|
Definition
| Bid rigging, or price-fixing, involves an arrangement between contractors to control the bid prices of a construction project or to divide up customers or market areas. |
|
|
Term
| What is the legitimate purpose of unbalanced bids? |
|
Definition
| To front-end-load the project to recapture mobilization costs when there is no mobilization item in the bid list. |
|
|
Term
| What is a “complementary bid?” |
|
Definition
| One that a contractor submits to the owner that the contractor did not prepare but obtained from another contractor. |
|
|
Term
| What are the effects of a “state preference statute?” |
|
Definition
| To give in-state contractors an advantage when state money involved |
|
|
Term
| When is scope bidding usually used? |
|
Definition
| When performance specifications are written, and on negotiated work for the establishment of target estimates or guaranteed maximum contract amounts. |
|
|
Term
| On what type of projects is range estimating utilized? |
|
Definition
| Very large and complex projects. |
|
|
Term
| What does “BIM” stand for? |
|
Definition
| Building Information Modeling |
|
|
Term
| Most negotiated contracts use what kind of fee arrangement? |
|
Definition
|
|
Term
| What are three of the responsibilities an owner has on a project? |
|
Definition
(1) Providing property surveys, granting access to the site, providing certain insurance, making periodic payments to the contractor
(2) Coordinating separate prime contracts
(3) Providing, and warranting the accuracy of, construction plans |
|
|
Term
| What are four of the main “points of law” that an A/E has no authority to decide? |
|
Definition
(1) Time of completion
(2) Extensions of time
(3) Liquidated damages
(4) Claims for extra payment |
|
|
Term
| What is “indemnification?” |
|
Definition
| Requires one party compensate a second party for a loss that the second party would otherwise bear |
|
|
Term
| Subject to contractual requirements and limitations in the contract, a contractor is free to do what three things on a project? |
|
Definition
(1) Subcontract portions of the contract
(2) Purchase materials where it chooses
(3) Process the work in any way and in any order it pleases |
|
|
Term
| What are the three main ways a contract may be terminated? |
|
Definition
(1) Full and satisfactory performance
(2) Material breach of contract
(3) Mutual agreement of the parties |
|
|
Term
| When does a subcontract have to be in writing? |
|
Definition
| If the contract requires it to be. Otherwise, a good idea anyway. |
|
|
Term
| What is the result of including “time is of the essence” language in a contract? |
|
Definition
| Makes time a material obligation of the contract, failure of which would permit the owner to rescind the contract and recover damages. Contractor must start “as soon as possible” and “diligently” pursue the work. |
|
|
Term
| What are “liquidated damages?” |
|
Definition
| An agreed upon amount, being a reasonable measure of expected actual damages, resulting from completing the project late (after the extended deadline). |
|
|
Term
| What are three of the acceptable reasons for a time extension? |
|
Definition
(1) Caused by law
(2) Caused by the owner or owner’s representative
(3) Caused by Mother Nature |
|
|
Term
| What is “acceleration” and what is “constructive acceleration?” |
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Definition
Acceleration is speeding up the work to finish in a shorter time than scheduled.
Directed acceleration is an order from the owner to speed up work.
Voluntary acceleration is the contractor deciding to speed up work to either get back on schedule or finish ahead of schedule.
Constructive acceleration is when the owner refuses to issue a justified time extension and insists that the contractor still finish on schedule. |
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Term
| What are the two kinds of “differing site conditions?” |
|
Definition
(1) Type I: when a physical aspect of the project materially differs from that indicated in the contract documents
(2) Type II: when a physical aspect of the project materially differs from that normally expected on that type of construction |
|
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Term
| When an owner delays a project, what is meant by “consequential damages” or “impact costs?” |
|
Definition
“Impact costs” are costs to the contractor in addition to direct costs for a change order or time extension, including stacking of trades (idleness of workers due to too many being onsite at the same time), disrupted schedules, etc.
“Consequential damages” are damages in addition to impact costs, such as the cost of the contractor’s reputation, bankruptcy, lost bonding capacity, etc. due to owner interference or improper contract termination. |
|
|
Term
| What is the “agreement” document and what is it intended to do? |
|
Definition
| (Also the “contract”) formalizes the deal; brings together all of the contract documents by reference |
|
|
Term
| What is a “letter of intent” or “letter contract?” |
|
Definition
| Authorization to contractor to start work prior to signing of formal contract |
|
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Term
| What is the effect of a “notice to proceed?” |
|
Definition
| It is the beginning of the contract time. |
|
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Term
| What constitutes final acceptance of the project and what are the results of such acceptance? |
|
Definition
Not progress payments. Not occupancy and use by the owner. At substantial completion (when the project is complete enough for its intended use, even if minor defects remain), contractor entitled to receive full payment less an amount to pay for minor defects work (“punch list”), unless contract states otherwise, which it usually does. Then, after completion of punch list items a Certificate of Payment is approved by owner’s representative and final acceptance is achieved.
