CSLB Contractor's Law & Business Practice Exam

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What is the best practice for a prime contractor to determine the price for subcontracted electrical work?

Estimate the costs based on past experiences.
Get a firm bid from the subcontractor.
Assume standard industry pricing.
Consult with a financial advisor.

The correct answer is: Get a firm bid from the subcontractor.

A firm bid from the subcontractor is the best practice for a prime contractor to determine the price for subcontracted electrical work because it provides a clear and specific cost that reflects the current market conditions and the unique requirements of the project. This approach ensures that the prime contractor has an accurate understanding of the total expenses involved, which helps in budgeting and financial planning. Getting a firm bid also minimizes the risks associated with unexpected cost overruns that can arise from vague estimates or assumptions about standard pricing. It allows for a formal agreement that can be referenced in the event of disputes, ensuring clarity and accountability in the financial relationship between the prime contractor and the subcontractor. Overall, obtaining a firm bid fosters better communication and trust, resulting in a smoother project execution.