Business, Contract, and Project Management
Core concepts
Understand estimating (labor, material, equipment, overhead, profit), change orders, and contract types (fixed-price, time and materials, cost-plus). Know lien rights and the importance of written contracts, scope, and payment terms. Understand scheduling, subcontractor coordination, and punch lists. Be familiar with warranties (labor vs. manufacturer), maintenance agreements, and the value of documentation. Know basic accounting concepts: markup vs. margin, break-even, and cash flow. Understand risk management through insurance, bonding, and clear exclusions.
Traps in questions
- Markup vs. margin: a 25% markup on cost is not a 25% margin on price. Questions frequently test this.
- Verbal changes without written change orders create disputes; always document.
- Lien rights depend on notices and deadlines; missing them can forfeit recovery.
- Warranty scope: manufacturer warranty covers parts; contractor warranty covers labor - clarify both.
- Cash flow: profitability on paper does not guarantee solvency; progress billing matters.
Worked example / rule of thumb
If a job costs $8,000 and you want a 20% margin, price = cost ÷ (1 − 0.20) = $10,000. A 20% markup would give $9,600 - a $400 difference that erodes profit. Always distinguish markup from margin when quoting.
Study guidance
Practice building a simple estimate and a change order, and review a sample contract for scope, payment, and warranty clauses.