Approval of the contractor’s pay application by the owner’s representative |
|
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Term
| What are the three main ways a contract may be terminated? |
|
Definition
(1) Full and satisfactory performance
(2) Material breach of contract
(3) Mutual agreement of the parties |
|
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Term
| What are the two main things a contractor is responsible for during the warranty period? |
|
Definition
(1) Improper workmanship
(2) Inferior materials
(3) Faults resulting from failure to perform in accordance with the contract |
|
|
Term
| What is the difference between insurance and suretyship? |
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Definition
| Insurance protects a party from risk of loss, whereas suretyship guarantees the performance of a defined contractual duty. |
|
|
Term
| What are the three elements of a construction bond? |
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Definition
| The bond instrument itself, the face amount of the bond, and the premium for the bond. |
|
|
Term
| What are the two principal responsibilities the prime contractor accepts? |
|
Definition
(1) To perform the objective of the contract
(2) To pay all costs associated with the work |
|
|
Term
| What four guarantees to the owner are usually required? |
|
Definition
(1) The contractor’s bid will be in good faith
(2) If selected by the owner, the contractor will enter into contract with the owner
(3) The amount of the contract will match the bid amount
(4) The contractor will provide the other bonds required (and insurances required) |
|
|
Term
| What does a performance bond guarantee? |
|
Definition
| Guarantees that the contract will be performed and that the owner will receive its structure. |
|
|
Term
| What does a payment bond guarantee? |
|
Definition
| Guarantees payment for labor and materials (and equipment rentals). |
|
|
Term
| What is the difference between a statutory payment bond and a common-law payment bond? |
|
Definition
| Statutory bonds, at least by reference, contain the provisions of the statute that makes a bond a requirement. Common-law bonds stand entirely on the provisions contained in the bond itself. |
|
|
Term
| In what amount is a Miller Act performance bond written? |
|
Definition
| In such amount required by the contracting officer. |
|
|
Term
| Is written notice required when making a claim for payment? |
|
Definition
| Claim must be in accordance with the requirements of the bond, which may require a claim to be in writing. |
|
|
Term
| Why is approval of a change order by the surety a good idea? |
|
Definition
| Because common law does not allow two contracting parties to bind a third party without its consent |
|
|
Term
| Bond premiums are payable when? |
|
Definition
| In advance, subject to later adjustment |
|
|
Term
| On a large contract, a surety may seek protection for itself by doing what? |
|
Definition
| Enlisting other sureties to underwrite a portion |
|
|
Term
| What does it mean to “indemnify” the surety? |
|
Definition
| To pay back the surety if it is called upon. Indemnification from the principal and a third-party indemnitor. |
|
|
Term
| What are the components of the “three C’s” requirement for a bond? |
|
Definition
(1) Character
(2) Capacity
(3) Capital |
|
|
Term
| What is “bonding capacity?” |
|
Definition
| Maximum value of uncompleted work the surety will allow the contractor to have on hand at any one time |
|
|
Term
| Who is the “surety agent?” |
|
Definition
| Local representative of the bonding company |
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|
Term
| What are the three principal actions a surety may take in the event of a default by the contractor? |
|
Definition
(1) May assume charge of the project and complete it
(2) Allow the owner to contract with another contractor
(3) Help the original contractor financially to complete it |
|
|
Term
| Why does an Owner not require a bond from the design professional? |
|
Definition
| Because protection comes from the A/E’s professional liability insurance |
|
|
Term
| When a subcontractor provides a bond, who is the principal and who is the obligee? |
|
Definition
| Subcontractor is the principal, prime contractor is the obligee |
|
|
Term
| What are three of the alternatives to providing a bond? |
|
Definition
(1) Personal or individual surety
(2) Cash, or cash equivalents such as bonds or notes, certified or cashier’s check, bank drafts, and postal service money orders
(3) Irrevocable letter of credit |
|
|
Term
| What is a “maintenance bond?” |
|
Definition
| (Or warranty bond) covers warranty liability beyond statutory limits (usually one year). |
|
|
Term
| How does insurance shift risk? |
|
Definition
| By having a professional risk-bearer take on the risk. |
|
|
Term
| What are the five steps that a construction company can follow in applying risk management to its business? |
|
Definition
(1) Recognize and identify the various risks
(2) Measure the degree of exposure
(3) Decide how to protect against those risks (eliminate or transfer to another party)
(4) Conduct a company-wide program of loss control or prevention
(5) Monitor the results |
|
|
Term
| How are the risks of liability to which the owner and designer are exposed usually handled? |
|
Definition
| Indemnification from the contractor |
|
|
Term
| What two obligations does an insurance company have to its insured contractor? |
|
Definition
(1) Indemnify the contractor from loss covered by a policy
(2) Duty to defend the contractor in an action brought |
|
|
Term
| What are three of the typical insurance policies that construction contracts require of a contractor? |
|
Definition
(1) Workers’ Compensation
(2) Employer’s Liability
(3) Comprehensive General Liability |
|
|
Term
| What are four of the kinds of insurance required by law? |
|
Definition
(1) Workers’ Compensation
(2) Automobile Liability
(3) Unemployment
(4) Social Security |
|
|
Term
| If a risk is insurable, what three things must be balanced against the cost of the premiums? |
|
Definition
(1) Possible loss
(2) Probability of its occurrence
(3) Contractor’s ability to withstand the loss |
|
|
Term
| What costs more with insurance: gaps or overlaps? |
|
Definition
| Gaps if there is an uninsured loss. Overlaps if there is no uninsured loss. |
|
|
Term
| What is the greatest risk facing a highway contractor? |
|
Definition
|
|
Term
| What coverage does a builder’s risk policy provide? |
|
Definition
