Chapter 16 Quiz — Procurement and Buyout

D. Report gross and net separately, always, and show what moved between them. A single number invites the reader to believe the wrong one. Answer B is arithmetically right but hides the size of the miss, which is the information a reader actually needs in order to ask whether there are more of them.

B. The practical test is whether the vendor's employee sets foot on your job to perform work. A PO for goods carries none of the site obligations you need from anyone working on your project. There is no dollar threshold rule, and POs are certainly enforceable.

C. April 18 was the fabricator's real production constraint, and it lived on the fabricator's schedule rather than on any Kestrel document. Kestrel managed its own milestone (April 15) and never asked for the one that mattered. Ask every long-lead subcontractor: what is your no-later-than release date, and what happens if we miss it?

B. EMR is a workers' compensation premium multiplier built from claim cost history relative to expected losses for that class, size, and state. It is not a recordable rate, not an audit result, and not a statement about the current crew. It is also backward-looking, volatile for small firms, and jurisdictional.

C. Pay-when-paid is a timing clause; pay-if-paid is a condition precedent. Enforceability varies significantly by state — some enforce clearly drafted clauses, some refuse on public-policy grounds, some require unmistakably explicit language, and some limit the clause by statute or by its interaction with prompt-payment, lien, or payment-bond rights. Verify governing law for your specific project; never carry one state's rule into another.

B. Half the value of a seam walk is finding double-buys. If you hunt only for gaps you will add the access panels to the drywall subcontract while the mechanical subcontractor is already carrying them, and pay for the same 186 panels twice.

C. It identifies specific scope, discloses no competitor's price, and asks for a corrected number rather than a lower one. And if the discovered gap changes the package, the disciplined move is to reissue to all bidders — which is the one rule that makes shopping structurally impossible.

C. If the switchgear is ten weeks late, your remedy is very likely repair or replacement and nothing more. Time spent negotiating delay damages into a material PO is time you should have spent moving the order three weeks earlier.

B. Flow-down transfers obligations, not benefits. If you want the subcontractor to have your rights — a time extension, for example — you must say so. And you must actually make the prime contract available to them; flowing down terms nobody was shown is both unfair and frequently unenforceable.

C. This is the "notice sandwich." A subcontractor who notices you on day 21 leaves you zero days to notice the owner. Check your subcontract's notice period against your prime contract's on every job — copying last job's subcontract onto a project with a 10-day owner notice period builds a trap.

B. SDI is first-party insurance the contractor buys. The carrier requires an approved prequalification program because you are now evaluating subcontractor credit. It is usually cheaper and faster to respond, and it lets capable firms that cannot get bonded onto your jobs — but the retention is real money on every event, and many public statutes and owner contracts require bonds regardless.

False. A favorable variance caused by unbought scope is a deferred loss. Northgate's week-three $312,000 of "savings" contained $196,000 of scope nobody had bought — and one of the three headline savings was actually a $7,000 overrun.

False. More packages produce more competition and more seams. Every additional package is another boundary at which two proposals can each say "by others." The right number of packages is driven by how many qualified bidders each will attract, not by how the specification is filed.

False. The Northgate blocking gap was $107,000 at buyout and roughly $279,450 in month nine — about 2.6 times — because of demolition, re-close, refinish, and markup. And the multiplier is not the worst part: at buyout you have five bidders and no signed contract; in month nine you have one mobilized subcontractor and no alternative.

False. Caldwell used exactly its contractual review period, as planned. The entire slip came from Kestrel holding the submittal eleven days instead of five — and, more fundamentally, from a back-schedule with zero float that tracked the approval date rather than the fabricator's release date.

False. A backcharge requires a contractual obligation the subcontractor failed to perform. You cannot backcharge someone for work they never agreed to do. On Rivermont Elementary, Curtis Boone's backcharges against Delacroix and Vessel both failed on exactly that ground — and would have failed a second time on the 48-hour written notice precondition he had already blown.

