Business and Project Management
What the exam tests
Project success is a business outcome, not just a construction outcome. Know how a contractor is organized (sole proprietorship, LLC, corporation), who must hold the license, what insurance is required (general liability, workers' compensation, auto, umbrella), and how bonding capacity limits how much work a firm can pursue. Understand the difference between a surety bond and an insurance policy - a bond is a three-party guarantee, not a policy you buy for protection.
Money mechanics
Be fluent with the schedule of values, progress billing, retainage, and lien waivers. Know how overhead differs from job cost, how indirect costs are allocated, and how a change order flows into the contract sum and schedule. Cash flow kills more young contractors than bad pricing: know the difference between earned revenue and collected cash.
Scheduling
Understand critical path method logic - activities, dependencies, float, and how total float differs from free float. Questions often show a simple network and ask which activity delay pushes completion. Rule: only delays on the critical path (zero total float) extend the project date.
Traps
- Markup vs. margin confusion. Markup is applied to cost; margin is a share of price.
- Confusing a delay caused by the owner with an excusable but non-compensable delay (weather).
- Reading "recordable incident" as equivalent to "lost-time incident."
Worked example
You want a 15% profit margin on a $340,000 cost. Do not add 15% to cost ($51,000) - that yields a 13.04% margin. Instead divide: price = cost ÷ (1 − 0.15) = $340,000 ÷ 0.85 = $400,000. Markup = margin ÷ (1 − margin) = 0.15 ÷ 0.85 = 17.65%.