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1. Under California law, a home improvement contract is required for residential work when the total contract price (labor AND materials) is at least:

California requires a written home improvement contract for any work on a residential property totaling $500 or more, including both labor and materials.

2. A homeowner can cancel a home improvement contract that was solicited at their home within:

The three-day right of rescission applies to contracts solicited and signed at the consumer's home. The homeowner has until midnight of the third business day to cancel without penalty.

3. Which of the following MUST be included in a California home improvement contract?

California law requires home improvement contracts to include the contractor's name, address, license number and expiration date, description of work, project start and completion dates, and payment schedule.

4. A contractor and homeowner agree to change the scope of work during a project. This agreement must be:

All changes to a home improvement contract must be documented in a written change order signed by both the contractor and homeowner before the changed work begins.

5. A contractor may demand final payment from the homeowner:

A contractor may not demand or accept final payment until the project is substantially complete. Demanding payment before this point is a violation of California Contractors' Law.

6. Which statement about arbitration clauses in construction contracts is TRUE?

Arbitration clauses are permitted in construction contracts but must be clearly disclosed, written in at least 10-point boldface type in home improvement contracts, and separately initialed by the homeowner.

7. A contractor abandons a job without justification after receiving a substantial deposit. The contractor may face:

Abandonment without legal excuse exposes a contractor to license discipline (suspension/revocation), civil liability for breach of contract, and potentially criminal charges for misappropriation of funds.

8. Who is primarily responsible for obtaining building permits on a construction project?

While permits can technically be pulled by the owner, it is the contractor's professional responsibility to ensure all required permits are obtained before work begins. Working without required permits is a license violation.

9. A contract clause that shifts responsibility for delays outside the contractor's control to the owner is called:

A force majeure clause excuses a party from performance when extraordinary events beyond their control (weather, acts of God, pandemics) prevent timely completion. It protects the contractor from delay damages.

10. An owner includes a liquidated damages clause of $500 per day for late completion. This clause is enforceable if:

Liquidated damages are enforceable if: (1) damages were difficult to estimate at contract signing, and (2) the amount is a reasonable estimate of probable harm — not a penalty.

11. A contractor must provide an owner with a "Notice to Owner" (preliminary notice) primarily to:

The preliminary notice is not a demand for payment — it preserves the right to file a mechanics' lien later if the contractor or supplier is not paid. Without it, lien rights may be lost.

12. Under a "time and materials" (T&M) contract, the owner pays:

A T&M contract pays the contractor for actual labor hours at an agreed rate plus actual material costs, typically plus overhead and profit markup. The total cost is not fixed in advance.

13. Which contract type places the MOST financial risk on the contractor?

Under a fixed-price (lump sum) contract, the contractor agrees to complete the work for a set price regardless of actual costs. If costs exceed the estimate, the contractor absorbs the loss.

14. A subcontractor fails to complete their scope of work on a project. The prime contractor's primary recourse is:

The prime contractor can withhold payment from the defaulting subcontractor, hire a replacement to complete the work, and sue the original sub for any additional cost incurred above the original subcontract price.

15. California's "prompt payment" law requires owners to pay general contractors within how many days of a proper invoice?

On private works, owners must pay general contractors within 30 days of a proper undisputed invoice. On public works the period is 30 days from invoice or 39 days from billing, depending on the agency.

16. A general contractor must pay a subcontractor within how many days of receiving payment from the owner?

California prompt payment law requires general contractors to pay subcontractors within 7 days of receiving payment from the owner for private works, and 10 days for public works.

17. A contractor is hired to build a room addition. After completion, the homeowner claims defects. The contractor's written warranty on new residential construction must be at least:

California's Right to Repair Act (SB 800) establishes statutory warranties for new residential construction: 1 year for most components, 4 years for plumbing/electrical/mechanical, 10 years for structural defects.

18. On a $40,000 home improvement contract, what is the maximum down payment a contractor may legally demand or accept before work begins?

California limits the down payment on a home improvement contract to $1,000 or 10% of the contract price, whichever is LESS. Here 10% would be $4,000, so the smaller cap of $1,000 controls.

19. On a $6,000 home improvement contract, what is the maximum allowable down payment?

The down payment may not exceed $1,000 or 10% of the contract price, whichever is less. Ten percent of $6,000 is $600, which is less than $1,000, so $600 is the legal maximum.

