For California state-funded construction projects, what is the minimum percentage contingency that must be included in cost estimates for projects exceeding $1 million according to California Public Contract Code?
Correct Answer
C) 10%
California Public Contract Code requires a minimum 10% contingency for state-funded construction projects over $1 million. This mandatory contingency helps protect against cost overruns and ensures adequate funding for project completion while maintaining fiscal responsibility in public spending.
Why This Is the Correct Answer
California Public Contract Code requires a minimum 10% contingency reserve on state-funded construction projects exceeding $1 million. This requirement ensures that public projects have adequate funding buffers against cost overruns, scope changes, and unforeseen conditions. The 10% floor is a hard legislative minimum — agencies may budget more, but not less.
Why the Other Options Are Wrong
Option A: 15%
15% exceeds the mandatory minimum. While some agencies voluntarily budget at 15% for complex projects, the statutory floor under California Public Contract Code for projects over $1 million is 10%, not 15%. Choosing 15% represents over-budgeting relative to the legal requirement.
Option B: 5%
5% is below the required minimum. A 5% contingency might be sufficient for small, well-defined private projects, but California Public Contract Code mandates double that (10%) for state-funded projects over $1 million to protect public funds.
Option D: 8%
8% is between the common private-sector practice and the statutory public minimum, but it does not meet the 10% requirement of California Public Contract Code. This distractor tests precision — candidates who vaguely recall 'around 10%' may round down to 8%.
Memory Technique
Public Contract = 10%. Think: '10 fingers on a public official's hands' or 'Public projects need a Perfect 10 contingency.' The $1 million threshold is the trigger — above that, 10% is the floor.
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