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CPC Certified Professional Constructor study materials
CPC Certified Professional Constructor study resources

CPC Certified Professional Constructor: Contract Administration and Legal Issues: Risk Allocation, Notice, and Payment

CPC Certified Professional Constructor · Work through your exam, one topic at a time.

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Contract Administration and Legal Issues: Risk Allocation, Notice, and Payment

Contract Administration and Legal Issues tests how the contract allocates risk and how the parties must administer notices, payment, changes, claims, and disputes. The exam is practical: identify the clause, the deadline, and the document that preserves the right.

Contract types and risk

  • Lump sum: contractor bears quantity risk for defined scope.
  • Unit price: owner pays for measured quantities; contractor bears unit-rate productivity risk.
  • Cost-plus: owner bears cost risk; a GMP shifts some overrun risk to the contractor.
  • T&M is used for undefined work but needs labor rates, equipment rates, and markups defined in advance.
  • Standard clauses often allocate differing site conditions, owner-caused delay, and suspension to the owner; the contractor usually bears means and methods and workforce performance.

Administration

  • Notice provisions are conditions precedent. A claim for delay or extra cost may be barred if written notice is not given within the stated period.
  • Pay applications follow contract procedures: schedule of values, percent complete, retainage, stored materials, lien waivers, and certified payroll where required.
  • Performance and payment bonds are separate; payment bonds protect subcontractors and suppliers.
  • Changes should be priced before work, or on a documented cost basis with reserved rights. Constructive changes and oral directives must be confirmed in writing.
  • Claims need causation, cost, and time documentation. Disputes typically move through decision, mediation, arbitration, or litigation as the contract provides.

Worked example

A $1,000,000 contract provides 10% retainage until 50% completion, then 5%. At $600,000 of completed work, the first $500,000 carries $50,000 retainage; the next $100,000 carries $5,000. Total retainage is $55,000, so the gross payment before prior payments and deductions is $545,000. If the owner also withholds a $20,000 disputed backcharge, the payment may be $525,000, but the contractor should follow the contract dispute procedure rather than accept the deduction as a change.

Traps

Missing a notice deadline; relying on verbal approval; confusing conditional and unconditional lien waivers; treating a payment bond as a performance bond; assuming pay-when-paid always bars a subcontractor claim; and failing to check bond claim deadlines.