20. Which of the following is NOT a required element of a California home improvement contract?

Home improvement contracts must state the work description, payment schedule, and start/completion dates, among other items. A homeowner's income is private financial information and is never a required contract term.

21. A home improvement contract in California must be signed by the homeowner and contractor and a copy given to the buyer:

The contractor must furnish the buyer a fully completed and signed copy of the home improvement contract before any work begins, so the buyer can review terms and exercise cancellation rights.

22. A homeowner signs a $9,000 home improvement contract at their kitchen table on a Tuesday. By when must the homeowner deliver a written cancellation notice to keep the cancellation valid?

A buyer may cancel a home solicitation home improvement contract until midnight of the third business day after signing. The cancellation right is exercised by written notice delivered within that window.

23. After the down payment, payments collected under a home improvement contract must:

California prohibits front-loading. Each progress payment must not exceed the value of work actually performed and materials actually delivered, protecting the homeowner if the contractor stops work.

24. If a home improvement contract contains a binding arbitration clause, California law requires that the clause be:

An arbitration clause in a contract for residential work must appear in at least 10-point boldface type, contain prescribed disclosure language, and be separately initialed or signed by the consumer.

25. A change order on a home improvement project that increases the price must:

Any change in the contract price, scope, or terms must be documented in a written change order signed by both parties. Verbal change orders are unenforceable and a license law violation.

26. Section 7164 of the Business and Professions Code governs contracts for:

B&P Code §7164 sets the required terms for contracts to build a new single-family residential structure sold to the person it is built for. Home improvement (remodel/repair) contracts are governed by §7159.

27. A home improvement contract must contain a heading that identifies it as a:

The law requires the contract to bear a clear heading identifying it as a "Home Improvement" contract so the consumer knows which set of protective rules applies to the agreement.

28. A home improvement salesperson who solicits, negotiates, or sells home improvement contracts for a contractor must be:

A person who solicits or negotiates home improvement contracts on behalf of a contractor must be registered with the CSLB as a Home Improvement Salesperson (HIS), unless they are an officer of the licensed entity.

29. A home improvement contract must include a notice informing the homeowner about:

The contract must contain a notice describing the CSLB, including its contact information, so consumers know how to verify a license, learn about the contractor's history, and file a complaint.

30. When a contract is subject to the three-day right of cancellation, the contractor must give the buyer:

The contractor must attach to the contract a properly completed Notice of Cancellation (typically two copies) that the buyer can complete and mail to exercise the three-day cancellation right.

31. A senior citizen (65 or older) who signs a home solicitation contract for disaster repairs after an emergency generally has a right to cancel of:

While the standard home solicitation cancellation period is three business days, California extends the cancellation period to seven business days for senior citizens, including certain disaster and emergency repair contracts.

32. If a buyer properly cancels a home solicitation contract within the cancellation period, the contractor must:

Upon a valid cancellation, the seller must, within 10 days, refund all payments made and return any goods traded in. The contractor may not retain a fee for a properly cancelled contract.

33. A homeowner asks a contractor to begin a $15,000 kitchen remodel based only on a verbal agreement. The contractor should:

Any home improvement work over $500 requires a written contract before work begins. Starting on a verbal agreement violates license law and exposes the contractor to discipline and unenforceable payment claims.

34. Which practice by a contractor on a home improvement contract is PROHIBITED?

It is unlawful to demand or accept a payment that exceeds the value of the work performed and materials delivered. The other choices describe proper, lawful contracting practices.

35. A contractor takes a deposit, performs a small amount of work, and then stops returning calls and never finishes. This conduct is BEST described as:

Willfully departing from or disregarding plans or stopping work without legal excuse and without the owner's consent is abandonment, a cause for license discipline under B&P §7107.

36. A contract bids a job at a single total price covering all labor, materials, and overhead, regardless of actual cost. This is a:

A fixed-price or lump-sum contract sets one total price for the entire scope. The contractor profits if costs come in low and loses if they run high, bearing the cost risk.

37. Under a cost-plus-percentage contract, the contractor's fee is calculated as:

In a cost-plus-percentage contract, the contractor is reimbursed for actual costs and earns a fee equal to an agreed percentage of those costs. The owner bears most of the cost risk.

