Exam Cheat Sheet · Quick Reference
Alabama - Business & Law Examination (formerly General Contractor Examination)
Alabama · PSI Services Contractor
Verified, not estimated. Every figure below is drawn from the official exam structure we maintain — question counts, passing standard and topic weighting. Practice questions are grounded in the source law with statute citations. We omit any figure we can't verify rather than guess at it.
Total questions
50
Passing score
70%
Exam time
120 min
Administered by
PSI Services Contractor
Format
Reference materials allowed
Alabama State Portion 50 questions
Licensing
8 Q · 16%
License requirement thresholds for general contractors and subcontractorsMajor license classifications and specialty classificationsPrime contractor licensing application process and feesMaximum bid limits and letter classification systemLicense renewal procedures, fees, and late penaltiesExemptions from contractor licensing requirementsReciprocity agreements with other statesDisciplinary actions, administrative fines, and criminal penalties
Estimating and Bidding
5 Q · 10%
Quantity take-off method for estimating costsLabor cost calculation including labor burdenMaterials cost estimation and supplier biddingProject overhead vs. company overhead calculationMarkup, profit margin, and cost-based pricingBid documents, bid submission requirements, and unresponsive bidsEthics in bidding including bid shopping, bid peddling, and bid riggingAlabama licensing requirements for bidding on projects over $50,000
Liens
2 Q · 4%
Who qualifies for mechanics' and materialmen's lien rightsFiling deadlines by lien claimant type (prime contractor, laborer, all others)Required contents of the verified lien statement and filing locationNotice requirements for material suppliers and non-original contractorsPriority of liens relative to commencement of workBonding around a lien (bond amount, interest, court cost deposit)Prime contractor duty to provide list of materialmen and laborersLiens on buildings or improvements on leased land
Financial
5 Q · 10%
Accounting cycle steps and journal typesFinancial statements: balance sheet, income statement, and statement of cash flowsFinancial ratio analysis: liquidity, quick, activity, debt, and profitability ratiosContract accounting methods: completed contract, percentage of completion, and cost comparisonCash management: accounts receivable, progress payments, retainage, and Alabama Prompt Pay LawDepreciation methods: straight-line, accelerated, and MACRSPayroll accounting: gross pay, deductions, net pay, and payroll journalFederal and Alabama state tax obligations: income tax, FICA, FUTA, sales/use tax, and business privilege tax
Payroll and Taxes
6 Q · 12%
Federal Employer Identification Number (EIN) requirements and application methodsFederal employment tax types and corresponding IRS forms by business entitySocial Security and Medicare taxes (FICA) withholding and employer matchingFederal income tax withholding, W-4 and W-2 requirements and deadlinesFederal Unemployment Tax (FUTA) liability thresholds, deposit schedules and Form 940Payroll tax deposit schedules (monthly, semiweekly, daily) and penalties for late or incorrect depositsForm 1099-MISC reporting requirements for independent contractorsAlabama state tax specifics including state income withholding, business privilege tax, sales and use tax, and contractors gross receipts tax
Personnel and Labor
5 Q · 10%
Fair Labor Standards Act (FLSA) minimum wage, overtime, and recordkeeping requirementsInterviewing and hiring: lawful vs. prohibited interview questionsNew hire reporting requirements and procedures under PRWORAChild labor laws: working hour restrictions and prohibited tasks for minorsEmployee documentation: I-9, W-4, and other required formsKey employment laws: ADA, Title VII, ADEA, FMLA, and other federal protectionsWorkers' compensation, unemployment compensation, COBRA, and employee benefitsEmployee discipline, termination procedures, and at-will vs. contractual employment
Project Management
3 Q · 6%
Scheduling methods: calendar, bar chart, and critical path method (CPM)Scheduling process: sequence of tasks, activity duration, contingency time, and float timeProject manager role, responsibilities, and qualitiesProject supervisory team roles: superintendent, foreman, materials expediter, architect/owner's representativeProject life cycle phases: pre-construction, construction, and job closeoutTracking project progress: daily reports, status reports, and schedule trackingBudget and cost controls: cost overruns, just-in-time delivery, purchase orders, and budget trackingQuality assurance and value engineering
Contracts
6 Q · 12%
Required elements of a binding contract (offer, acceptance, consideration, competent parties, legal purpose)Types of construction contracts (lump-sum, unit-price, cost-plus)Contracting methods (single prime, design/build, construction management, turnkey, fast-track, multiple prime, partnering)Breach of contract and liquidated damagesContract provisions (payment terms, progress payments, retainage, final payment)Change orders and contract modificationsAlternative dispute resolution (negotiation, mediation, collaborative law, arbitration)Risk-limiting provisions (force majeure, indemnification, warranties, differing site conditions, delay clauses)