| Project property damage only including temporary buildings and materials stored therein. |
|
|
Term
| What does “all-risk” builder’s risk insurance policy cover? |
|
Definition
| Any problem unless excluded |
|
|
Term
| What does a “named-peril” builder’s risk insurance policy cover and how do you get more coverage? |
|
Definition
| Any risk named in the policy, and in an endorsement (or rider) |
|
|
Term
| What two forms of premiums are available for builder’s risk insurance and how do they differ? |
|
Definition
(1) Reporting form, subject to periodic progress reports, with payments made periodically in accordance with work in place
(2) Completed-value, with payment up-front – usually an average of the expected value periodically |
|
|
Term
| What are three types of projects that lend themselves to the owner providing the builder’s risk insurance? |
|
Definition
(1) Multiple prime contractors
(2) Remodeling project
(3) Building addition project |
|
|
Term
| Subrogation gives the insurance company what right? |
|
Definition
| To recover its costs from the party whose negligence caused the loss |
|
|
Term
| When is a builder’s risk policy terminated? |
|
Definition
| Unless the contract states otherwise, when the owner has made formal acceptance |
|
|
Term
| An equipment floater policy is available on what two bases? |
|
Definition
(1) Schedule form, with each piece of equipment listed in the policy and valued
(2) Blanket form, with a listing of all owned equipment and its value |
|
|
Term
| What coverage does a property insurance policy typically provide and what are three of the indirect losses that may also covered? |
|
Definition
| Covers buildings, business personal property of the contractor, and the personal property of others in the contractor’s care, custody, or control, including building contents. Indirect costs: business interruption, rental value, and extra expense |
|
|
Term
| What does a liability insurance policy protect the contractor against and what right to settle does the insurance company usually reserve? |
|
Definition
| Protects the contractor against claims brought against it by third parties. Insurance company reserves the right to settle as it sees fit without the approval or consent of the contractor. |
|
|
Term
| What coverage does a commercial general liability insurance policy provide? |
|
Definition
| Protects against third party claims arising from the contractor’s operations as well as those of independent contractors, completed operations, contractual liability, personal injury, and certain other hazards. |
|
|
Term
| What coverage does a public liability insurance policy provide and what coverage does it specifically exclude? |
|
Definition
| Protects the contractor against its legal liability to third persons for bodily injury and property damage arising from its own operations. Excluded are injuries to the contractor’s own employees and automobile liability. |
|
|
Term
| What coverage does a contractor’s protective public and property damage liability insurance policy provide? |
|
Definition
| (also contingent liability insurance) protects the contractor from its contingent liability imposed by law because of injuries to persons or damage to property others arising from the acts or omissions of independent contractors (e.g., subcontractors). |
|
|
Term
| What coverage does a completed-operations liability insurance policy provide? |
|
Definition
| Protects the contractor from liabilities arising out of projects that have been completed or abandoned. |
|
|
Term
| What coverage does a contractual liability insurance policy provide? |
|
Definition
| (also indemnification insurance) covers liabilities of others assumed by the contractor in the contract |
|
|
Term
| What coverage does third-party beneficiary provision provide? |
|
Definition
| When a third party can enforce its rights under the contract even though it is not a party (not usually covered by the contractual liability insurance) |
|
|
Term
| What is difference between “bodily injury” and “personal injury?” |
|
Definition
| Bodily injury refers to physical injury, including shock, mental anguish, mental injury, sickness, disease, or death. Personal injury refers to intangible harm. |
|
|
Term
| What are three of the typical exclusions from a CGL policy? |
|
Definition
- (1) Property damage liability
- (2) Automobile, watercraft, and aircraft liability
- (3) Professional liability
- (4) Liability for injury to the contractor’s own employees
- (5) Liability arising from pollution
|
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|
Term
| What are four of the property damage liability exclusions? |
|
Definition
(1) Property owned by, leased to, or rented to the contractor
(2) Personal property in the contractor’s care, custody, or control
(3) Premises sold, abandoned, or given away by the contractor
(4) Property lent to the contractor
(5) Damage to the work site
(6) Property that must be restored due to faulty workmanship |
|
|
Term
| Physical damage coverage in an automobile policy is available in what three major forms? |
|
Definition
(1) Collision
(2) Specified perils
(3) Comprehensive |
|
|
Term
| Who might need to purchase professional liability insurance on a construction project? |
|
Definition
| Persons performing design and other professional services |
|
|
Term
| What three purposes does an umbrella excess liability insurance policy serve? |
|
Definition
(1) To cover gaps in policies
(2) To raise policy limits
(3) To provide coverage not provided by the underlying liability policies |
|
|
Term
| What is “wrap-up” insurance? |
|
Definition
| Paid for by the owner, usually one insurance company provides coverage for workers’ compensation and employer’s liability, general liability, umbrella, and builder’s risk insurances, and contractor is required to accept the coverages (although he can acquire excess policies |
|
|
Term
| What are two ways that an owner’s exposure to liability may be covered? |
|
Definition
(1) Owner’s protective liability insurance
(2) Indemnification by contractor |
|
|
Term
| What is meant by a “subcontractor-under” provision? |
|
Definition
| Covers the contractor for claims against a subcontractor when the subcontractor’s coverage is faulty or insufficient. |
|
|
Term
| What is the difference between a “risk retention pool” and a “self-insured pool?” |
|
Definition
A risk retention pool is when a group of contractors band together for purchasing power for insurance to be purchased individually by each member.
