According to California regulations, when a general contractor subcontracts work and includes markup in their bid, what is the maximum allowable markup on subcontractor work for cost-plus contracts under Business and Professions Code Section 7157?
Correct Answer
A) There is no specific maximum percentage limitation
Business and Professions Code Section 7157 does not establish a specific maximum percentage for contractor markup on subcontracted work. However, markups must be reasonable and disclosed in cost-plus contracts. The markup should reflect actual overhead and management costs associated with coordinating and supervising the subcontracted work.
Why This Is the Correct Answer
B&P Code §7157 governs cost-plus contracts in California but does not establish a specific maximum percentage for markup on subcontractor work. The law requires that markups be reasonable and properly disclosed to the owner, but leaves the actual percentage to negotiation between the parties. This is a nuanced point: no statutory cap exists, unlike what many candidates assume.
Why the Other Options Are Wrong
Option B: 15% of the subcontractor's bid
15% is not a statutory maximum under B&P §7157. While 15% is a common industry practice and is sometimes written into individual contracts as a cap, it is not a California legal requirement. Selecting this answer conflates industry custom with statutory law.
Option C: 10% of the subcontractor's bid
10% is not a statutory maximum under B&P §7157. As with 15%, this figure may appear in some public contracts or owner-negotiated agreements, but it is not mandated by state law for cost-plus contracts generally.
Option D: 20% of the subcontractor's bid
20% is not a statutory maximum under B&P §7157. This distractor tests whether candidates will choose the highest number as the most 'permissive' cap, but the correct answer is that no specific cap exists in the statute.
Memory Technique
§7157 = No Cap, Just Disclose. Remember: 'In California cost-plus, you can mark up subcontractors — just tell the owner what you're charging.' The statute is about transparency, not a specific number. If you see a percentage in the answer choices for a §7157 question, it's a trap.
More law-business Questions
Under B&P Code Section 7071.9, a contractor may deposit cash or securities instead of obtaining a surety bond. If a contractor chooses this option, where must the deposit be maintained and what happens to interest earned?
Under California's AB 5 law (Dynamex decision), which factor is NOT part of the ABC test for determining independent contractor status?
According to Business and Professions Code Section 7031, what is required when a licensed contractor supervises work performed by unlicensed employees on a construction project?
Under California Building Standards Code Title 24, which entity has the authority to issue building permits for most residential and commercial construction projects?
According to B&P Code 7159.5, service and repair contracts must include specific provisions. Which statement is correct regarding these contracts?
Which of the following activities is exempt from California contractor licensing requirements under Business and Professions Code Section 7048?
Under Cal/OSHA regulations in Title 8 CCR Section 5192, Safety Data Sheets (SDS) for hazardous chemicals used on construction sites must be readily accessible to employees during which hours?
Under California Business and Professions Code Section 7071.9, in lieu of a surety bond, what alternative security may a contractor provide to satisfy the contractor license bond requirement?
According to Cal/OSHA regulations, which of the following is NOT a required element of a written Injury and Illness Prevention Program (IIPP)?
A homeowner requests that a B-General Building Contractor provide a certificate of insurance naming the homeowner as an additional insured on the contractor's general liability policy. Under California law, what is the contractor's obligation?
People Also Study
Business & Financial Management
120 questions · 70% to pass
Contract Administration
60 questions · 70% to pass
Project Management
60 questions · 70% to pass
Related Study Resources
Previous Question
According to California Title 24 energy compliance requirements, when must a Certificate of Compliance be submitted during a residential construction project?
Next Question
According to California law, when must a contractor provide workers' compensation insurance coverage for employees?