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Section 5 of 7

CSLB Cost Control Practice Questions

10 free practice questions on cost control, part of the Contract Requirements and Execution section (about 21% of the exam). Try each one, then open the answer: every choice is explained and the law is quoted.

Questions and answers

  1. Contract Requirements and Execution

    1. Under Business and Professions Code section 7159.5, what must the contract amount in a home improvement contract include?

    • A. Labor and materials only, with the profit shown in a separate place
    • B. The entire cost, including profit, labor, and materials, but not finance charges
    • C. The entire cost, including profit, labor, materials, and all finance charges
    • D. Materials only, with labor billed later at an hourly rate
    Show answer

    Correct answer: B

    • A. Labor and materials only, with the profit shown in a separate place

      The contract amount must include the entire cost, including profit. The contractor cannot leave profit out of the stated price.

    • B. The entire cost, including profit, labor, and materials, but not finance charges

      Correct answer

      Section 7159.5 says the contract amount must include the entire cost, including profit, labor, and materials, but excluding finance charges, which are set out separately.

    • C. The entire cost, including profit, labor, materials, and all finance charges

      Finance charges are excluded from the contract amount. If there is a finance charge, it must be set out separately from the contract amount.

    • D. Materials only, with labor billed later at an hourly rate

      The contract amount must include the entire cost, including labor and profit, not materials alone. Labor cannot be left out of the stated price.

    Explanation

    Section 7159.5 says the contract amount must include the entire cost of the contract, including profit, labor, and materials. Finance charges are left out of the contract amount. If there is a finance charge, it must be shown separately. So the contractor cannot leave profit or labor out of the stated price, and it cannot mix finance charges into it.

    Sources

  2. Contract Requirements and Execution

    2. A city hires a contractor to build a $600,000 public building. The contract is not financed by revenue bonds. A magnitude 5.0 earthquake causes $50,000 of damage to the work, which was built to the plans and building standards. What is the most the contract can make the contractor pay for the repairs?

    • A. $2,500
    • B. $30,000
    • C. $50,000
    • D. $60,000
    Show answer

    Correct answer: B

    • A. $2,500

      $2,500 takes 5 percent of the $50,000 damage. The limit is 5 percent of the contract amount, not of the damage.

    • B. $30,000

      Correct answer

      An earthquake over magnitude 3.5 is an act of God, so the contractor's share is capped at 5 percent of the contract amount: $600,000 x 0.05 = $30,000. The $50,000 damage is more than that, so $30,000 is the most.

    • C. $50,000

      $50,000 is the full damage and ignores the limit. A public contract cannot make the contractor pay more than 5 percent of the contract amount for act of God damage.

    • D. $60,000

      $60,000 uses 10 percent of the contract amount. The limit in section 7105 is 5 percent, which is $30,000.

    Explanation

    Public Contract Code section 7105 says a public contract cannot make the contractor pay more than 5 percent of the contract amount to repair damage caused by an act of God. An earthquake over magnitude 3.5 counts as an act of God. Step 1: 5 percent of the contract amount is $600,000 x 0.05 = $30,000. Step 2: The damage of $50,000 is more than $30,000, so the contractor's share is limited to $30,000. $50,000 ignores the limit. $2,500 takes 5 percent of the damage instead of the contract amount. $60,000 uses 10 percent of the contract amount.

    Sources

  3. Contract Requirements and Execution

    3. During a home remodel, the owner tells the contractor to add a skylight. The owner refuses to sign anything for the change. Under Business and Professions Code section 7159.6, may the owner require the contractor to do this extra work?

    • A. Yes, because an oral request is enough for small extra work
    • B. Yes, if the contractor adds the cost to the final bill
    • C. No, because extra work requires a new separate contract
    • D. No, not without the owner's written authorization for the work
    Show answer

    Correct answer: D

    • A. Yes, because an oral request is enough for small extra work

      An oral request does not meet the rule, even for a small change. The owner must provide written authorization for extra work.

    • B. Yes, if the contractor adds the cost to the final bill

      Adding the cost to the final bill does not fix the missing written authorization.

    • C. No, because extra work requires a new separate contract

      The law does not call for a new separate contract. It requires the owner's written authorization, and extra work is handled by a written change order.

    • D. No, not without the owner's written authorization for the work

      Correct answer

      Section 7159.6 says the buyer may not require a contractor to perform extra or change-order work without providing written authorization. The owner refused to sign anything, so it cannot require the skylight work.

    Explanation

    Business and Professions Code section 7159.6 says the buyer may not require a contractor to perform extra or change-order work without providing written authorization. An oral request does not meet this rule, even for a small change. Adding the cost to the final bill does not fix the missing authorization. The law uses a written change order for extra work, not a new separate contract.

    Source

  4. Contract Requirements and Execution

    4. A city's request for bids requires the contractor to buy insurance for act of God damage to the work. The premium is a separate bid item. Under Public Contract Code section 7105, when must the contractor show evidence of this insurance?