A self-insured pool acts as a self-contained insurance company that purchases the insurance to cover the members. |
|
|
Term
| What are three kinds of employee benefit insurances often provided by an employer? |
|
Definition
| Fringe benefits: major medical, hospital, surgical, life, accidental death, disability, and weekly income coverages. |
|
|
Term
| What is a certificate of insurance and how is it used? |
|
Definition
| Printed form executed by an insurance company certifying that a named insured has in force the insurance designated by the certificate used to evidence coverage. |
|
|
Term
| What is the underlying economic principle of workers’ compensation? |
|
Definition
| That costs associated with an on-the-job injury or death of an employee, regardless of fault, is an expense of production and should be borne by the industry. |
|
|
Term
| When can an injured worker sue his or her own employer? |
|
Definition
| When the contractor has a subjective realization that injury or death could occur because of an unsafe condition (based on gross negligence of the employer). |
|
|
Term
| How is it determined what benefits an injured worker is entitled to under workers’ compensation? |
|
Definition
| Only those provided by law. |
|
|
Term
| What are the four classifications of work injuries used in conjunction with workers’ compensation benefits? |
|
Definition
(1) Temporary-total
(2) Permanent-partial
(3) Permanent-total
(4) Death |
|
|
Term
| How is a second injury to a worker administered? |
|
Definition
| Second employer only liable for payments caused by second injury only. |
|
|
Term
| What limits are set on the medical costs and legal fees incurred by a worker under workers’ compensation? |
|
Definition
| No limits on medical costs; legal fees ordered by court. |
|
|
Term
| How are workers’ compensation premiums calculated? |
|
Definition
| In all but one state, premium costs are computed by multiplying each employee’s total wages, exclusive of overtime pay, by the rate specified for his classification. |
|
|
Term
| How does a workers’ compensation deductible plan work? |
|
Definition
| If the contractor assumes personal liability for payment of a prescribed portion of a claim, the premiums are reduced. |
|
|
Term
| What must an employer do to become self-insured for workers’ compensation purposes? |
|
Definition
| If it can meet minimum financial requirements, and possibly furnish a bond, it can self-insure. Usually, a policy for excess coverage is purchased. |
|
|
Term
| What coverage does an employer’s liability insurance policy provide? |
|
Definition
| Protects a contractor for bodily injury or death of an employee arising from employment not covered under the workers’ compensation law. |
|
|
Term
| What is non-occupational disability insurance and how is it usually paid? |
|
Definition
| Pays a weekly benefit, for a specified period, for an employee disabled by an accident away from work. Paid by employer and employee. |
|
|
Term
| What coverage does unemployment insurance provide and who pays for it? |
|
Definition
| For a worker whose employment is terminated through no fault of his own paid for by the employer. |
|
|
Term
| What kinds of losses or liabilities must be brought to the attention of the insurance company? |
|
Definition
| Every possible loss must be reported |
|
|
Term
| What are the four basic types of benefits provided by social security? |
|
Definition
(1) Retirement benefits
(2) Hospitalization benefits
(3) Survivor benefits
(4) Disability benefits |
|
|
Term
| While the management of the field operations is vitally important to the success or a construction company, what is another indispensable part of the total picture? |
|
Definition
| Necessary support functions performed by the central office |
|
|
Term
| What are three of the many reasons for proper records to be kept by a contractor? |
|
Definition
(1) The law requires it
(2) Source material for obtaining indispensable support services
(3) Submittal to bankers, sureties, owners, insurance companies, public agencies, lending firms, etc. |
|
|
Term
| What is the difference between the cash method of accounting and the accrual method of accounting? |
|
Definition
Cash method recognizes income when received and expenses when made
Accrual method recognizes income when earned and expenses when incurred |
|
|
Term
| What is a long-term contract for accounting purposes? |
|
Definition
| A contract not completed within the taxable year in which entered into |
|
|
Term
| What is the percentage of completion method of accounting? |
|
Definition
| Recognizes job income and expenses from long-term contracts as the work advances based on percent complete |
|
|
Term
| What is the percentage-of-completion capitalized cost method? |
|
Definition
| Where 90% of the revenue and expenses use the percentage-of-completion method and the remaining 10% use the completed-contract method. |
|
|
Term
| What is the completed-contract method of accounting? |
|
Definition
| Recognizes income and expenses only when the project is substantially completed |
|
|
Term
| Who are three of the entities that are interested in a company’s financial statements and why? |
|
Definition
(1) Company management for advance planning of operations, purchasing, equipment ownership, and office overhead
(2) Banks for loan purposes
(3) Sureties for bond purposes |
|
|
Term
| What is an income statement? |
|
Definition
| Shows the nature and amount of the company’s income and expenses for a given time period (often a calendar year) |
|
|
Term
| What is a balance sheet and what is meant by book value? |
|
Definition
| A summary of the assets, liabilities, and net worth of a company at a particular time (usually end of year) |
|
|
Term
| What are three of the four financial ratios in section 9.11 and what do they show? |
|
Definition
(1) Liquidity ratios show the ability to meet financial obligation
(2) Activity ratios show the level of investment turnover (how well the working capital and other assets are being used)
(3) Profitability ratios show company profits to various parameters
(4) Leverage ratios show comparison of company debt with other financial measures |
|
|
Term
| What does the ratio of quick assets to current liabilities show? |
|
Definition
| The number of dollars immediately available to cover current debt |
|
|
Term
| What are two of the advantages of equipment rental as opposed to equipment purchase? |
|
Definition
(1) Coverage for an equipment breakdown
(2) For low-percentage utilization and for short-term peak or seasonal use
(3) For evaluation for later purchase |
|
|
Term
| What is meant by an internal rental rate for a piece of equipment? |
|
Definition
| Acting as a profit center to recover the cost of the equipment recovered on each project on which the equipment is used |
|
|
Term
| What is meant by the mid-quarter convention as used in equipment depreciation? |
