Exam Cheat Sheet · Quick Reference

New Jersey Business and Law Exam (Electrical Contractor and Master Plumber)

New Jersey  ·  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
130 min
Administered by
PSI Services Contractor
Format
Reference materials allowed

New Jersey State Portion 50 questions

Business Organization 2 Q · 4%
Business naming, trade names, trademarks, and New Jersey name reservation procedures
Licensing 5 Q · 10%
Electrical contractor license eligibility requirements (age, education, experience)Master plumber license eligibility requirements (age, experience, apprenticeship)License examination structure, scheduling, and retake rulesLicense renewal, late renewal, suspension, reactivation, and reinstatement proceduresBonding, insurance, and workers' compensation requirementsPressure seal issuance, proper use, misuse penalties, and return obligationsCommercial vehicle, stationery, and advertising identification requirementsExemptions from licensure (electrical and plumbing)
Estimating and Bidding 7 Q · 14%
Contract Management 8 Q · 16%
Project Management 5 Q · 10%
Risk Management 4 Q · 8%
Workers' compensation insurance: NJ coverage requirements and penaltiesEmployment-related insurance (unemployment insurance, SUTA dumping, Social Security)
Safety 4 Q · 8%
Underground utility safety and New Jersey One Call requirementsEnvironmental regulations and permits (EPA, New Jersey DEP)
Labor Law 4 Q · 8%
Required federal and New Jersey state workplace postingsWorkers' compensation coverage requirements and fraud
Financial Management 5 Q · 10%
Tax Law 3 Q · 6%
Lien Law 3 Q · 6%
Definition and purpose of a construction lien under NJ law (N.J.S. 2A:44A-1 et seq.)Parties entitled to file a lien claim (contractors, subcontractors, suppliers, licensed professionals)Exemptions from lien rights (public works, security agreements, residential contract non-compliance)Process and form requirements for filing a lien claim (N.J.S. 2A:44A-6 and 2A:44A-8)Filing deadlines (90-day non-residential / 120-day residential from last work provided)Service of lien claim requirements (10-day rule, methods of service, consequences of late service)Lien fund calculation and priority of lien claimants (first, second, third tier)Bonding around a lien and discharge of lien claim (surety bond or cash deposit)

Key Distinctions

AddendavsModifications

Addenda are changes made to the bid package/contract documents prior to the contract award (and become part of the contract when awarded), while modifications are changes made after the contract is signed and executed.

NASCLA Contractors Guide, Chapter 7 - Contract Management
Bid shoppingvsBid peddling

Bid shopping is the general contractor approaching subcontractors other than those who submitted bids to seek a lower offer, while bid peddling is a subcontractor approaching the general contractor after the project was awarded to lower the price submitted on bid day.

NASCLA Contractors Guide, Bidding and Estimating chapter — Bid Shopping section
Bid riggingvsBid shopping / bid peddling

Bid rigging is collusion where contractors coordinate their bids to fix the award outcome of a project, unlike bid shopping (GC seeking lower sub prices after bids) or bid peddling (sub lowering its price after award).

NASCLA Contractors Guide, Bidding and Estimating chapter — Bid Rigging section
ArbitrationvsMediation

In arbitration a third-party arbitrator acts as a judge and renders an arbitral award that legally binds all parties, while in mediation an independent third-party mediator only facilitates dialogue and the parties themselves set the terms of any agreement.

NASCLA Contractors Guide, Contract Management chapter — Arbitration section
Arbitration / mediationvsCollaborative law

Collaborative law involves no neutral mediator or arbitrator; the parties use their own advocates, most often lawyers, to negotiate a mutually beneficial result.

NASCLA Contractors Guide, Contract Management chapter — Alternative Dispute Resolution section
Material breachvsImmaterial (partial) breach

A material breach is a serious violation (e.g., contractor refuses to perform or owner refuses to pay) that may void the contract and most likely ends in litigation, while an immaterial or partial breach usually does not terminate the contract and the injured party may only sue for the value of the damages suffered.

NASCLA Contractors Guide, Contract Management chapter — Breach of Contract section
All-risk builders' risk insurancevsNamed peril builders' risk insurance

All-risk covers direct loss by any peril not specifically excluded by the policy (nearly all risks), while named peril has narrower coverage and specifies which perils are covered, such as fire and lightning.

NASCLA Contractors Guide, Managing Risk chapter — Insurance section
Project overheadvsCompany overhead

Project overhead includes bonds, temporary storage, temporary office, security guard, utilities, dumpsters and portable toilets (typically 5-10 percent of the total bid), while company overhead includes items such as office rent, accounting fees and legal fees.

NASCLA Contractors Guide, Bidding and Estimating chapter — Add Project Overhead section
Quantity take-off methodvsUnit price method

The quantity take-off method individually estimates units of materials and labor for each task (generally the most accurate), while the unit price method bundles all cost factors — labor, materials, equipment and subcontractors — into a single price for the entire task.