Three linked mechanisms. (1) The specification is filed by product and system, not by responsibility, so nothing in it assigns the work between two systems. (2) The low bidder wins, so a bidder facing ambiguous scope must choose between including it and being higher, or excluding it and being lower — over enough bids the market selects for exclusion. (3) Exclusion pages are boilerplate that travels from job to job, and "by others" means "not by me" while saying nothing about who others is.

The result is a system that reliably produces holes in which every hole is technically disclosed. The scope sheet is the only instrument that closes them, because it is the only document written from the boundary's point of view.

(1) Ten days of procurement float, bought by issuing a letter of intent at GMP approval instead of waiting for the executed subcontract — cost: one page and a signature. (2) A gating-submittal list with a 48-hour internal clock and a named owner — cost: a one-page list and a daily two-minute standup. (3) Tracking the fabricator's release-to-mill date, not the approval date — cost: one question, asked once. (4) Pre-negotiated expedited review (7 days instead of 14) for the four gating submittals — cost: a conversation at the design-team kickoff, possibly a small design-assist fee.

Each one alone would have prevented all twenty-three days and the $168,000 of acceleration.

"By others" names no one. It tells you only that this bidder does not have the work — and every competing bidder's boilerplate says the same thing, so the exclusion cancels out in a vertical bid comparison and never appears as a price difference. A named exclusion at least gives you a party to check with.

The discipline is the horizontal seam walk: put adjacent packages' proposals side by side and, for each of the twenty seam-checklist items, force a yes or no and name the package that carries it. Then trace each item back into every base bid to catch scope you are about to buy twice.

Because oversized equipment must be rigged into its room before the building is closed around it. Northgate's 3,000-amp switchgear enters the level-1 main electrical room through the north loading opening, which closes when architectural precast panel P-C4 is set on February 10, Year 2 — long before the equipment is needed electrically.

Missing that window does not delay the electrical system; it costs $18,500 to leave a panel off and heat the room, $31,000 to remove and reset the panel, or $52,000 to cut a slab opening and rig from above. Buying the switchgear three weeks earlier costs $0.

(a) You have found a classic boundary gap of the type that cost Curtis Boone $180,000 on a $22.4M job — the fire main, the grease waste system including the interceptor, the yard storm piping, and almost certainly the foundation sleeves, coring, and re-compaction in the five-foot zone. On a $31M job, budget in the same order of magnitude and do not assume you have found all of it.

(b) In order: (1) Do not issue any of the three subcontracts if any are unexecuted — stop them today. (2) Take off the actual quantities so you are negotiating with numbers, not adjectives. (3) Run the full twenty-item seam checklist across all three pairs, not just the items you noticed, and also trace back for double-buys. (4) Call all three subcontractors for scope review, separately, and ask each to state who they believe has each item. (5) If a package is unexecuted and the scope changes materially, reissue to all bidders rather than negotiating with one. (6) Write the boundary language — physical location, everything assigned on both sides, plus the order-of-precedence clarification that makes the scope exhibit govern over the attached proposal.

(c) Report both numbers to your operations executive the same week: gross $418,000 favorable, and net after funding the identified gaps. Show the gap as its own line with a description, not netted invisibly. Book a named scope-gap reserve inside contingency for the seams you have not yet walked, with a date to retire it. On a cost-reimbursable or GMP contract, tell the owner's representative too — on a 75/25 savings split, most of the money at stake is theirs.

(a) Nov 20 − 8 = ships Nov 12 → −45 = fabrication starts Sep 28 → −42 = material ordered/released Aug 17 → −14 = to A/E Aug 3 → −5 = fabricator submits Jul 29 → −35 = subcontract executed no later than June 24, Year 1.

(b) Add 22 CD (12 resubmittal + 10 second review): June 2, Year 1.

(c) June 2. On a delegated-design curtain wall reviewed by an architect and a structural engineer, the two-round cycle is the base case, not the risk case — build it into the plan and treat first-round approval as recovered float.

(d) "Approved as noted" — which permits fabrication to proceed — versus "revise and resubmit," which does not. In March, at the design-team kickoff, identify the gating submittals by name and ask the A/E to use "approved as noted" wherever their comments do not go to design intent. It is a free conversation and it is worth three weeks.