Midterm

Question 1

Why does CM have a high failure rate?

Answer 1

competition, low profit margin, inexperience, and being “one job away from bankruptcy”

Question 2

AGC

Answer 2

Associated General Contractors

Motto: Skill, Integrity, Responsibility

Question 3

Entrepreneur

Answer 3

Someone who takes advantage of business opportunities assuming risk

Question 4

Home based business

Answer 4

Most common due to no commute, little overhead, tax advantages

Question 5

Fast growing business

Answer 5

Usually started by someone who has started a business before

Question 6

What is needed to start up a business?

Answer 6

Business plan, Market analysis, Start up Cost, location

Question 7

Each segments of the market is responsible for

Answer 7

1. Acquisition of work
2. Performance of the work
3. Management of the financial capital and human resources

Question 8

Major External Influences on business failure

Answer 8

1. Prolonged economic recession
2. loss of major customer
3. new competition
4. shortage of skilled labor

Question 9

Major Internal Influences on Business failure

Answer 9

1. Pursuit of volume
2. Lack of comprehensive business plan
3. Diversifying into unfamiliar projects
4. Lack of management maturity
5. etc

Question 10

Planning

Answer 10

defining goals, establish strategies, developing plans

Question 11

Leading

Answer 11

Creating a vision for the company , establishing company standards

Question 12

External Customers

Answer 12

Firms and individuals that purchase construction services from the construction company

Question 13

Internal Customers

Answer 13

employees who receive support from various departments in the company

Question 14

Proprietorship

Answer 14

easy/inexpensive/minimal start-up costs/total control by owner, but unlimited liability of owner/termination upon death of owner/difficult to attract capital

Question 15

General Partnerships

Answer 15

pooling of resources, talent, and responsibilities/easier to attract capital than proprietorships, but unlimited liability of partners/any partner can obligate partnership/termination upon departure or death of partner.

Question 16

Limited Partnerships

Answer 16

pooling of resources, talent, and responsibilities/limited liability of limited partners/easier to attract capital than general partnerships, but unlimited liability of general partners/any general partner can obligate partnership/termination upon departure or death of a general partner

Question 17

C-Corporation

Answer 17

limited liability of owners/pooling of talent and responsibilities/perpetual life/easier to attract capital than partnerships, but closely regulated/state charter required/expensive to create/extensive record-keeping required/double taxation of profits.

Question 18

Corporation

Answer 18

same as C Corporation but no double taxation/limited on number of stockholders and business volume.

Question 19

Joint Venture

Answer 19

pooling of financial resources, equipment, talent, expertise, responsibilities, risk, but less control/sharing of profits

Question 20

LLP

Answer 20

protects partners from malpractice debt and claims. Architects/accountants/attorneys only.

Question 21

Risk categories

Answer 21

people, property, process

Question 22

Insurance cost

Answer 22

can account for up to 20% of overhead cost

Question 23

Builder’s risk insurance

Answer 23

First-party insurance that provides cover for the cost of damages to the project during construction

Question 24

Workers comp insurance

Answer 24

Mandated by law

Question 25

surety

Answer 25

part that assumes responsibility for the performance of another party

Question 26

Surety bond

Answer 26

three party contract where the company purchases a bong from a surety guaranteeing that they will perform

Question 27

indemnity agreement

Answer 27

provides the company will pay the surety back for any losses that the surety incurs in making good on the guarantee to the surety

Question 28

Bid Bond

Answer 28

A guarantee that the bidder will furnish performance of the construction contract

Question 29

payment bond

Answer 29

ensures the contractor will compensate any entity that provided labor. Protect owner from mechanics liens and subcontractors from non payment

Question 30

All employers in California that have at least one employee must carry Workman’s Compensation Insurance. Failure to do so is subject to:

Answer 30

Criminal Penalties

Question 31

The benefit of a Wrap Policy is that one policy covers the following parties on a project:

Answer 31

Owner, contractor, subcontractor, and consultants

Question 32

Leverage is the strategy of

Answer 32

using borrowed money to generate returns

Question 33

3 c's of bonding

Answer 33

character, capacity, cash

Question 34

General conditions do not contain

Answer 34

Required means, materials, and methods

Question 35

Brooks act

Answer 35

mandates the negotiation of design contracts at fair and reasonable prices

Question 36

Risk management strategies

Answer 36

Avoid, Accept, Transfer

Question 37

LLC

Answer 37

limited liability of owners/pooling of talent and responsibilities/easier to attract capital than partnerships/less regulated than corporations, but regulated/state charter required/more expensive to form than partnerships