LSAT 19, Logical Reasoning II, Q23, LSATHacks

QUESTION TEXT: Construction contractors working on the cutting edge…

QUESTION TYPE: Paradox

PARADOX: Costs overruns are more common under a fixed-profit system than a fixed-percentage system.

ANALYSIS: This sounds very puzzling. We would expect costs to be lower in a fixed-profit system – contractors don’t profit from overruns in a fixed profit system.

But the stimulus only says overruns are more common. We’re not told how large the overruns are. It could be that overruns are highest under fixed-percentage systems even if they are more common with fixed-cost systems.

The right answer takes a different approach. It presents a method of keeping down costs that is only available for fixed-percentage contracts.

___________

1. This is pretty vague, and doesn’t differentiate between the two types of cost-plus systems.
2. This doesn’t differentiate between the two types of cost-plus contracts.
3. This doesn’t differentiate between the two types of cost-plus contracts.
4. CORRECT. If clients can review expenses then contractors might want to avoid unnecessary or fake expenses so they don’t look bad. This option is only available with fixed-percentage systems. That could explain why fixed-cost systems are more likely to overrun.
5. This is very tempting, but the stimulus was talking about cost overruns, once the cost estimation process was done. This answer choice is talking about fraud during the cost-estimation process.

Recap: The question begins with “Construction contractors working on the cutting edge”. It is a Paradox question. Learn how to master LSAT Paradox questions on the LSAT Logical Reasoning question types page.

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