    • A. Within 30 days after work begins
    • B. Before the first progress payment is made
    • C. Before the contract is executed (signed)
    • D. Only after an act of God causes damage
    Show answer

    Correct answer: C

    • A. Within 30 days after work begins

      Waiting until work begins is too late. The evidence of insurance must be furnished before the contract is executed.

    • B. Before the first progress payment is made

      Waiting until the first progress payment is too late. The evidence of insurance must be furnished before the contract is executed.

    • C. Before the contract is executed (signed)

      Correct answer

      Correct. The contract must require the contractor to furnish evidence of satisfactory insurance coverage before the contract is executed (signed).

    • D. Only after an act of God causes damage

      Showing the insurance only after damage happens would defeat its purpose. The evidence is due before the contract is executed.

    Explanation

    Public Contract Code section 7105 says that when act of God insurance is required, the contract must require the contractor to furnish evidence of satisfactory coverage before the contract is executed. Executed means signed by the parties. Waiting until work begins or until the first progress payment is too late. Showing the insurance only after damage happens would defeat its purpose.

    Source

  5. Contract Requirements and Execution

    5. A home improvement contract has the box checked to show that subcontractors will be used. Later, the owner and contractor sign a change order. Under Business and Professions Code section 7159, what must the change order also contain?

    • A. The same subcontractor disclaimer that is in the contract
    • B. The license numbers of every subcontractor on the job
    • C. A new three-day Notice of Cancellation form
    • D. The signature of each subcontractor doing the extra work
    Show answer

    Correct answer: A

    • A. The same subcontractor disclaimer that is in the contract

      Correct answer

      Correct. Section 7159 says that if there is a change order during the project, the same subcontractor disclaimer must be on each change order.

    • B. The license numbers of every subcontractor on the job

      The disclaimer says the list of subcontractors, with license numbers, must be provided on request. The license numbers do not have to be on the change order.

    • C. A new three-day Notice of Cancellation form

      Section 7159 does not require a new cancellation notice on the change order. It requires the same subcontractor disclaimer that is in the contract.

    • D. The signature of each subcontractor doing the extra work

      Section 7159 does not require subcontractor signatures on the change order. It requires the same subcontractor disclaimer that is in the contract.

    Explanation

    Business and Professions Code section 7159 says that when the contract shows subcontractors will be used, the contract must contain a disclaimer (a set statement) about the subcontractor list. If there is a change order during the project, the same disclaimer must be on each change order. The disclaimer says the list of subcontractors, with license numbers, must be provided on request, so the numbers do not have to be on the change order. The law does not require a new cancellation notice or subcontractor signatures on the change order.

    Sources

  6. Contract Requirements and Execution

    6. A county contract says that if the county causes a delay, the contractor's only remedy is more time. The county causes a short delay of a kind both parties expected when they signed. Does Public Contract Code section 7102 let the contractor recover delay damages anyway?

    • A. Yes, because any delay the county causes allows damages
    • B. Yes, because all clauses that limit delay remedies are void
    • C. No, because the law covers only unreasonable, unexpected delays
    • D. No, because the law covers only delays caused by subcontractors
    Show answer

    Correct answer: C

    • A. Yes, because any delay the county causes allows damages

      Not every delay the agency causes allows damages. Section 7102 applies only when the delay is unreasonable and not within the contemplation of the parties.

    • B. Yes, because all clauses that limit delay remedies are void

      Section 7102 does not make all time-only clauses void. It overrides them only for unreasonable delays the parties did not expect.

    • C. No, because the law covers only unreasonable, unexpected delays

      Correct answer

      Correct. This delay was short and of a kind both parties expected, so section 7102 does not override the time-only clause.

    • D. No, because the law covers only delays caused by subcontractors

      Section 7102 is about delays caused by the agency or other contractee, not only by subcontractors.

    Explanation

    Public Contract Code section 7102 protects the contractor only when the delay is "unreasonable under the circumstances involved, and not within the contemplation of the parties." This delay was short and of a kind both parties expected, so section 7102 does not override the time-only clause. Not every agency-caused delay allows damages, and the law does not make all time-only clauses void. The law is about delays caused by the agency or other contractee, not only by subcontractors.

    Source

  7. Contract Requirements and Execution

    7. In 2026, a contractor on a city public works project wants payment for extra work that the contract does not pay for. Under Public Contract Code section 9204, how must the contractor send its claim?

    • A. By email to the city's project manager
    • B. By regular first-class mail to the city clerk
    • C. By hand delivery to the city inspector at the site
    • D. By registered or certified mail, return receipt requested
    Show answer

    Correct answer: D

    • A. By email to the city's project manager

      Email does not meet the definition. Section 9204 says a claim must be sent by registered or certified mail with return receipt requested.