Business Organization
2 Q · 4%
Types of business structures: sole proprietorship, partnership, corporation, LLCLiability characteristics of each business structureTaxation treatment for each business entity typeAdvantages and disadvantages of each business structureAlabama registration and formation requirements by entity typeJoint venture requirements under Alabama Administrative CodeBusiness naming rules, trade names, and name reservation in AlabamaBusiness plan elements, functions, and pitfalls
Risk Management
4 Q · 8%
Types of insurance coverage for contractors (property, liability, automobile, burglary/theft)Commercial General Liability (CGL) and supplemental liability policiesWorkers' compensation requirements under Alabama lawSurety bonds: types, qualifying criteria, and bond languageMiller Act and Alabama bonding requirements for public construction projectsEmployment-related insurance (unemployment insurance, SUTA, Social Security)Insurance coverage verification for subcontractorsCoverage gaps, overlaps, and Business Owner's Policies (BOPs)
Safety Recordkeeping and Environmental
4 Q · 8%
OSHA recordkeeping requirements (Forms 300, 300A, and 301)Recordable vs. non-recordable injuries and illnesses (first aid definitions, decision tree)Reporting fatalities and hospitalizations to OSHARetention periods for OSHA records, exposure records, and medical recordsOSHA penalty types and amounts (serious, willful, repeated, failure to abate)Environmental regulations and permits (EPA, ADEM, Clean Water Act, NPDES, air permits)Hazardous and non-hazardous solid waste identification, notification, and disposalAsbestos and lead regulations (notification requirements, Lead PRE Rule, contractor certification)
Key Distinctions
Free Float TimevsTotal Float Time
Free float is how long an activity can be delayed without impacting the early start of the NEXT activity, while total float is the leeway allowed without delaying overall project completion.
NASCLA Contractors Guide Alabama, Page 9-2ArbitrationvsMediation
Arbitration produces a legally binding arbitral award rendered by a third-party arbitrator, while mediation produces a non-binding decision.
NASCLA Contractors Guide Alabama, Page 8-8All-Risk Builders' Risk InsurancevsNamed Peril Builders' Risk Insurance
All-risk covers direct loss from any peril not specifically excluded, while named peril specifies only the covered perils (e.g., fire and lightning), providing narrower coverage.
NASCLA Contractors Guide Alabama, Page 4-4Percentage of Completion MethodvsCompleted Contract Method
Percentage of completion recognizes income as it is earned throughout the project, while completed contract defers income recognition until the contract is finished and is restricted to small contractors with ≤$10M average annual gross receipts.
NASCLA Contractors Guide Alabama, Page 14-8Project Overhead CostsvsCompany Overhead Costs
Project overhead costs (e.g., temporary storage, bonds, dumpsters) are tied to a specific job site, while company overhead costs (e.g., office rent, accounting fees, legal fees) are ongoing business expenses not tied to a single project.
NASCLA Contractors Guide Alabama, Page 7-6Prime Contractor LicensevsSubcontractor License
Prime contractors pay a $300 application fee and a $200 renewal fee and are subject to bid limits, while subcontractors pay a $150 application fee and a $100 renewal fee and are NOT subject to bid limits.
NASCLA Contractors Guide Alabama, Page 3-3Unit-Price ContractvsFixed-Price (Lump-Sum) Contract
A unit-price contract pays the contractor based on actual quantities used when the full extent of work cannot be determined in advance, while a fixed-price contract sets a single predetermined amount for the entire scope of work.
NASCLA Contractors Guide Alabama, Page 8-6EmployeevsIndependent Contractor
An employee is distinguished from an independent contractor by evaluating three IRS factors: behavioral control, financial control, and type of relationship between the parties.
NASCLA Contractors Guide Alabama, Pages 13-2 to 13-3Prime Contractor Mechanics' Lien DeadlinevsLaborer/Journeyman Mechanics' Lien Deadline
Prime contractors must file a mechanics' lien within 6 months after last work or materials were furnished, while laborers and journeymen must file within 30 days after last work was performed.
NASCLA Contractors Guide Alabama, Page 16-2Classification A ContractorvsClassification D Contractor
Classification A has a maximum bid limit of $100,000, while Classification D has a maximum bid limit of $1,000,000.
NASCLA Contractors Guide Alabama, Page 3-4License Required (General Contracting)vsLicense Required (Swimming Pool Construction)
A general contractor's license is required when project cost (labor + materials) is $50,000 or more, while a swimming pool contractor's license is required when cost exceeds $5,000.