38. A grading contract pays $4.50 per cubic yard of soil excavated, with the final quantity measured in the field. This is a:

A unit-price contract sets a price per unit of work (per cubic yard, per linear foot, etc.). The total contract value depends on the actual measured quantities completed.

39. A "guaranteed maximum price" (GMP) contract protects the owner because:

In a GMP contract, costs are reimbursed up to a negotiated ceiling. Any cost overrun above the cap is borne by the contractor, capping the owner's financial exposure.

40. A contractor's direct job costs are $80,000 and the contract sells for $100,000. What is the gross margin percentage on this job?

Margin is gross profit divided by the selling price. Profit is $100,000 - $80,000 = $20,000; $20,000 / $100,000 = 20% margin. (Markup, by contrast, divides profit by cost: $20,000 / $80,000 = 25%.)

41. A contractor wants a 30% markup on a job whose costs are $50,000. What selling price should the contractor bid?

Markup is added to cost: selling price = cost x (1 + markup) = $50,000 x 1.30 = $65,000. The $15,000 difference is the gross profit on the job.

42. A contractor needs a 25% gross margin on a job. If the direct costs are $30,000, what selling price achieves that margin?

To find the price for a desired margin, divide cost by (1 - margin): $30,000 / (1 - 0.25) = $30,000 / 0.75 = $40,000. The $10,000 profit is 25% of the $40,000 price.

43. A bid includes $60,000 in labor and materials, $12,000 in overhead, and the contractor wants $8,000 profit. What is the total bid price?

The bid price equals direct costs plus overhead plus profit: $60,000 + $12,000 + $8,000 = $80,000. Overhead and profit must both be added on top of direct job costs.

44. A contractor's annual overhead is $120,000 and projected annual direct job costs are $600,000. What overhead rate should be applied to each job's direct costs?

The overhead rate is total overhead divided by total direct costs: $120,000 / $600,000 = 0.20, or 20%. Each job is marked up 20% of its direct costs to recover overhead.

45. A contractor's fixed overhead is $90,000 per year and the average gross profit margin on jobs is 30%. How much sales revenue is needed to break even on overhead?

Break-even sales = fixed overhead divided by gross margin: $90,000 / 0.30 = $300,000. At $300,000 in sales, the 30% margin produces exactly $90,000 to cover overhead.

46. A contractor adds a 5% contingency to a job estimated at $200,000 in direct costs. How much money does the contingency add to the estimate?

A contingency is a percentage of estimated cost set aside for unforeseen conditions: 5% x $200,000 = $10,000. It cushions the budget against surprises without inflating the base estimate.

47. On a project with a $250,000 contract, the owner withholds 10% retention from each progress payment. After $150,000 of work has been billed and approved, how much retention has been withheld so far?

Retention is withheld as a percentage of the work billed to date: 10% x $150,000 = $15,000. Retention is released after satisfactory completion, typically tied to project acceptance.

48. On a private works project, after the owner pays the general contractor a progress payment, the general contractor must pay each subcontractor its share within how many days?

Under California prompt payment law, a direct contractor on a private project must pay each subcontractor its portion within 7 days of receiving a progress payment from the owner.

49. If an owner wrongfully withholds an undisputed progress payment from a general contractor, California prompt payment law allows a penalty of:

California prompt payment statutes impose a penalty of 2% per month (in lieu of interest) on amounts wrongfully withheld, and the prevailing party in an enforcement action may recover attorney's fees and costs.

50. After a project is satisfactorily completed and accepted on a private works job, the owner must release retention to the general contractor within:

On private works, an owner must release retention proceeds withheld from a direct contractor within 45 days after completion of the work of improvement.

51. After receiving retention from the owner, a general contractor on a private works project must pass through each subcontractor's retention within:

Once the general contractor receives retention from the owner, it must release each subcontractor's share of that retention within 10 days on a private works project.

52. In a construction contract, a "schedule of values" is BEST described as:

A schedule of values divides the total contract sum among the various components of the work. Each progress payment application bills the percentage complete of each line item against this schedule.

53. On a $500,000 contract, the schedule of values shows framing as 18% of the total. If framing is 50% complete, how much may the contractor bill for framing this period?

Framing's total value is 18% x $500,000 = $90,000. At 50% complete the contractor may bill 50% x $90,000 = $45,000 for that line item this period.