|
Definition
| Requires depreciation for each piece of equipment to begin midway through the quarter in which it was put in use |
|
|
Term
| What is meant by straight-line depreciation? |
|
Definition
| Writing off the depreciable value of an asset at a uniform rate throughout its service life |
|
|
Term
| What is meant by accelerated depreciation? |
|
Definition
| Gives a faster write-off of the cost of an asset during the first years of its life |
|
|
Term
| What is the Modified Accelerated Cost Recovery System (MACRS)? |
|
Definition
| An accelerated depreciation procedure for business income tax reporting |
|
|
Term
| What are the five principal procurement functions discussed in section 9.19? |
|
Definition
(1) Purchasing
(2) Expediting and Receiving
(3) Inspection
(4) Shipping
(5) Subcontracts |
|
|
Term
| What is the difference between “2/10 net 30” and “2/10 prox net 30?” |
|
Definition
(1) 2/10 net 30 means if payment is made within 10 days of invoice date, 2 percent discount can be deducted from invoice
(2) 2/10 prox net 30 means 2 percent discount can be deducted from invoice if paid by the 10th day of the next month |
|
|
Term
| When does title to a purchase change from the seller to the buyer? |
|
Definition
| When the sale is complete. On cash sale, when paid for and delivery made. On shipment by common carrier, FOB specification. |
|
|
Term
| Regarding project financing, what should a contractor do if he is dealing with a new subsidiary of an owner corporation, and why? |
|
Definition
| Require a guaranty from the parent company |
|
|
Term
| What is the usual difference in periodic payments to a road contractor and a residential contractor? |
|
Definition
Road contractor: periodic payments, usually monthly
Residential contractor: Based on completion units: slab, framed under roof, closed in, completed |
|
|
Term
| What is the basis for a lump-sum periodic payment request? |
|
Definition
|
|
Term
| What is the basis for a unit-price periodic payment request? |
|
Definition
| The measured or counted number of units in place |
|
|
Term
| How is a periodic payment request calculated on a cost-plus fee contract? |
|
Definition
| Reimbursement of expenses incurred by the contractor supported by cost records, plus a prorate share of the negotiated fee |
|
|
Term
| What is included in a final payment to a contractor? |
|
Definition
| Remaining amount owed, including retainage |
|
|
Term
| What are various ways an owner can assure itself that the prime contractor has paid his subcontractors? |
|
Definition
| By requiring releases of liens, receipts, or affidavits of payment, or by using joint checks to the contractor and subcontractor |
|
|
Term
| What is meant by direct payment? |
|
Definition
| Payment by the owner directly to a subcontractor, skipping the prime contractor |
|
|
Term
| How do back charges apply to subcontractors? |
|
Definition
| Deduction from payments owed to the subcontractor |
|
|
Term
| How do back charges apply to material vendors? |
|
Definition
| Payment to material supplier after a deduction is made to the invoice for defective materials |
|
|
Term
| Why is a positive cash flow important to a contractor? |
|
Definition
| So a contractor can meet payrolls, pay for materials, make equipment payments, and satisfy other financial obligations as they become due |
|
|
Term
| How does cash forecasting help a contractor? |
|
Definition
| A schedule that summarizes estimated cash receipts, estimated disbursements, and available cash balances for some period into the future helps a contractor know when he needs to borrow money to operate |
|
|
Term
| What is a mechanic’s lien? |
|
Definition
| A right created by law to secure payment for work performed and materials furnished in the improvement of land designed to protect workers, material suppliers, and subcontractors, etc. |
|
|
Term
| How does a waiver of lien protect an owner? |
|
Definition
| It keeps an entity from filing a lien that would affect the owner’s property |
|
|
Term
| What is an assignment in regards to a construction contract? |
|
Definition
| Transfer of a right from one person to another |
|
|
Term
| How does a contractor market its services effectively? |
|
Definition
| By identifying a target audience and developing materials and a strategy for reaching and influencing the target |
|
|
Term
| How can a contractor motivate its employees? |
|
Definition
| To get the idea that the company is a good place to work and that the employee has a sense of involvement, company should solicit their ideas and suggestions, have a procedure to air grievances, and use of profit sharing, bonuses, and public recognition. |
|
|
Term
| What is the NLRB position regarding drug or alcohol testing? |
|
Definition
| The National Labor Relations Board has ruled that such testing is a mandatory subject of collective bargaining and is not a management prerogative. |
|
|
Term
| How much does the construction industry lose each year due to equipment theft? |
|
Definition
| One billion dollars per year |
|
|
Term
| What is the difference between union and open shop in the training programs used? |
|
Definition
| Union shop workers are trained by the union via apprenticeship programs. Open shop workers are trained by the employers, usually via third-party trainers and onsite training. |
|
|
Term
| What are the responsibilities of the project manager? |
|
Definition
| To organize, plan, schedule, and control the fieldwork, and to get the project completed within the time and cost limitations |
|
|
Term
| What are the responsibilities of the project superintendent? |
|
Definition
| To handle the day-to-day operations in the field |
|
|
Term
| What are the responsibilities of the project engineer? |
|
Definition
| Project scheduling, progress measurement and reporting, progress billing, keeping job records and reports, cost studies, testing, job engineering and surveys, safety and first aid, and payrolls |
|
|
Term
| How much time is the owner’s representative required to be on the project? |
|
Definition
| As much as the owner wants to pay for, from on request from contractor to periodic, to full-time |
|
|
Term
| Who runs the regular job site meetings? |
|
Definition
|
|
Term
| What is the difference in “approved” and “reviewed” shop drawings? |
|
Definition
| Responsibility and possible liability |
|
|
Term
| A field quality control program involves what? |
|
Definition
| Inspection, testing, and documentation for the control of the quality of materials, workmanship, and methods |
|
|
Term
| What are the six basic elements of TQM listed in the book? |
|
Definition
- Top level management commitment to quality;
- company-wide dedication to continuous improvement;
- customer focus;
- company-wide participation;
- use of tools and techniques to base actions on facts, data, and analysis;
- training and education of the entire project team.
