Utah Contractor Practice Exam

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What does a contingency percentage typically account for in a bid?

Unexpected costs
Insurance fees
Market fluctuations
Labor costs

The correct answer is: Unexpected costs

A contingency percentage in a bid is primarily designed to cover unexpected costs that may arise during the course of a project. This percentage serves as a safeguard for the contractor, allowing them to address unforeseen circumstances without derailing the financial integrity of the project. Such unexpected costs can include anything from changes in project scope to unexpected site conditions, which may not have been identified during the initial planning phase. This contingency amount is not intended for standard project expenses like labor, materials, or insurance fees, which should be accurately estimated and included in the baseline budget. By incorporating a contingency percentage, contractors can better manage risk and ensure that they have the financial flexibility to respond to surprises without putting the project's completion or quality at stake.