FLORIDA CONSTRUCTION INDUSTRY
LICENSING BOARD GENERAL
CONTRACTOR CONTRACT
ADMINISTRATION EXAM WITH QUESTIONS
AND VERIFIED ANSWERS, PLUS DETAILED
RATIONALES/EXPERT VERIFIED FOR
GUARANTEED PASS 2026/LATEST
UPDATE/INSTANT DOWNLOAD PDF
1. A general contractor is preparing a bid for a commercial building. The
estimator has calculated direct labor of $185,000, direct materials of
$310,000, equipment costs of $45,000, and subcontractor costs of $260,000.
The company applies field overhead of 8% to direct costs and home-office
overhead of 5% to the subtotal. The contractor then wants a 10% profit
based on the final selling price. Which approach most accurately determines
the required contract price?
A. Add all direct costs, add 13% overhead, and then add 10% of that subtotal
B. Add direct costs, calculate the applicable overhead, and gross up the resulting
cost so that profit equals 10% of the selling price
C. Add 10% profit directly to the direct costs and then calculate overhead
D. Calculate profit as 10% of direct labor only and add all remaining costs
afterward
Answer: B
Rationale: The distinction between markup and margin is critical in
construction estimating. If the contractor wants profit to represent 10% of the
final selling price, the price cannot simply be increased by 10% over cost. The
estimator must first establish the total cost, including applicable overhead, and
then divide the cost by 0.90 to obtain a selling price producing a 10% gross
margin.
1
, 2. A contractor receives subcontractor bids of $425,000, $438,000, and
$441,000 for the same scope of work. The lowest bidder appears to have
omitted several items specifically shown in the plans. The contractor has
only 24 hours before submitting the prime bid. What is the BEST course of
action?
A. Automatically use the lowest subcontractor bid because it produces the most
competitive prime bid
B. Average the three subcontractor bids and use the average
C. Review the lowest bidder's scope against the plans and specifications and obtain
clarification before relying on the bid
D. Reject all three bids and estimate the subcontract work using the highest
possible cost
Answer: C
Rationale: A subcontractor bid is valuable only when its scope is complete and
comparable to competing bids. An artificially low bid caused by omissions can
create substantial exposure after award. The general contractor should perform
a scope comparison, verify inclusions and exclusions, and obtain written
clarification before incorporating the bid into the prime estimate.
3. A project has estimated direct costs of $900,000. The contractor anticipates
$90,000 in project overhead and $60,000 in home-office overhead. The
contractor wants a 15% profit margin calculated as a percentage of the final
contract price. What approximate contract price should be used?
A. $1,207,500
B. $1,235,294
C. $1,050,000
D. $1,176,471
Answer: B
Rationale: Total estimated cost is $900,000 + $90,000 + $60,000 = $1,050,000.
Because the desired profit is 15% of the selling price, the price is calculated as
$1,050,000 ÷ 0.85 = approximately $1,235,294. Simply adding 15% to cost would
produce a markup rather than a 15% profit margin on sales.
2
, 4. A contractor is reviewing a lump-sum contract before signing. The plans
contain one dimension that conflicts with the written specifications. The
specifications require a higher-cost material than the drawing appears to
indicate. What should the contractor do BEFORE submitting or finalizing
the contract price?
A. Assume the less expensive interpretation
B. Ignore the conflict because the architect is responsible for design
C. Seek clarification through the contract's established question/RFI process and
document the interpretation used for pricing
D. Include neither item in the bid and wait until construction begins
Answer: C
Rationale: Contract-document conflicts should be identified and resolved before
the contractor commits to a price whenever possible. A documented clarification
establishes the basis of the bid and reduces the risk that an unresolved ambiguity
becomes a costly dispute.
5. Under a lump-sum contract, the contractor agrees to construct a building for
$2,400,000. Actual project costs become $2,250,000 because the contractor
obtains unusually favorable material pricing. Assuming there are no contract
modifications affecting compensation, what is the contractor generally
entitled to receive?