|
|
|
Term
|
Definition
| Employee of contractor responsible for making sure deliveries are timely to keep project on or ahead of schedule |
|
|
Term
| Who is responsible for scheduling subcontractors? |
|
Definition
| The project superintendent |
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Term
| What is the “daily job log” and what are six of the many entries entered into it? |
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Definition
| Historical record of the daily events: date, weather conditions, job accidents, numbers of workers, amounts of equipment, subcontractors onsite, meetings |
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Term
| What are the two important uses of a project cost management system? |
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Definition
(1) To develop production and cost data for labor and equipment for estimating purposes, and
(2) to assist in keeping the construction costs of an ongoing project within budget |
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Term
| Project cost control systems compare what to what? |
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Definition
| Project expenses to budget |
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Term
| Information generated for company estimating purposes can be in terms of what? |
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Definition
| Labor and equipment rates, unit cost, or both |
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Term
| What is the master list of project cost accounts? |
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Definition
| An identifying code designation |
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Term
| The required cost breakdown is achieved by maintaining what? |
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Definition
| A detailed set of separate cost records for each project |
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Term
| What is a monthly cost report? |
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Definition
| Routine reports to inform management in sufficient detail and in a timely manner concerning the cost status of the work |
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Term
| What is project overhead? |
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Definition
| Project expenses general in nature and not associated with specific work items |
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Term
| What two job costs are subject to considerable variability? |
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Definition
| Labor and equipment costs |
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Term
| What does cost accounting involve? |
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Definition
| The continuous determination of labor and equipment costs, together with the work quantities produced, the analysis of these data, and the presentation of the results in summary form |
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Term
| What is a labor and equipment budget? |
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Definition
| Estimate that serves as the yardstick against which the actual field costs are measured |
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Term
| What is the optimum period of time for cost reports? |
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Definition
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Term
| What is the source document for payroll purposes and labor cost accounting? |
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Definition
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Term
| How frequently should time cards be done? |
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Definition
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Term
| Weekly measurement of work quantities includes what? |
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Definition
| All work items performed, whether accomplished by labor, by equipment, or by their combination |
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Term
| Weekly labor reports can be prepared on what two bases? |
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Definition
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Term
| Labor costs are matched with what each week? |
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Definition
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Term
| Generally, equipment expense is directly chargeable to what? |
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Definition
| To a single project work account |
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Term
| Equipment costs are expressed as what? |
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Definition
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Term
| Weekly equipment costs are matched with what? |
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Definition
| Corresponding quantities of work produced |
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Term
| What equipment costs are not incorporated into time rates of expense? |
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Definition
| Costs of move-in, erection, dismantling, and move-out are fixed costs |
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Term
| What is the best answer to what should be provided to craft foremen about cost overruns? |
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Definition
| Total amounts of cost overruns without specifying the estimated or actual unit costs |
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Term
| Cost reports make it possible for company management to assess what two things? |
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Definition
| The cost status of the project and to pinpoint the work areas where such expenses are excessive |
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Term
| Estimating requires production rates and unit costs that are what? |
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Definition
| A balanced time average of good days and bad days, high production and low production |
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Term
| Computerizing job cost accounting allows the contractor to do what? |
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Definition
| Obtain accurate and timely project financial information thnat makes it possible to control costs, manage cash flow, improve cost estimates, and increase profitability |
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Term
| Why is it important to know at least something about federal and state statutes regarding labor law? |
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Definition
| Because the employment of labor is subject to an imposing array of both federal and state statutes |
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Term
| What are three of the important federal acts affecting labor relations? |
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Definition
(1) Sherman Anti-Trust Act of 1890
(2) Norris-Laguardia Act of 1932
(3) National Labor Relations Act (the Wagner Act) of 1935
(4) Labor Management Relations Act (Taft-Hartley) of 1947
(5) Labor-Management Reporting and Disclosure Act (Landrum-Griffin) of 1959 |
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Term
| What did the Norris-Laguardia Act of 1932 do? |
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Definition
| Limited the federal courts power to issue injunctions against union activities in labor disputes |
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Term
| What was the central purpose of the National Labor Relations Act (the Wagner Act) of 1935? |
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Definition
| To protect union-organizing activities and to foster collective bargaining |
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Term
| What did the Labor Management Relations Act (the Taft-Hartley Act) of 1947 do? |
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Definition
| Imposed comprehensive controls on organized labor activities, and established the basic right of every worker to participate in union activities or to refrain from them |
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Term
| What did the Labor-Management Reporting and Disclosure Act (the Landrum-Griffin Act) of 1959 establish and safeguard? |
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Definition
| Established a code of conduct for unions, union officers, employers, and labor relations consultants to safeguard the rights of the individual union member, to ensure democratic elections in unions, to combat corruption and racketeering in union, and to protect the public |
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Term
| What is the declared purpose of the National Labor Relations Act, as amended? |
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Definition
| To state the recognized rights of employees, employers, and labor unions in their relations with one another and with the public |
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Term
| What are the two primary functions of the National Labor Relations Board? |
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Definition
(1) To establish whether groups of employees wish to be represented by designated labor organizations for collective bargaining purposes
(2) To prevent and remedy unfair labor practices |
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Term
| The free speech provision of the Taft-Hartley Act established what rights? |
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Definition
| The employee’s right to hear the arguments of both labor and management |
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Term
| What are three of the activities in which an employer could be involved that are unfair labor practices under the NLRA? |
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Definition
(1) Interfering with, restraint of, or coercion of employees in the exercise of rights protected by the Act
(2) Interference with any labor organization
(3) Discrimination against an employee in order to encourage or discourage union membership
(4) Discharging or otherwise discriminating against an employee because he filed charges or gave testimony under the Act