NASCLA Contractors Guide, Bidding and Estimating chapter — Quantity Take-off section
Leasing equipmentvsPurchasing equipment

Leasing requires no down payment, spreads lower payments over a longer period, allows lease payments to be deducted as operating expenses and returns obsolete equipment to the owner, while purchasing usually costs less in the long run and gives ownership/salvage value (leases generally cannot be cancelled).

NASCLA Contractors Guide, Bidding and Estimating chapter — Determining Estimated Costs section
Liquidated damagesvsActual damages

They are mutually exclusive remedies — an owner who sues for liquidated damages (the contract's per-day assessment) cannot also sue for actual damages.

NASCLA Contractors Guide, Contract Management chapter — Breach of Contract section
Discharging a lien by paying the claimantvsDischarging a lien by surety bond or deposit of funds with the court

Per the statutory lien claim form notice, an owner who pays the claimant and obtains a discharge of lien claim loses the right to challenge the lien claim in a court proceeding, whereas an owner who discharges by surety bond or deposit of funds retains that right.

NASCLA Contractors Guide, New Jersey (2nd ed.), Appendix J — N.J.S. 2A:44A-8 (lien claim form notice) and 2A:44A-31
First tier lien claimantvsSecond / third tier lien claimant

Under N.J.S. 2A:44A-2 a first tier lien claimant is a claimant who is a contractor (in direct privity with the owner), a second tier claimant is a subcontractor or supplier in relation to the contractor, and a third tier claimant is a subcontractor or supplier to a second tier claimant; N.J.S. 2A:44A-9(f) gives no lien rights to anyone other than first, second or third tier claimants (so a fourth tier party has none).

NASCLA Contractors Guide, New Jersey (2nd ed.), Appendix J — N.J.S. 2A:44A-2 and 2A:44A-9(f)

Key Terms

Addendum NASCLA Contractors Guide, Bidding and Estimating chapter — Bid Documents section
A document issued when changes are made to a bid package before it is due; it becomes part of the bid documents and ultimately part of the contract when awarded.
Unresponsive bidder NASCLA Contractors Guide, Bidding and Estimating chapter — Bid Documents section
A bidder can be found 'unresponsive' if information in the bid package is incorrectly submitted or omitted altogether.
Allowance NASCLA Contractors Guide, Bidding and Estimating chapter — Add Allowances section
An amount included in an estimate representing the owner's budget for items not specified in the project plans, such as carpeting, fixtures and lighting; the contract should address who pays the difference if the owner's choices exceed or fall short of the allowance.
Contingency NASCLA Contractors Guide, Bidding and Estimating chapter — Add Contingencies section
A percentage sometimes added to an estimate to protect the contractor if an unanticipated problem or condition arises, generally based on the project's risk level (e.g., 2 percent for a low-risk project, higher for higher risk).
Preliminary estimate NASCLA Contractors Guide, Bidding and Estimating chapter — Preliminary Estimates section
The risky practice of quoting a price to a customer before accurate calculations can be made — quoting too high may lose the bid, quoting too low may disappoint the customer.
Conceptual estimate NASCLA Contractors Guide, Bidding and Estimating chapter — Other Methods of Estimating section
An estimate generally prepared by the architect using cost models from previous projects; the contractor may arrive at a much different cost due to the project's unique characteristics.
MasterFormat NASCLA Contractors Guide, Bidding and Estimating chapter — Estimating Checklist section
A classification system published by the Construction Specifications Institute that groups numbers and job tasks by major construction activities and is recommended as an estimating checklist.
Cost code system (job cost recording) NASCLA Contractors Guide, Bidding and Estimating chapter — Job Cost Recording System section
A three-part code consisting of a project number, an activity classification code and a distribution code identifying material (M), labor (L), equipment (E) or project overhead (P), used to compare estimated to actual costs.
Retainage NASCLA Contractors Guide, Scheduling and Project Management chapter — Progress Payments section
An amount, commonly 10 percent, withheld from progress payments and released to the contractor after all final approvals are obtained at the end of the project.
Unit-price contract NASCLA Contractors Guide, Contract Management chapter — Unit-Price Contract section
A contract used when the extent of work cannot be fully determined in advance, in which a price per unit is calculated for each item and the contractor is paid according to actual quantities used.
Change order NASCLA Contractors Guide, Contract Management chapter — Making Changes to the Contract section
A written agreement between owner and contractor that changes the contract by adding to, deleting from, or otherwise altering the work set forth in the construction documents.
Indemnification clause NASCLA Contractors Guide, Contract Management chapter — Provisions to Limit Risk section
A contract provision that shifts payment or liability for losses or damages incurred by a third party from the indemnified party to another party, and must be carefully examined to ensure proper liability distribution between contractor and owner.
Project manual NASCLA Contractors Guide, Contract Management chapter — Contract Documents and Project Manual section
A central location containing bid documents, contract provisions, technical specifications and addenda.
Equipment floater policy NASCLA Contractors Guide, Managing Risk chapter — Equipment Floater Policy section
A type of inland marine insurance providing coverage for direct physical loss to tools and equipment while stored on premises, in transit, or at temporary locations or jobsites.
Workweek (FLSA) NASCLA Contractors Guide, Employee Management chapter — Fair Labor Standards Act (FLSA) section
Under the Fair Labor Standards Act, a period of 168 hours during seven consecutive 24-hour periods.
'Contract' under the NJ Construction Lien Law (N.J.S. 2A:44A-2) NASCLA Contractors Guide, New Jersey (2nd ed.), Appendix J: Construction Lien Law — N.J.S. 2A:44A-2 (definition of 'contract') and 2A:44A-3
An agreement in writing, signed by the party against whom the lien claim is asserted, evidencing the parties' responsibilities, price or other consideration, and a description of the improvement — without it no lien may attach under N.J.S. 2A:44A-3, regardless of the 90-day filing window.
Bonding around a lien (N.J.S. 2A:44A-31) NASCLA Contractors Guide, New Jersey (2nd ed.), Chapter 16 (New Jersey Construction Lien Law) — Bonding Around a Lien; Appendix J — N.J.S. 2A:44A-31
Releasing a construction lien claim by filing a surety bond with the court in the amount of the claim of lien, or alternatively depositing with the court a sum of money equivalent to the required bond amount.
License reinstatement (N.J.A.C. 13:31-2.5) NASCLA Contractors Guide, New Jersey (2nd ed.), Appendix E, Page E-24
Requires a reinstatement application, certification of employment for each job held during suspension, evidence of required continuing education, the current triennial renewal fee, plus the past due renewal fee for the immediately preceding triennial period and the reinstatement fee set forth in N.J.A.C. 13:31-1.6.
DEP Division of Air Quality General Permit NASCLA Contractors Guide, New Jersey (2nd ed.), Chapter 12 — New Jersey DEP Division of Air Quality section
A pre-approved permit and certificate for a specific class of significant sources; an owner who properly registers and meets all requirements satisfies the NJAC 7:27-8.3 requirement for a permit and certificate of construction, repair and maintenance activities.
Failure to insure (NJ workers' compensation) NASCLA Contractors Guide, New Jersey (2nd ed.), Chapter 11 (Employee Management) — Workers' Compensation Laws section
Operating with employees without required workers' compensation coverage is punishable by fines up to $5,000 for the first 10 days plus additional $5,000 assessments for each 10-day period thereafter, is a disorderly persons offense, and if determined to be intentional is also a crime of the fourth degree.

