Utah Contractor Practice Exam

When a contractor is bidding a job, which of the following is the biggest risk factor?

1. Owner's financial stability

2. Change orders

3. Small extras

4. Finding subs

The correct answer is: Owner's financial stability

The biggest risk factor when a contractor is bidding a job relates to the owner's financial stability. This aspect is crucial as it directly affects the contractor's ability to get paid for the work completed. If a project owner is experiencing financial difficulties, there is a heightened risk of non-payment, delays in payment, or even potential bankruptcy. This uncertainty can have serious ramifications for contractors, leading to cash flow issues or the inability to cover expenses for materials and labor. While aspects like change orders, small extras, and finding subcontractors can also pose risks, they are typically more manageable than the financial stability of the owner. Change orders can be negotiated and accounted for within the contract, and small extras can often be absorbed within the overall project cost. Similarly, while finding qualified subcontractors is important, it is a logistical challenge that contractors can usually overcome with the right planning and networking. In contrast, a financially unstable owner could jeopardize the entire project, making this the most significant risk factor during the bidding process.