    • B. By regular first-class mail to the city clerk

      Regular first-class mail does not meet the definition. The claim must go by registered or certified mail with return receipt requested.

    • C. By hand delivery to the city inspector at the site

      Handing the claim to an inspector does not meet the definition. Section 9204 requires registered or certified mail with return receipt requested.

    • D. By registered or certified mail, return receipt requested

      Correct answer

      Correct. Section 9204 defines a claim as a separate demand sent by registered mail or certified mail with return receipt requested, and a claim can ask for payment for work the contract does not otherwise pay for.

    Explanation

    Public Contract Code section 9204 defines a claim as a separate demand sent by registered mail or certified mail with return receipt requested. A claim can ask for a time extension, for payment for work the contract does not otherwise pay for, or for a disputed amount. Email, regular mail, and handing the claim to an inspector do not meet this definition.

    Source

  8. Contract Requirements and Execution

    8. In 2026, a county (not Los Angeles or Santa Clara) awards a $5,000,000 construction contract. The board of supervisors has authorized the county engineer to order changes. Under Public Contract Code section 20142, what is the highest extra cost the engineer may order for one change?

    • A. $210,000
    • B. $237,500
    • C. $250,000
    • D. $262,500
    Show answer

    Correct answer: A

    • A. $210,000

      Correct answer

      Correct. $25,000 plus 5% of the $4,750,000 above $250,000 is $262,500, but section 20142 says no change may exceed $210,000, so the limit is $210,000.

    • B. $237,500

      Wrong. $237,500 is only 5% of the amount above $250,000; it leaves out the $25,000 base and ignores the $210,000 cap.

    • C. $250,000

      Wrong. $250,000 takes 5% of the whole $5,000,000 contract instead of only the part above $250,000, and it also ignores the $210,000 cap.

    • D. $262,500

      Wrong. $262,500 is the formula result ($25,000 plus $237,500), but it is more than the $210,000 cap, so it is not allowed.

    Explanation

    Public Contract Code section 20142 sets the limit at $25,000 plus 5 percent of the original contract cost above $250,000, but no change may exceed $210,000. Step 1: $5,000,000 - $250,000 = $4,750,000. Step 2: 5% x $4,750,000 = $237,500. Step 3: $25,000 + $237,500 = $262,500. Step 4: $262,500 is more than the $210,000 cap, so the limit is $210,000. Forgetting the cap gives $262,500. Forgetting the $25,000 and the cap gives $237,500. Taking 5 percent of the whole contract gives $250,000.

    Sources

  9. Contract Requirements and Execution

    9. During a home remodel, the owner asks for extra tile work. Under Business and Professions Code section 7159, when must the change order be in writing and signed by the parties?

    • A. Before any of the extra tile work begins
    • B. Within 10 days after the extra work begins
    • C. When the final bill for the project is sent
    • D. Only if the extra work costs more than $500
    Show answer

    Correct answer: A

    • A. Before any of the extra tile work begins

      Correct answer

      Section 7159 says any change to a home improvement contract must be in writing and signed by the parties before the work covered by the change order begins.

    • B. Within 10 days after the extra work begins

      Waiting until 10 days after the extra work begins is too late. The change order must be written and signed before the work it covers begins.

    • C. When the final bill for the project is sent

      Waiting until the final bill is too late. The change order must be written and signed before the work it covers begins.

    • D. Only if the extra work costs more than $500

      The rule applies to every change order, not only to ones that cost more than $500.

    Explanation

    Section 7159 says a home improvement contract and any changes to it must be in writing and signed by the parties before the work covered by the change order begins. Waiting until the work has started or until the final bill is too late. The rule applies to every change order, not only to large ones.

    Source

  10. Contract Requirements and Execution

    10. Under Business and Professions Code section 7159.6, a change order is enforceable against a home improvement buyer only if it states certain items. Which item is NOT one of them?

    • A. The scope of the work covered by the order
    • B. The amount added to or subtracted from the contract
    • C. The effect on the progress payments or completion date
    • D. The names of the suppliers who will furnish materials
    Show answer

    Correct answer: D

    • A. The scope of the work covered by the order

      The scope of work covered by the order is one of the three required items, so it is not the answer.

    • B. The amount added to or subtracted from the contract

      The amount added to or subtracted from the contract is one of the three required items, so it is not the answer.

    • C. The effect on the progress payments or completion date

      The effect on the progress payments or the completion date is one of the three required items, so it is not the answer.

    • D. The names of the suppliers who will furnish materials

      Correct answer

      Supplier names are not a required item. Section 7159.6 lists the scope of work, the amount added or subtracted, and the effect on progress payments or the completion date.

    Explanation

    Section 7159.6 says an extra work or change order is not enforceable against the buyer unless it sets out three things. These are the scope of the work, the amount added to or subtracted from the contract, and the effect on the progress payments or the completion date. Supplier names are not one of the required items. A clear change order helps both sides control the cost of the job.

    Sources

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