Oregon Construction Contractors (CCB) Practice Test

What primarily determines the differences in the types of contractors?

1. Who takes the risk that the work will be performed for the estimated cost

2. Who pays for the cost overruns

3. Who keeps the cost savings if the project performed is less than the estimate

4. All of the above

The correct answer is: All of the above

The correct answer encompasses all aspects of risk, cost management, and financial incentives associated with construction contracting. The primary differences in types of contractors arise from their roles in project execution and financial responsibility. When it comes to risk, different types of contractors may assume varying levels of risk concerning the estimated costs of a project. Some may offer fixed-price contracts where they bear the risk if the project exceeds the initial estimate. Others might work on a cost-plus basis, where the client covers the cost overruns. Understanding who takes on these risks is essential in distinguishing among contractors. Furthermore, the approach to cost overruns is also a defining factor. Some contractors might be responsible for covering these overruns directly, while others may shift that responsibility to the client. This fundamental difference shapes contract negotiations and project management strategies. Additionally, retaining savings from a project, if it comes in under budget, plays a critical role as well. In fixed-price contracts, the contractor typically benefits from any cost savings, whereas in other arrangements, these savings may be shared or not benefit the contractor at all. Thus, the differences among types of contractors are influenced by who assumes risk for estimated costs, who is accountable for overruns, and who benefits from cost savings, making the inclusive answer the