Florida General Contractor Practice Exam

What is the primary risk associated with not properly accounting for contingencies in a construction project?

1. Loss of materials

2. Delay in project schedule

3. Cost overruns

4. Failure to meet safety standards

The correct answer is: Cost overruns

Not properly accounting for contingencies in a construction project primarily leads to cost overruns. Contingencies are extra funds set aside to cover unforeseen costs that may arise during a project. These can include unexpected material price increases, labor shortages, or additional work required due to unforeseen site conditions. When contingencies are insufficient or overlooked, any unexpected expenses will need to be covered from the existing project budget, which can quickly deplete financial resources. This may result in expenditures that exceed what was initially planned, thus leading to cost overruns. It is critical for project managers to accurately assess potential risks and include appropriate contingency allowances to help ensure the project can absorb unexpected costs without jeopardizing the overall financial stability. While loss of materials, delay in project schedule, and failure to meet safety standards can also result from various mismanagement scenarios, they do not directly tie back to the financial implications of insufficient contingency planning the way cost overruns do.