A residential construction project will disturb 3.2 acres and is located within 500 feet of a wetland. The contractor must obtain an NPDES permit and estimate the cost at $2,800. If permit costs are marked up 15% and included in the project bid, what amount should be included?
Correct Answer
A) $3,220
The permit cost with markup is $2,800 × 1.15 = $3,220. Since the project disturbs more than 1 acre, an NPDES permit is required, and contractors typically mark up permit costs to cover administrative time and risk.
Why This Is the Correct Answer
The correct answer is C) $3,220 because contractors must include markup on permit costs when bidding projects. The base NPDES permit cost of $2,800 is multiplied by 1.15 (representing the 15% markup) to account for administrative time, processing effort, and business risk. This markup is standard practice in construction bidding to ensure the contractor recovers all costs associated with obtaining permits.
Why the Other Options Are Wrong
Option B: $2,800
Option A is wrong because $2,800 represents only the base permit cost without any markup. Contractors cannot simply pass through permit costs at face value as they must account for the time, effort, and risk involved in obtaining permits.
Option C: $3,080
Option B is wrong because $3,080 would represent only a 10% markup ($2,800 × 1.10), not the specified 15% markup required in the problem. This calculation error would result in insufficient cost recovery for the contractor.
Option D: $3,500
Option D is wrong because $3,500 represents a 25% markup ($2,800 × 1.25), which exceeds the specified 15% markup in the problem. While contractors may use various markup percentages, this problem specifically states 15%.
Memory Technique
Remember 'NPDES = Never Pass Direct Expense Straight' - always add markup to permit costs in bids
Reference Hint
Florida Building Code Chapter 1 - Permits and Inspections, and NPDES permit requirements under environmental regulations section
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