A. $2,250,000 because payment is based on actual cost
B. $2,325,000 because the contractor must share savings with the owner
C. $2,400,000, subject to the contract's payment and completion requirements
D. $2,650,000 because savings automatically become additional profit
Answer: C
Rationale: A lump-sum contract generally establishes a fixed contract price for
the defined scope. If the contractor performs the required work for less than
anticipated, the resulting savings generally accrue to the contractor unless the
contract contains a sharing, incentive, or other applicable provision.
3
, 6. An owner wants the contractor to perform work for the contractor's actual
allowable costs plus an agreed percentage for overhead and profit. Which
contract type BEST describes this arrangement?
A. Lump-sum contract
B. Cost-plus contract
C. Unit-price contract
D. Guaranteed maximum price contract
Answer: B
Rationale: A cost-plus contract compensates the contractor for specified
allowable costs and adds a fee or markup determined by the contract. The exact
definition of reimbursable costs, documentation requirements, fee calculation,
and audit rights should be established in the contract.
7. A contractor enters into a guaranteed maximum price contract for $5
million. The contract permits certain defined costs to be reimbursed but
establishes $5 million as the maximum price absent authorized changes.
Actual allowable costs are $4.6 million. Which statement is MOST
accurate?
A. The contractor automatically receives $5 million regardless of contract
provisions
B. The contractor is generally limited by the GMP and must follow the contract's
provisions concerning savings and compensation
C. The owner must pay $5.4 million because actual costs are reimbursable
D. A GMP is legally identical to a pure cost-plus contract
Answer: B
Rationale: A GMP establishes an upper limit under the contract, subject to its
specific terms. The parties must examine provisions addressing savings,
contingency, fee, allowances, change orders, and costs included or excluded
from the GMP.
8. A contractor is bidding a project using unit prices. The bid schedule lists
2,500 cubic yards of excavation at $28 per cubic yard. The final measured
4
LICENSING BOARD GENERAL
CONTRACTOR CONTRACT
ADMINISTRATION EXAM WITH QUESTIONS
AND VERIFIED ANSWERS, PLUS DETAILED
RATIONALES/EXPERT VERIFIED FOR
GUARANTEED PASS 2026/LATEST
UPDATE/INSTANT DOWNLOAD PDF
1. A general contractor is preparing a bid for a commercial building. The
estimator has calculated direct labor of $185,000, direct materials of
$310,000, equipment costs of $45,000, and subcontractor costs of $260,000.
The company applies field overhead of 8% to direct costs and home-office
overhead of 5% to the subtotal. The contractor then wants a 10% profit
based on the final selling price. Which approach most accurately determines
the required contract price?
A. Add all direct costs, add 13% overhead, and then add 10% of that subtotal
B. Add direct costs, calculate the applicable overhead, and gross up the resulting
cost so that profit equals 10% of the selling price
C. Add 10% profit directly to the direct costs and then calculate overhead
D. Calculate profit as 10% of direct labor only and add all remaining costs
afterward
Answer: B
Rationale: The distinction between markup and margin is critical in
construction estimating. If the contractor wants profit to represent 10% of the
final selling price, the price cannot simply be increased by 10% over cost. The
estimator must first establish the total cost, including applicable overhead, and
then divide the cost by 0.90 to obtain a selling price producing a 10% gross
margin.
1
, 2. A contractor receives subcontractor bids of $425,000, $438,000, and
$441,000 for the same scope of work. The lowest bidder appears to have
omitted several items specifically shown in the plans. The contractor has
only 24 hours before submitting the prime bid. What is the BEST course of
action?
