Sean Meehan, LEED AP, ADMG
As a typical construction project nears completion, the project team is usually inundated with many last minute issues that threaten to derail the completion of the project. Often, the team has to commit so many resources towards meeting the deadline, that the administrative elements of project closeout may be neglected. I will review the basics of project closeout, and their importance to the project in terms of mitigating risk and ensuring smooth operation of the facility.
- Substantial Completion – The term ‘Substantial Completion’ generally implies that a project is sufficiently complete that an Owner can occupy or utilize the work for its intended use. However, substantial completion is typically a specifically defined contract term that requires numerous conditions be met. A typical AIA contract stipulates that the Architect will prepare a Certificate of Substantial Completion (AIA G704) that:
- Establishes the date of Substantial Completion
- Establishes the responsibilities of the Owner and GC for security, maintenance, utilities, damage to the work and insurance.
- Fix the time that the GC has to finish all remaining items on a punch list accompanying the certificate.
- Establishes the commencement of Warranties.
- Must be accepted by the Owner and GC in writing, and upon acceptance, the Owner is to pay retainage applying to such work (adjusting for work that is incomplete).
- Final Completion – Again, more so than meaning that the obligations of the contract have been fully performed, there are specific responsibilities established for this critical step in most construction contracts (always refer to your construction contract for specifics). A typical AIA A201 requires:
- The GC to request final inspection in writing
- The GC to prepare final Application for Payment
- Architect to make inspection and issue final Certificate of Payment
- Neither final payment nor retained percentage shall become due until GC submits:
- Affidavit that payrolls and other indebtedness have been paid.
- A certificate evidencing that insurance is in effect.
- A written statement that the GC knows of no reason that the insurance will not be renewable.
- Consent of surety.
- Releases of waivers and liens.
- Notice of Completion– While not a typical element of a construction contract, a Notice of Completion is an important tool for the Owner to mitigate risk. In California, a Notice of Completion:
- Is to be recorded in the office of the county recorder within 10 days of final completion.
- Limits timeframe for a Mechanic’s Lien to be filed to 60 days for prime contractors and 30 days for subcontractors.
We should all endeavor to adhere to closeout procedures carefully to ensure that conditions of the contract are met. The AIA has a series of free best practices articles on their website. Their article on the topic has additional suggestions and anecdotes regarding this very important step in the project life cycle: AIA – Planning for Effective Project Closeout