54. A contractor completes $80,000 of work in a billing period. The contract provides for 10% retention. How much should the contractor expect to receive for this progress payment?

The owner withholds 10% retention: $80,000 x 10% = $8,000 retained, so the current payment is $80,000 - $8,000 = $72,000. The $8,000 retention is paid later upon completion.

55. The primary purpose of job costing during a project is to:

Job costing tracks actual labor, material, and other costs against the budget line by line, allowing the contractor to identify overruns early and take corrective action before losses grow.

56. A job was estimated at $40,000 in labor but actual labor came in at $48,000. This $8,000 difference is BEST described as:

When actual cost exceeds the estimate, the shortfall is a cost overrun, also called an unfavorable variance. Job costing flags such variances so the contractor can investigate the cause.

57. When a general contractor relies on a subcontractor's bid to prepare its prime bid, the sub generally:

When a general reasonably and foreseeably relies on a sub's bid in submitting its own, the sub can be held to that bid under promissory estoppel (detrimental reliance), even without a signed contract.

58. The practice of a general contractor revealing one subcontractor's bid to a competitor to obtain a lower price is called:

Bid shopping is using one sub's quoted price to pressure other subs to bid lower after bids are submitted. It is widely viewed as unethical and is restricted on public works to protect competitive bidding.

59. A contractor discovers a $20,000 arithmetic error in its bid one hour after submitting it, before any contract is signed. The contractor's BEST course of action is to:

A genuine, promptly disclosed clerical or arithmetic error generally allows a bidder to withdraw or correct the bid before contract formation. Proceeding with deficient work or hidden corner-cutting would violate license law.

60. In project organization, the document that defines exactly what work is and is NOT included in a contract is the:

The scope of work spells out the specific work the contractor will perform. A clear scope prevents disputes over whether a task is included in the contract price or is extra work requiring a change order.

61. A "punch list" near the end of a project is:

A punch list itemizes minor defects or unfinished details that must be completed or corrected before the owner gives final acceptance and releases final payment and retention.

62. "Substantial completion" of a construction project generally means:

Substantial completion is reached when the work is sufficiently complete that the owner can occupy or use the project for its intended purpose, even if minor punch-list items remain.

63. A liquidated damages clause in a construction contract will most likely be unenforceable if:

Under Civil Code §1671, liquidated damages must be a reasonable estimate of probable harm. A clause set arbitrarily high to punish, with no relation to actual anticipated loss, is an unenforceable penalty.

64. A contract sets liquidated damages of $400 per day for late completion. The contractor finishes 12 days late. Assuming the clause is enforceable, how much may the owner deduct?

Liquidated damages accrue per day of delay: $400 x 12 days = $4,800. An enforceable clause fixes this amount in advance so actual damages need not be separately proven.

65. Under California's Right to Repair Act (SB 800), the statutory standard for plumbing and electrical system defects in new residential construction generally applies for:

SB 800 establishes tiered standards: most function/finish items 1 year, plumbing and electrical systems generally 4 years, and structural/major defects up to 10 years from close of escrow.

66. Under SB 800, the longest statutory standard period applies to which type of defect in new residential construction?

The 10-year period under SB 800 applies to major structural defects. Finish and function items such as paint, trim, and hardware carry much shorter standard periods, often one year.

67. Under SB 800, before a homeowner may file a construction defect lawsuit against the builder, the homeowner generally must first:

SB 800 establishes a prelitigation process: the homeowner must notify the builder of the claimed violation, and the builder has the right to inspect and offer to repair before a lawsuit may proceed.

68. A home improvement contract states the contract price as "to be determined" with no total dollar amount. This contract is:

A home improvement contract must clearly state the total contract price in dollars. An open-ended or undetermined price deprives the consumer of a key disclosure and violates the contract requirements.

69. In a cost-plus contract, the party who bears the MOST risk of cost overruns is the:

Under cost-plus, the contractor is reimbursed for actual costs plus a fee, so cost increases are passed through to the owner. The owner therefore bears the bulk of the cost-overrun risk.

70. A contractor signs a $700 repair contract with a homeowner. Which statement is correct?

California requires a written home improvement contract whenever the combined labor and material price is $500 or more. A $700 repair clearly exceeds the threshold and must be in writing.

71. A contractor's bid totals $90,000, of which $54,000 is direct cost. What percentage of the bid is gross profit and overhead combined?

