Certified Construction Manager Practice Test

Price competitively bid contracts typically assume the contractor's risk for completion because the price for completing the project is established through a competitive bidding process. In this type of contract, contractors submit their bids based on the project's specifications and their estimated costs, including a margin for profit. Once the contract is awarded, the contractor is obligated to complete the work for the agreed-upon price, regardless of any unforeseen costs or complications that may arise during the project. This places the risk on the contractor to manage costs effectively and deliver the project within the bid amount.

In contrast, time and materials contracts allow for adjustments based on the actual costs incurred, which shifts some risk away from the contractor. Reimbursable contracts typically involve costs being reimbursed to the contractor along with an agreed-upon fee, which means that the contractor is not fully at risk for cost overruns. Negotiated price contracts are based on discussions and agreements with the client but may not always place the same level of completion risk on the contractor as competitively bid contracts do, as the terms may be more flexible and consider anticipated changes in scope or costs.