Cmgt 3500- Final Exam Pt.1 End Of Chapter
Questions And Answers
List several measures that describe the size of the construction industry Correct Answer: - accounts
for 2/3 of $1-trillion in expenditures per year in new construction
- constitutes about 5% of GDP
-6% (7.5 mill) of workers of the industrial workforce is employed directly in the construction industry
-the construction industry represents the largest single production activity in the American economy
Under what conditions might the funding of public construction projects be particularly high? Correct
Answer: periods of recession
Why is the construction industry referred to as an easy entry and easy exit industry? Correct Answer:
high growth rate in construction
Low capital requirements
Little absolute cots or profit advantage for established firms
Most states have no rigid licensing requirements or fees
What are the ramifications of the cyclic tendencies experienced in the construction industry? Correct
Answer: some firms exit the industry without the benefit of choice, they fail.
Periods of recession, weak local economy , competition increases, causing profit margins to
decrease which results in failure of construction companies
Contrast the financing of public versus private construction projects? Correct Answer: private:
Funded through:
-expenditure of existing capital
-direct loans from outside creditors
-sale of fixed assets
-issuance of additional shares of stock/corporate bonds
-endowments
Public:
Funded through:
-appropriations from annual operating budgets (general taxation)
-special taxation assessments for specific purposes
-bond issues for specific purposes
-endowments
What are some advantages and disadvantages of the general contract approach? (design-bid-build)
Correct Answer: Advantages:
-gives the owner a firm idea of the final costs of the project
, -GC has skills that should reduce cost to owner
-GC maintains a staff of trained supervisors
-clearly defined roles for each contracting party
Disadvantages:
-often extends project duration
-owner does not have an agent involved in contractual arrangements
-leads to tight bids and small profit margins
-exposes owner a greater probability to claims
Discuss the criticisms that have been made of public agencies performing construction services by
the self-performance or force account method Correct Answer: -instances in which the public owner
submitted a bid on competitively bid projects, owner is frequently the low bidder
-other cases; owner does not permit private contractors to submit bids- the contractors state they're
placed at an unfair disadvantage
-say that owners do not charge properly for the costs of owning and operating heavy equipment
What type of project might be ideally suited for the design-build or design-construct method? Correct
Answer: popular in constructing large, industrial type projects
No extensive design on which to compute a bid
It is possible to begin construction before completion of the design for the project
What are the advantages of using the professional construction management approach? Correct
Answer: to the owners benefit
CM gives the owner a GMP that the project cost will not exceed
Permits flexibility for changing the project as the design evolves
Fast-tracking projects are good for this approach
Which types of contractual arrangements lend themselves to fast-tracking? Correct Answer: projects
to be delivered quickly
What general rule is followed when one party to a contract wants to cancel the contract, even though
the second party has already performed a portion of or all the obligations under the contract? Correct
Answer:
Give a construction example of a unilateral contract, and a bilateral or a mutual contract. Correct
Answer: unilateral: a one-sided contract in that only one of the contracting parties makes a promise,
while the other party exchanges something other than a promise, (performance)
Bilateral: an agreement created by mutual promises made by the contracting parties. Each party
plays two roles: promisor and promisee. Most construction projects are bilateral
Give an example of an implied contract in which estoppel will prevent one party from canceling the
contract Correct Answer: a contract may be created by what a party does or says, without a written
document, and that party is then "estopped" from denying that a contract exists.
Questions And Answers
List several measures that describe the size of the construction industry Correct Answer: - accounts
for 2/3 of $1-trillion in expenditures per year in new construction
- constitutes about 5% of GDP
-6% (7.5 mill) of workers of the industrial workforce is employed directly in the construction industry
-the construction industry represents the largest single production activity in the American economy
Under what conditions might the funding of public construction projects be particularly high? Correct
Answer: periods of recession
Why is the construction industry referred to as an easy entry and easy exit industry? Correct Answer:
high growth rate in construction
Low capital requirements
Little absolute cots or profit advantage for established firms
Most states have no rigid licensing requirements or fees
What are the ramifications of the cyclic tendencies experienced in the construction industry? Correct
Answer: some firms exit the industry without the benefit of choice, they fail.
Periods of recession, weak local economy , competition increases, causing profit margins to
decrease which results in failure of construction companies
Contrast the financing of public versus private construction projects? Correct Answer: private:
Funded through:
-expenditure of existing capital
-direct loans from outside creditors
-sale of fixed assets
-issuance of additional shares of stock/corporate bonds
-endowments
Public:
Funded through:
-appropriations from annual operating budgets (general taxation)
-special taxation assessments for specific purposes
-bond issues for specific purposes
-endowments
What are some advantages and disadvantages of the general contract approach? (design-bid-build)
Correct Answer: Advantages:
-gives the owner a firm idea of the final costs of the project
, -GC has skills that should reduce cost to owner
-GC maintains a staff of trained supervisors
-clearly defined roles for each contracting party
Disadvantages:
-often extends project duration
-owner does not have an agent involved in contractual arrangements
-leads to tight bids and small profit margins
-exposes owner a greater probability to claims
Discuss the criticisms that have been made of public agencies performing construction services by
the self-performance or force account method Correct Answer: -instances in which the public owner
submitted a bid on competitively bid projects, owner is frequently the low bidder
-other cases; owner does not permit private contractors to submit bids- the contractors state they're
placed at an unfair disadvantage
-say that owners do not charge properly for the costs of owning and operating heavy equipment
What type of project might be ideally suited for the design-build or design-construct method? Correct
Answer: popular in constructing large, industrial type projects
No extensive design on which to compute a bid
It is possible to begin construction before completion of the design for the project
What are the advantages of using the professional construction management approach? Correct
Answer: to the owners benefit
CM gives the owner a GMP that the project cost will not exceed
Permits flexibility for changing the project as the design evolves
Fast-tracking projects are good for this approach
Which types of contractual arrangements lend themselves to fast-tracking? Correct Answer: projects
to be delivered quickly
What general rule is followed when one party to a contract wants to cancel the contract, even though
the second party has already performed a portion of or all the obligations under the contract? Correct
Answer:
Give a construction example of a unilateral contract, and a bilateral or a mutual contract. Correct
Answer: unilateral: a one-sided contract in that only one of the contracting parties makes a promise,
while the other party exchanges something other than a promise, (performance)
Bilateral: an agreement created by mutual promises made by the contracting parties. Each party
plays two roles: promisor and promisee. Most construction projects are bilateral
Give an example of an implied contract in which estoppel will prevent one party from canceling the
contract Correct Answer: a contract may be created by what a party does or says, without a written
document, and that party is then "estopped" from denying that a contract exists.