The amount above direct cost is $90,000 - $54,000 = $36,000. As a percentage of the bid: $36,000 / $90,000 = 40%, which covers both overhead and profit.

72. A contractor estimates a job will take 320 labor hours at a fully burdened rate of $55 per hour. What is the estimated labor cost?

Estimated labor cost equals hours times the burdened hourly rate: 320 x $55 = $17,600. The burdened rate already includes payroll taxes, insurance, and benefits.

73. Three contractors submit sealed bids of $182,000, $176,500, and $189,300 for the same defined scope. The lowest responsible, responsive bid is:

Competitive bidding awards the contract to the lowest responsible and responsive bidder. Among $182,000, $176,500, and $189,300, the lowest is $176,500.

74. A general contractor uses a critical path method (CPM) schedule mainly to:

A CPM schedule maps task dependencies and durations to find the critical path, the longest chain of activities that determines the minimum project duration and the completion date.

75. On a fixed-price contract, the contractor's estimate was $100,000 but actual costs reached $112,000. The owner still pays only the agreed price. The contractor's profit or loss is:

In a fixed-price contract the price is locked. With costs of $112,000 and revenue of $100,000, the contractor absorbs a $12,000 loss; cost-risk falls entirely on the contractor.

76. If a contractor performs home improvement work without a written contract or with a noncompliant contract, the most likely consequence is:

Failure to use a compliant written home improvement contract is grounds for CSLB discipline and can make it difficult or impossible for the contractor to enforce payment in court.

77. An owner asks a contractor to add an unforeseen scope of work mid-project. To be paid for the extra work, the contractor should FIRST:

Extra or changed work should be authorized by a written change order signed by both parties before it is performed, so the price and scope are clear and the contractor's right to payment is protected.

78. California prompt payment laws are designed primarily to:

Prompt payment statutes set deadlines for owners, general contractors, and others to pay down the contracting chain, with penalties for late payment, so that everyone who performs work is paid timely.

79. A contractor wishes to require a larger down payment than the law allows because a custom-ordered material must be paid for up front. The proper way to handle this is to:

The down payment cap ($1,000 or 10%, whichever is less) cannot be waived by the homeowner. Special-order or custom-material costs must be handled through lawful contract provisions, not an oversized down payment.

80. A contractor's overhead is best described as:

Overhead consists of indirect costs of running the business — office, insurance, licenses, administrative salaries — that benefit all jobs and must be recovered through markup on direct costs.

81. On a home improvement contract, the start date and completion date provisions exist primarily to:

Required start and completion (or duration) dates give the homeowner a clear timeline, support enforcement if the contractor delays, and help establish whether abandonment has occurred.

82. Which item is generally considered a direct (job) cost rather than overhead?

Direct costs are traceable to a specific job — like lumber, job-site labor, and equipment rental for that job. Office phone, general insurance, and bookkeeper salary are indirect overhead.

83. A contractor marks up direct costs by 35%. If the markup amount on a job is $14,000, what were the direct costs?

Markup amount equals direct cost times the markup rate: $14,000 = cost x 0.35, so cost = $14,000 / 0.35 = $40,000. The selling price would be $54,000.

84. On a unit-price paving contract at $3.20 per square foot, the field measures 9,500 square feet actually paved. What is the contractor entitled to be paid?

Under a unit-price contract, payment equals the unit price times the measured quantity: $3.20 x 9,500 sq ft = $30,400.

85. A contractor finishes substantially all work on a private project and submits a proper final invoice for $30,000 (the retention). The owner refuses to pay although there is no genuine dispute. The contractor's BEST first step is to:

Where there is no good-faith dispute, the contractor should make a written demand and then enforce its rights through prompt-payment penalties and mechanics' lien or bond claims. Self-help removal of materials is unlawful.

86. An AIA-style "Application and Certificate for Payment" (commonly G702/G703) is used to:

The G702 (application/certificate) with its G703 continuation sheet itemizes the schedule of values and percentage of each item completed, supporting the contractor's request for a progress payment.

87. A contractor budgets a job at $250,000 total cost and is 60% complete. To stay on budget, total spending to date should be approximately:

If progress and spending track together, spending at 60% complete should be about 60% of the $250,000 budget: 0.60 x $250,000 = $150,000. Spending much above this signals a possible overrun.