(5) Refusing to bargain in good faith about wages, hours, and other conditions of employment
(6) Entering into a hot-cargo agreement with a union |
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Term
| What are three of the activities in which a union could be involved that are unfair union labor practices under the NLRA? |
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Definition
(1) Restraining or coercing employees in the exercise of their rights, or in selection of a union representative
(2) Causing an employer to discriminate against an employee
(3) Refusing to bargain in good faith about wages, hours, and other conditions of employment
(4) Engaging in a strike or boycott activities, or to threaten or coerce any person
(5) Requiring employees covered by a valid union shop, membership fees that are excessive or discriminatory |
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Term
| Within what time period must a charge of unfair labor practice be brought to the NLRB regional office? |
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Definition
| Within six months of the alleged unfair activity |
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Term
| Within six months of the alleged unfair activity |
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Definition
(1) Reinstatement of persons discharged
(2) Reimbursement of wages lost
(3) Refund of dues or fees illegally collected |
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Term
| A state right-to-work law prohibits what? |
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Definition
| Discrimination in employment on the basis of membership or non- membership in a labor union |
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Term
| What is a pre-hire agreement and what is its applicability? |
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Definition
| Permits an employer in the building or construction industry to sign a labor agreement with a union prior to the hiring of any workers or before the union can show that it represents a majority of the employees involved, which can apply only to one specific project or to a designated geographical area |
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Term
| What is a union hiring hall provision and how is a contractor assured of getting a qualified worker? |
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Definition
| A provision in a labor agreement requiring the contractor to acquire its workers only through a designated local union; it may specify minimum training or experience qualifications for employment or provide in job referrals based on length of service with the contractor |
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Term
| What is a secondary boycott? |
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Definition
| A primary boycott is when a union exhorts the firms’ customers and the public to refrain from dealing with that firm. A secondary boycott is when a union exerts pressure on the employees of another firm to stop handling or using the products of the primary firm. |
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Term
| What is the “separate gate” doctrine and what is its effect in the construction industry? |
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Definition
| Limits union picketing to the primary contractor involved in the dispute to a single gate so as not to be a secondary boycott against other contractors who use a separate gate to get to and from the work site |
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Term
| What does a typical labor subcontractor agreement require of a contractor? |
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Definition
| Requires the general contractor to award work only to those subcontractors who are signatory to a specific union labor contract, or who agree to the provisions of the union contract for the specific project |
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Term
| What is the effect of a prefabrication clause and what is the “right to control” test? |
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Definition
| Prohibits the use of prefabricated products in order to preserve their customary on-site work, unless the A/E has specified the particular prefabricated product (the right to control by the A/E and not by the contractor) |
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Term
| What is a labor jurisdictional dispute and what is the contractor’s involvement? |
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Definition
| When more than one union claims jurisdiction on a project, the contractor decides which union is correct subject to a NLRB jurisdiction hearing |
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Term
| How does an NLRB jurisdictional settlement work? |
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Definition
| If no voluntary jurisdictional settlement is reached, the NLRB will hear and resolve the dispute. |
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Term
| What is the NLRB’s involvement in voluntary methods of settlement of labor disputes? |
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Definition
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Term
| When does the Taft-Hartley Act prohibit payments by an employer to its employees? |
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Definition
| If payment is made by pay, loan, or other delivery of things of value to influence the right of employees to organize and bargain collectively |
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Term
| What are the limits that an individual can contribute to a federal candidate, a PAC, a state party committee, and a national party committee? |
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Definition
$2,000 per election to a federal candidate or campaign committee
$5,000 per calendar year to a PAC
$10,000 to a state party committee that supports federal candidates
$25,000 per calendar year to a national party committee
$95,000 biennially for total political contributions ($37,000 to all candidates and $57,500 to all PAC’s and parties) |
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Term
| What is the responsibility of the EEOC under the Civil Rights Act of 1964 pertaining to hiring and promotion of employees? |
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Definition
| To ensure that consideration for hiring and promotion is based on ability and qualifications, without discrimination |
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Term
| What was the basic thrust of Executive Order 11246 enacted in 1965? |
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Definition
| Applicable to all contracts and subcontracts that exceed $10,000 on federal and federally assisted construction projects, it requires affirmative action to increase the level of minority representation in the work forces |
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Term
| When is age discrimination not applicable? |
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Definition
When age is a bona fide occupational qualification
when differentiation is based on reasonable factors other than age, or is caused by the terms of a bona fide seniority system or employee benefit plan
when the discharge or discipline of the individual is for good cause |
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Term
| What is thrust of the Davis-Bacon Act of 1931 and what is its applicability? |
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Definition
| To protect the local wage rates and local economies of each community and presumably to put union and non-union contractors on a more nearly equal competitive footing, applicable to federal construction projects in excess of $2,000 and determines the wage rates, including fringe benefits |
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Term
| What is the limit of fringe benefits an employer can pay to its employees and why is there such a limitation? |
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Definition
| 25% of an employee’s annual compensation |
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Term
| What is the Anti-Kickback Law of the Copeland Act of 1934? |
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Definition
| Prohibits paybacks from employees to the employer by force, intimidation, threat of dismissal, or any other means whatsoever |
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Term
| What does the Fair Labor Standards Act (the Wage and Hour Law) of 1939 affect? |
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Definition
| Minimum wages, maximum hours, overtime pay, equal, pay, and child-labor standards |
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Term
| What is the thrust of the Work Hours Act of 1962? |
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Definition
| Overtime pay at a rate of at least time-and-a-half for work over 8 hours per day or 40 hours per week |
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Term
| What is applicability of the Hobbs Act or 1946 to unions? |
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Definition
| A felony to obstruct, delay, or affect interstate commerce by robbery or extortion; could be used by union to extort a contractor with payments to avoid “labor trouble.” |
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Term
| What does the Immigration Reform and Control Act of 1986 require of employers? |
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Definition
| Requires all employers to verify the employment status and keep records on each new employee; penalties for employers who knowingly hire aliens not authorized to work in the U.S. |
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Term
| What does an employer have to provide to its employees who are on family or medical leave? |
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Definition
| Up to 12 weeks of unpaid leave in a 12-month period for specified family and medical reasons |
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Term
| What does the term “disabled” mean under the Americans with Disabilities Act of 1990? |
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Definition
(1) Having a physical or mental impairment that substantially limits one or more of the major life activities, or
