CEE 4100 Exam 2 Questions and Answers Graded A+
What causes contractor failure? - Answers - Rapid overexpansion
- Subcontractor failure
- Changes in line of work, scope of work or territory
- Lack of comprehensive business plan
- Poor financial controls
- Failure in communication
Surety Bonds - Answers Offers assurances to the owner of a construction project that the
general contractor will perform the work specified in the contract and pay certain
subcontractors and suppliers
Owner Benefits of Surety Bonds - Answers - Provide a pool of qualified bidders
- Reduce risk of items and financial loss
- Increase likelihood of timely project completion
- Protect against defective materials and workmanship
GC Benefits of Surety Bonds - Answers - Increase the number of projects for which a contractor
can qualify
- Ensures payment protection for subcontractors, suppliers and laborers
- Technical, managerial or financial assistance can be made available in certain circumstances
Federal Mandate (Surety Bond) - Answers - Heart Act (1893) and Miller Act (1935)
- Require performance and payment bonds for public works contracts in excess of $100,000
State and Local Mandate (Surety Bond) - Answers - "Little Miller Acts"
- Require performance and payment bonds for state and local public works projects (vary by
state)
Who requires bonding? - Answers - Private Owners
- Lending Institutions
- General Contractors
Three Party Agreement - Answers - Surety company
, - Owner
- General contractor
Aspects of Surety Bonding - Answers - Can require prequalification
- Stipulates contract completion
- Requires payment to subcontractors and suppliers
Prequalification - Answers - Provides an in-depth look at the contractor's entire business
operation
- Determines the contractor's ability to meet current and future contractual and financial
obligations
- Three C's of Underwriting: capital, capacity, character
Capacity - Answers Knowledge, experience, equipment and planning abilities
Capital - Answers Ability to finance the project in conjunction with other projects in the work
program
Character - Answers Experience and reputation in fulfilling promises and obligations
Types of Surety Bonds - Answers - Bid Bond
- Performance Bond
- Payment Bond
Bid Bond - Answers Assures owner that GC will enter into the contract at the price bid and
provide the required performance and payment bonds
Performance Bond - Answers Assures owner that GC will perform the contract:
1) On time
2) On budget
3) According to specifications
4) Free of defective workmanship and materials within one year of completion
Payment Bond - Answers Assures owner that GC will pay selected laborers, subcontractors and
suppliers associated with the project
If GC Defaults - Answers - Re-bid the job for completion
What causes contractor failure? - Answers - Rapid overexpansion
- Subcontractor failure
- Changes in line of work, scope of work or territory
- Lack of comprehensive business plan
- Poor financial controls
- Failure in communication
Surety Bonds - Answers Offers assurances to the owner of a construction project that the
general contractor will perform the work specified in the contract and pay certain
subcontractors and suppliers
Owner Benefits of Surety Bonds - Answers - Provide a pool of qualified bidders
- Reduce risk of items and financial loss
- Increase likelihood of timely project completion
- Protect against defective materials and workmanship
GC Benefits of Surety Bonds - Answers - Increase the number of projects for which a contractor
can qualify
- Ensures payment protection for subcontractors, suppliers and laborers
- Technical, managerial or financial assistance can be made available in certain circumstances
Federal Mandate (Surety Bond) - Answers - Heart Act (1893) and Miller Act (1935)
- Require performance and payment bonds for public works contracts in excess of $100,000
State and Local Mandate (Surety Bond) - Answers - "Little Miller Acts"
- Require performance and payment bonds for state and local public works projects (vary by
state)
Who requires bonding? - Answers - Private Owners
- Lending Institutions
- General Contractors
Three Party Agreement - Answers - Surety company
, - Owner
- General contractor
Aspects of Surety Bonding - Answers - Can require prequalification
- Stipulates contract completion
- Requires payment to subcontractors and suppliers
Prequalification - Answers - Provides an in-depth look at the contractor's entire business
operation
- Determines the contractor's ability to meet current and future contractual and financial
obligations
- Three C's of Underwriting: capital, capacity, character
Capacity - Answers Knowledge, experience, equipment and planning abilities
Capital - Answers Ability to finance the project in conjunction with other projects in the work
program
Character - Answers Experience and reputation in fulfilling promises and obligations
Types of Surety Bonds - Answers - Bid Bond
- Performance Bond
- Payment Bond
Bid Bond - Answers Assures owner that GC will enter into the contract at the price bid and
provide the required performance and payment bonds
Performance Bond - Answers Assures owner that GC will perform the contract:
1) On time
2) On budget
3) According to specifications
4) Free of defective workmanship and materials within one year of completion
Payment Bond - Answers Assures owner that GC will pay selected laborers, subcontractors and
suppliers associated with the project
If GC Defaults - Answers - Re-bid the job for completion