88. A homeowner signs a home improvement contract at the contractor's place of business after visiting the showroom. Which statement is most accurate?

The required contents and protections of a home improvement contract apply regardless of where it is signed. The three-day home-solicitation cancellation right, however, is tied to contracts solicited at the buyer's home.

89. A 'no-damage-for-delay' clause in a contract typically:

A no-damage-for-delay clause provides that, for covered delays, the contractor's sole remedy is additional time to perform, not monetary compensation for delay costs.

90. An indemnification (hold harmless) clause in a construction contract generally:

An indemnification clause allocates risk by requiring one party to protect, defend, or reimburse another against specified claims or losses arising from the work.

91. A home improvement contract must disclose the contractor's license number primarily so that the homeowner can:

Listing the license number lets the homeowner check the CSLB record to confirm the license is active and properly classified and to review any disciplinary or complaint history before work begins.

92. A subcontract should clearly state the scope of work primarily to:

A precise subcontract scope avoids gaps and overlaps, making clear which work is included in the subcontract price and which is extra work requiring a change order, reducing disputes.

93. When an owner signs a contract by accepting a contractor's written bid exactly as offered, the agreement is formed by:

A binding contract requires an offer and an acceptance of that offer's terms, supported by consideration. Accepting a written bid as offered creates the contract through offer and acceptance.

94. A home improvement contract may NOT include which of the following provisions?

Statutory home improvement protections cannot be waived. A contract clause purporting to make the homeowner give up these consumer rights is unlawful and unenforceable.

95. A contractor's bid bond on a public project primarily guarantees that:

A bid bond guarantees that a successful bidder will honor its bid by signing the contract and furnishing the required performance and payment bonds; if it refuses, the bond covers the owner's reletting costs.

96. A homeowner exercises the three-day right to cancel a home improvement contract. The contractor had already delivered some materials. The contractor:

A timely cancellation must be honored: the contractor refunds the buyer's payments and may reclaim materials it delivered. The contractor cannot retain a fee or force the homeowner to proceed.

97. A contractor wants to recover $96,000 of annual overhead and earn 8% net profit on sales. If projected annual sales are $800,000, the profit dollars expected are:

Net profit equals the profit rate times sales: 8% x $800,000 = $64,000. Overhead recovery ($96,000) is separate; profit is what remains after both direct costs and overhead are covered.

98. A contractor stops work on a project for two weeks because the owner has not made an undisputed progress payment that is clearly due. This work stoppage is:

Abandonment requires departing the work without legal excuse. Stopping work because the owner failed to make a clearly due, undisputed payment is generally a justified suspension, not unlawful abandonment.

99. An estimate that totals all material and labor quantities from the plans, item by item, to build up a price is BEST described as:

A detailed estimate is built from a quantity takeoff — measuring and pricing every material and labor item from the plans. It is more accurate than a rough square-foot or conceptual estimate.

100. The home solicitation contract rules that give a three-day cancellation right apply to a contract that is:

Home solicitation contract rules apply to consumer contracts for goods or services solicited and signed at the buyer's residence (above a small statutory amount), triggering the three-day right to cancel.

101. A contractor's bid is $120,000. After the contract is signed, the owner requests an approved change order adding $15,000 of work and a deductive change order removing $4,000. The adjusted contract price is:

Change orders adjust the contract price up and down: $120,000 + $15,000 - $4,000 = $131,000. The adjusted price reflects all signed change orders.

102. Which contract type generally gives the owner the LEAST cost certainty at the time of signing?

Under cost-plus-percentage, the final price is unknown until the work is done because it depends on actual costs. Fixed-price and GMP contracts give the owner far more cost certainty up front.

103. A home improvement contract must be legible and any blank spaces should be:

The contract must be fully completed before the owner signs, so the homeowner sees and agrees to all material terms. Leaving blanks to be filled in later is improper and unfair to the consumer.

104. An owner-contractor agreement and a subcontract are kept consistent through:

A flow-down (or conduit) clause incorporates the prime contract's relevant terms into the subcontract, binding the subcontractor to the same obligations the general owes the owner for that scope.

105. A contractor's job-cost report shows materials are 15% over budget while labor is on budget at the 50% completion point. The contractor should:

Job costing exists to catch problems early. A 15% material overrun at mid-project should be investigated immediately so the contractor can correct purchasing practices or scope before the loss grows.