CEM 100 EXAM 2 QUESTIONS AND
ANSWERS
What are payment bonds? - Answer-Primarily for the protection of 3rd parties of the
contract and guarantees payment for labor and materials used or supplied in the
performance of the construction project
What is the Miller Act? - Answer-- A federal statute that prescribes the requirement of
performance and payment bonds used in conjunction with federal construction projects
- Act provides that the performance bond be written in such amount that, in the opinion
of the contracting officer, the interests of the us are adequately protected
What is the general rule of thumb for contract changes? - Answer-changes in the
contract that increase the amount of the contract by more than 10% are considered to
be significant
What are bond premiums? - Answer-Premium that the surety company will charge the
contractor is the function of the risk the company sees the contractor, as well as the
project itself
What is indemnity of surety - Answer-Legal fees incurred by the surety because of
claims under the bond are also recoverable from the principal, that is, the contractor
What is an investigation by surety? - Answer-A program of investigation needs to
happen before a surety will furnish a new or unknown contracting firm with a bid bond or
with contract bonds
What is bonding capacity/bonding line? - Answer-Refer to the maximum dollar value or
contract amount of uncompleted work the surety will allow the contractor to have on
hand at any one time
What is bonding capacity? - Answer-amount of surety credit that will be extended to a
given contractor
What is a surety agent? - Answer-First person that the contractor will first deal with
regard to all matters pertaining to bonding provided to his company generally and to
specific bonds required by owners for the projects the contractor performs
, What is a fidelity bond? - Answer-Indemnifies the contractor for loss of money or other
property caused by dishonest acts of its employees
What is a license bond? - Answer-Guarantee compliance with statutes or ordinances
and make provision for payment to the obligee or members of the general public in the
event that the licensee violates its legal or financial obligations
What is a termite bond? - Answer-Given by manufacturers or applicators of substances
intended to prevent damage caused by termites
What is a subdivision bond? - Answer-Given by developer to a public body, guarantees
construction of all necessary improvements and utilities
What is self-insurers' workers' compensation bond? - Answer-- given by self insured
contractor to the state
- guarantees payment of all statutory benefits to injured employees
what is a union wage bond? - Answer-- given by contractor to a union
- guarantees that the contractor will pay union wages and will make proper payment of
fringe benefits required by union contract
In surety bonding, the general contractor that gets the bond from the surety is termed
the ______. - Answer-Principal
Surety bonds are required by law on federal public construction jobs over $25,000 by
the ______ Act - Answer-Miller
A surety bond does not ______ - Answer-protect contractor from risk of loss
In surety bonding, the protected entity is referred to in technical terms as the ______ -
Answer-obligee
Bond to release retainage - Answer-Owner will sometimes make full payment to the
contractor without deducting retainage if the contractor will post a surety bond with the
owner as obligee for the amount of the accumulated retainage involved
What is a contract clause? - Answer-protects owner and/or the architect engineer by
transferring risk and uncertainty to the contractor
Is the contractor responsible for end results? Are they liable for the consequences of
design defects? - Answer-No
What is indemnification? - Answer-- Protects owners and architect-engineer from third
person liability
- construction contracts include indemnification or "hold-harmless" clauses
ANSWERS
What are payment bonds? - Answer-Primarily for the protection of 3rd parties of the
contract and guarantees payment for labor and materials used or supplied in the
performance of the construction project
What is the Miller Act? - Answer-- A federal statute that prescribes the requirement of
performance and payment bonds used in conjunction with federal construction projects
- Act provides that the performance bond be written in such amount that, in the opinion
of the contracting officer, the interests of the us are adequately protected
What is the general rule of thumb for contract changes? - Answer-changes in the
contract that increase the amount of the contract by more than 10% are considered to
be significant
What are bond premiums? - Answer-Premium that the surety company will charge the
contractor is the function of the risk the company sees the contractor, as well as the
project itself
What is indemnity of surety - Answer-Legal fees incurred by the surety because of
claims under the bond are also recoverable from the principal, that is, the contractor
What is an investigation by surety? - Answer-A program of investigation needs to
happen before a surety will furnish a new or unknown contracting firm with a bid bond or
with contract bonds
What is bonding capacity/bonding line? - Answer-Refer to the maximum dollar value or
contract amount of uncompleted work the surety will allow the contractor to have on
hand at any one time
What is bonding capacity? - Answer-amount of surety credit that will be extended to a
given contractor
What is a surety agent? - Answer-First person that the contractor will first deal with
regard to all matters pertaining to bonding provided to his company generally and to
specific bonds required by owners for the projects the contractor performs
, What is a fidelity bond? - Answer-Indemnifies the contractor for loss of money or other
property caused by dishonest acts of its employees
What is a license bond? - Answer-Guarantee compliance with statutes or ordinances
and make provision for payment to the obligee or members of the general public in the
event that the licensee violates its legal or financial obligations
What is a termite bond? - Answer-Given by manufacturers or applicators of substances
intended to prevent damage caused by termites
What is a subdivision bond? - Answer-Given by developer to a public body, guarantees
construction of all necessary improvements and utilities
What is self-insurers' workers' compensation bond? - Answer-- given by self insured
contractor to the state
- guarantees payment of all statutory benefits to injured employees
what is a union wage bond? - Answer-- given by contractor to a union
- guarantees that the contractor will pay union wages and will make proper payment of
fringe benefits required by union contract
In surety bonding, the general contractor that gets the bond from the surety is termed
the ______. - Answer-Principal
Surety bonds are required by law on federal public construction jobs over $25,000 by
the ______ Act - Answer-Miller
A surety bond does not ______ - Answer-protect contractor from risk of loss
In surety bonding, the protected entity is referred to in technical terms as the ______ -
Answer-obligee
Bond to release retainage - Answer-Owner will sometimes make full payment to the
contractor without deducting retainage if the contractor will post a surety bond with the
owner as obligee for the amount of the accumulated retainage involved
What is a contract clause? - Answer-protects owner and/or the architect engineer by
transferring risk and uncertainty to the contractor
Is the contractor responsible for end results? Are they liable for the consequences of
design defects? - Answer-No
What is indemnification? - Answer-- Protects owners and architect-engineer from third
person liability
- construction contracts include indemnification or "hold-harmless" clauses