(2) Having a record of such an impairment, or
(3) Being regarded as having such an impairment |
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Term
| What does ERISA stand for? |
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Definition
| Employee Retirement Income Security Act |
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Term
| What is the difference between a journeyman, an apprentice, and a helper? |
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Definition
(1) Journeyman is a skilled worker, who is fully qualified in a given craft or trade
(2) Apprentice is a person who is enrolled in a craft apprenticeship program
(3) Helper (or trainee, pre-apprentice, or sub-journeyman) is an unskilled or semi-skilled craft worker |
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Term
| What are three of the ways the construction industry is trying to improve its image in an effort to attract additional workers? |
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Definition
(1) By improving the industry’s image
(2) By actively recruiting young workers
(3) By improving retention
(4) By establishing better training programs
(5) By providing more on-the-job experience |
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Term
| What are three of the voluntary employee benefits contractors provide for their workers? |
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Definition
(1) Pension and profit sharing plans
(2) Health and welfare funds
(3) Life insurance
(4) Paid vacations
(5) Paid holidays
(6) Employee education
(7) Legal aid funds
(8) Annuities
(9) Sick leave
(10) Bonuses
(11) Supplemental unemployment payment plands,
(12) Retirement
(13) Apprenticeship programs
(14) Employee stock ownership plans
(15) 401(k) retirement savings programs |
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Term
| Relations between a contractor and his non-union workers are usually of a personal nature; of what nature are the relations with union workers? |
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Definition
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Term
| What are the three principal contributions unions make to the construction industry? |
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Definition
(1) Stabilizing influence
(2) Fixed wage rates
(3) Pool of skilled and experienced workers |
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Term
| What do the letters “AFL-CIO” stand for? |
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Definition
| American Federation of Labor – Committee for Industrial Organization |
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Term
| What is an independent union, and what important construction worker might be a member of such a union? |
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Definition
| Not affiliated with the AFL-CIO, including industrial unions such as the construction industry |
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Term
| What is meant by a “local?” |
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Definition
| The basic unit of a construction union exercising jurisdiction over an assigned geographical area |
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Term
| Who makes up the legislative body of a union? |
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Definition
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Term
| What are three examples of union work rules? |
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Definition
(1) Work hours per day
(2) Jurisdiction of work
(3) Multiple shifts
(4) Overtime and holidays
(5) Apprentices
(6) Prohibition of piecework
(7) Paydays
(8) Reporting time
(9) Foremen
(10) Crew size
(11) Safety provisions and devices
(12) Tools job stewards
(13) Drinking water |
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Term
| What is the business agent of the union, how is he selected, and what is his relationship with a contractor? |
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Definition
| Elected by the membership, he conducts the union business affairs and serves as its representative to outside agencies; only direct contact with a contractor |
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Term
| What is collective bargaining intended to accomplish? |
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Definition
| Establishment of wages, hours, and other essential conditions of employment |
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Term
| Who represents a contractor in a collective bargaining session? |
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Definition
| A contractor group or association |
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Term
| When a contractor withdraws from a collective bargaining unit, what is a withdrawal liability? |
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Definition
| Possible liability to a multiemployer pension plan under ERISA provisions |
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Term
| Who has final authority to consummate binding labor agreements? |
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Definition
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Term
| What four things must a contractor do to terminate or modify an existing labor contract? |
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Definition
(1) Serve written notice 60 days before the termination or modification date
(2) Offer to negotiate a new or modified contract
(3) Notify the Federal Mediation and Conciliation Service if no agreement reached within 30 days after service of notice
(4) Continue to live by the existing contract terms until expiration of 60 day period |
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Term
| What is the geographical coverage of a union agreement? |
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Definition
| Nation-wide to local boundaries, depending |
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Term
| What is a project union agreement? |
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Definition
| Applies only to a specific large construction job |
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Term
| What type of employers sign national union agreements? |
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Definition
| Mainly large industrial contractors |
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Term
| What is the Federal Mediation and Conciliation Service charged with? |
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Definition
| Promoting peace in regard to labor practices |
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Term
| What is an employer lockout? |
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Definition
| When employer closes their establishment against employees during negotiations and cease operations until a settlement has been reached |
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Term
| How much higher is a union worker’s wage scale than a non-union worker’s? |
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Definition
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Term
| Once a union agreement is signed the emphasis changes from negotiation to what? |
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Definition
| Interpretation and administration |
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Term
| What is an employer’s remedy if a union violates a no-strike arbitration agreement? |
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Definition
| May sue the union but not the union officials or members individually |
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Term
| Why do some contractor’s resist having prejob conferences with unions? |
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Definition
| They think it encourages the unions to make exorbitant demands |
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Term
| How does an open-shop contractor manage their employees? |
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Definition
| They pay according to ability and performance |
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Term
| Where does an open-shop contractor get his employees? |
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Definition
| Employee referral centers via AGC and ABC |
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Term
| How do some unions make it more difficult for non-union contractors to hire trained union workers? |
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Definition
| By having the apprentices sign a promissory note to pay for the training, which may be forgiven over time if the apprentice only works union jobs |
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Term
| What are three of the primary forms of non-apprenticeship training programs? |
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Definition
(1) Publicly funded training plans
(2) Privately funded training plans
(3) On-the-job training
(4) Correspondence courses |
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Term
| Why is supervisory training so important for a contractor? |
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Definition
| Because the financial performance is dependent on the caliber of its supervisory personnel |
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Term
| What are three of the reasons for the shift in the construction industry from union-shop to open-shop? |
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Definition
(1) Decline in worker productivity
(2) Increased wage rates
(3) Expensive fringe benefits
(4) Restrictions on the use of apprentices and helpers
(5) Inefficient work rules
(6) Jurisdictional disputes |
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Term
| If a dual-shop contractor is found to actually be a single employer, what are the penalties? |
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Definition
| Retroactive liability for underpaid wages and delinquent fringe benefit payments |
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Term
| How can union pension, health, and welfare funds be used to inhibit open-shop contractors? |
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Definition
| By use of withdrawal liability provisions |
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