NASCLA Contractors Guide Alabama, Page 3-2Key Terms
General Contractor License Threshold NASCLA Contractors Guide Alabama, Page 3-2
Per NASCLA Contractors Guide Alabama (Page 3-2), a contractor's license is required when the cost of the undertaking, including labor and materials, is $50,000 or more.
51% Regulation Alabama Licensing Board Rules and Regulations, Page F-9
Per Alabama Licensing Board Rules and Regulations (Page F-9), a general contractor may undertake any project if 51% or more of the work (measured by cost) falls within the major classification in which the contractor is licensed.
Bid Limit Formula NASCLA Contractors Guide Alabama, Page 3-4
Per NASCLA Contractors Guide Alabama (Page 3-4), bid limits are set at not more than 10 times the contractor's net worth or working capital, whichever is the lesser amount.
Late Renewal Penalty NASCLA Contractors Guide Alabama, Page 3-5
Per NASCLA Contractors Guide Alabama (Page 3-5), a licensee who fails to renew within 90 days following expiration is assessed a $50 late penalty upon renewal.
Mechanics' Lien – Bond Release Amount NASCLA Contractors Guide Alabama, Page 16-2
Per NASCLA Contractors Guide Alabama (Page 16-2), to release a mechanics' lien through bonding, the bond must equal the lien amount plus 8% interest for three years plus $100 toward court costs.
Mechanics' Lien Priority NASCLA Contractors Guide Alabama, Page 16-2
Per NASCLA Contractors Guide Alabama (Page 16-2), all labor and material liens have priority over all other liens created after commencement of the work.
Reciprocal Licensing States NASCLA Contractors Guide Alabama, Page 3-5
Per NASCLA Contractors Guide Alabama (Page 3-5), Alabama has reciprocal contractor licensing agreements with Arkansas, Louisiana, Mississippi, and Tennessee.
Labor Burden NASCLA Contractors Guide Alabama, Page 7-4
Per NASCLA Contractors Guide Alabama (Page 7-4), labor burden refers to the additional employer costs (employment taxes and insurance) that add approximately 30% to base labor costs.
MACRS (Modified Accelerated Cost Recovery System) NASCLA Contractors Guide Alabama, Page 14-12
Per NASCLA Contractors Guide Alabama (Page 14-12), MACRS is the IRS-approved depreciation method that allows larger deductions in the earlier years of an asset's useful life.
Arbitral Award NASCLA Contractors Guide Alabama, Page 8-8
Per NASCLA Contractors Guide Alabama (Page 8-8), an arbitral award is the legally binding decision rendered by an arbitrator in an arbitration proceeding.
Project Overhead Cost Percentage NASCLA Contractors Guide Alabama, Page 7-6
Per NASCLA Contractors Guide Alabama (Page 7-6), project overhead costs typically account for 5% to 10% of the total bid.
Standard Industry Markup NASCLA Contractors Guide Alabama, Page 7-7
Per NASCLA Contractors Guide Alabama (Page 7-7), the standard industry markup is 15%, though market conditions and competition should be considered.
Alabama Licensing Board Composition Alabama Licensing Board for General Contractors Licensing Law, Page E-7
Per Alabama Licensing Board for General Contractors Licensing Law (Page E-7), the board consists of five members appointed by the Governor.
Contract Splitting Prohibition NASCLA Contractors Guide Alabama, Page 3-2
Per NASCLA Contractors Guide Alabama (Page 3-2), a contract cannot be divided into parts under $50,000 to evade licensing requirements; combined parts totaling $50,000 or more are treated as one contract.
Formulas to Know
Total Unit Price
Quantity × Unit Price per unit = Total Price (e.g., 2,000 sq ft × $2.00/sq ft = $4,000)Maximum Bid Limit
Maximum Bid Limit = 10 × Lesser of (Net Worth or Working Capital)Labor Cost with Burden
Total Labor Cost = Base Labor Cost × 1.30 (labor burden adds ~30%)Mechanics' Lien Bond Release Amount
Bond Amount = Lien Amount + (Lien Amount × 8% × 3 years) + $100Prompt Pay Interest
Monthly Interest Owed = Outstanding Balance × 1% (12% per year)Estimate Accuracy Check
Acceptable Variance = Actual Construction Cost × 1% to 2% (good estimate falls within this range)Total Project Cost Estimate
Estimate = Materials + Labor + Labor Burden (30%) + Subcontractor Fees + Project Overhead (5–10%) + Equipment + Contingencies + Allowances + Company Overhead + Profit (typically 15% markup)