Formulas to Know

Labor cost per task (quantity take-off method); planning and scheduling hours must also be figured into labor costRequired Labor Hours per Task × Labor Rate = Labor Cost per Task
Total material unit cost (obtain at least three supplier bids)Price per Unit × Number of Units Needed = Total Material Unit Cost
Bid price after adding overhead (example: direct costs $100,000, project overhead 9% + company overhead 11% = 20%)Direct Costs ÷ (1 − Total Overhead %) ; $100,000 ÷ 0.80 = $125,000
Hourly unit cost of owned equipment, and project equipment cost (examples: $12,000 ÷ 600 hr = $20/hr; $30,000 ÷ 1,000 hr = $30/hr × 40 hr = $1,200)Total Yearly Equipment Cost ÷ Estimated Hours of Use per Year = Unit Cost per Hour; Unit Cost per Hour × Project Hours = Project Equipment Cost
Activity duration (example: 16 labor hours ÷ 4 hours/day = 4 working days)Total Labor Hours ÷ Hours per Day Available for the Task = Activity Duration in Working Days
Liquidated damages (example: $500/day × 20 days late = $10,000; cannot also sue for actual damages)Per-Day Liquidated Damages Rate × Number of Unexcused Days Late
Percentage of completion and cumulative earnings (example: $80,000 ÷ $160,000 = 50%; 50% × $200,000 = $100,000)Project Costs Incurred ÷ Total Estimated Costs = % Complete; % Complete × Contract Amount = Cumulative Earnings
Net pay (example: $3,200 − $884.80 = $2,315.20)Net Pay = Gross Pay − All Taxes and Deductions
Profitability ratio / profit margin (example: $46,300 ÷ $545,600 ≈ 8.5%); higher percentage = more profitableProfit Margin = Net Income ÷ Revenues
Quick ratio (acid test) (example: ($150,000 − $30,000) ÷ $100,000 = 1.20); one or more is generally acceptable to most creditorsQuick Ratio = (Current Assets − Inventory) ÷ Current Liabilities
Straight-line depreciation (example: ($80,000 − $5,000) ÷ 5 = $15,000 per year)(Initial Asset Cost − Salvage Cost) ÷ Useful Life in Years = Yearly Depreciation Amount
NJ statutory lien claim amount, form in N.J.S. 2A:44A-8 (example: ($90,000 + $15,000) − ($5,000 + $60,000) = $40,000; limited by 2A:44A-9(a) to the unpaid portion of the contract price)E − [F + G] = Total Contract Price (initial price + executed amendments/change orders) − (Agreed Upon Credits + Amounts Paid to Date)
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