A. Automatically use the lowest subcontractor bid because it produces the most
competitive prime bid
B. Average the three subcontractor bids and use the average
C. Review the lowest bidder's scope against the plans and specifications and obtain
clarification before relying on the bid
D. Reject all three bids and estimate the subcontract work using the highest
possible cost
Answer: C
Rationale: A subcontractor bid is valuable only when its scope is complete and
comparable to competing bids. An artificially low bid caused by omissions can
create substantial exposure after award. The general contractor should perform
a scope comparison, verify inclusions and exclusions, and obtain written
clarification before incorporating the bid into the prime estimate.
3. A project has estimated direct costs of $900,000. The contractor anticipates
$90,000 in project overhead and $60,000 in home-office overhead. The
contractor wants a 15% profit margin calculated as a percentage of the final
contract price. What approximate contract price should be used?
A. $1,207,500
B. $1,235,294
C. $1,050,000
D. $1,176,471
Answer: B
Rationale: Total estimated cost is $900,000 + $90,000 + $60,000 = $1,050,000.
Because the desired profit is 15% of the selling price, the price is calculated as
$1,050,000 ÷ 0.85 = approximately $1,235,294. Simply adding 15% to cost would
produce a markup rather than a 15% profit margin on sales.
2
, 4. A contractor is reviewing a lump-sum contract before signing. The plans
contain one dimension that conflicts with the written specifications. The
specifications require a higher-cost material than the drawing appears to
indicate. What should the contractor do BEFORE submitting or finalizing
the contract price?
A. Assume the less expensive interpretation
B. Ignore the conflict because the architect is responsible for design
C. Seek clarification through the contract's established question/RFI process and
document the interpretation used for pricing
D. Include neither item in the bid and wait until construction begins
Answer: C
Rationale: Contract-document conflicts should be identified and resolved before
the contractor commits to a price whenever possible. A documented clarification
establishes the basis of the bid and reduces the risk that an unresolved ambiguity
becomes a costly dispute.
5. Under a lump-sum contract, the contractor agrees to construct a building for
$2,400,000. Actual project costs become $2,250,000 because the contractor
obtains unusually favorable material pricing. Assuming there are no contract
modifications affecting compensation, what is the contractor generally
entitled to receive?
A. $2,250,000 because payment is based on actual cost
B. $2,325,000 because the contractor must share savings with the owner
C. $2,400,000, subject to the contract's payment and completion requirements
D. $2,650,000 because savings automatically become additional profit
Answer: C
Rationale: A lump-sum contract generally establishes a fixed contract price for
the defined scope. If the contractor performs the required work for less than
anticipated, the resulting savings generally accrue to the contractor unless the
contract contains a sharing, incentive, or other applicable provision.
3
, 6. An owner wants the contractor to perform work for the contractor's actual
allowable costs plus an agreed percentage for overhead and profit. Which
contract type BEST describes this arrangement?
A. Lump-sum contract
B. Cost-plus contract
C. Unit-price contract
D. Guaranteed maximum price contract
Answer: B
Rationale: A cost-plus contract compensates the contractor for specified
allowable costs and adds a fee or markup determined by the contract. The exact
definition of reimbursable costs, documentation requirements, fee calculation,
and audit rights should be established in the contract.
7. A contractor enters into a guaranteed maximum price contract for $5
million. The contract permits certain defined costs to be reimbursed but
establishes $5 million as the maximum price absent authorized changes.
Actual allowable costs are $4.6 million. Which statement is MOST
accurate?
A. The contractor automatically receives $5 million regardless of contract
provisions
B. The contractor is generally limited by the GMP and must follow the contract's
provisions concerning savings and compensation
C. The owner must pay $5.4 million because actual costs are reimbursable
D. A GMP is legally identical to a pure cost-plus contract
Answer: B
Rationale: A GMP establishes an upper limit under the contract, subject to its
specific terms. The parties must examine provisions addressing savings,
contingency, fee, allowances, change orders, and costs included or excluded
from the GMP.
8. A contractor is bidding a project using unit prices. The bid schedule lists
2,500 cubic yards of excavation at $28 per cubic yard. The final measured
4
