Originally posted 2017-12-11 09:24:24.
For this week’s Guest Post Friday post here at Construction Law Musings, we welcome back Matt Bouchard. Matt is a partner with Lewis & Roberts, PLLC in Raleigh, North Carolina. For over ten years his practice has focused on representing the interests of contractors, sureties and owners in connection with commercial construction projects. You can follow his blog, “N.C. Construction Law, Policy & News.” You can also follow him on Twitter @MattBouchardEsq.
Final completion.
The ultimate milestone for any construction project. The date when the owner accepts the finished facility, assumes legal responsibility for the work and renders final payment to the contracting team that built it. An occasion for ribbon-cutting and photo opportunities, and perhaps for evaluating lessons learned. A time for moving on, maybe a little wearier, maybe a little wiser, and probably a bit of both.
And all too often, a complete and utter pain-in-the-neck to achieve.
Why?
Maybe because the contracting team has already transitioned geographically and/or psychologically to the next project, and can’t be bothered to tie up loose ends on the present one. Maybe because the owner is so caught up in occupancy that it loses sight of the contract’s remaining requirements. Or maybe because the project participants are ensnarled in a long, drawn-out claims process that postpones finality and spoils the party for everyone (except, of course, the lawyers).
Whatever the reasons might be, a delay in achieving final completion can be a frustrating exercise for everyone involved.
Last week, during my annual sojourn to NYC for the Fidelity & Surety Law Committee’s 2014 Midwinter Meeting, I attended a workshop presented by a panel of public owner reps all too familiar with the frustrations of untimely project close-out.
The panelists spoke about why final completion mattered to them, focusing in part on their need for complete, timely and accurate as-built drawings to facilitate long-term maintenance on facilities designed and built to serve the public for decades. They also spoke passionately about the need for teamwork and communication throughout the project – pre-construction, 80% completion, substantial completion – so that all project participants understand the prime contract’s close-out requirements and work together to cross the finish line timely.
As someone who does not regularly represent public owns, it was important for me to hear their perspectives on why effective close-out matters to them. In the week since I’ve been back, I’ve given some thought to why finishing strong should matter enough to contractors to be made a top priority by them. Here’s my list so far:
(1) Maximizing Profit. Sure, obtaining final payment is pretty sweet in and of itself, but wouldn’t it be even sweeter for that payment to contain as much profit as possible? Timely completion means less supervisory, equipment and overhead costs incurred during the punch list phase of the project. It goes without saying that less punch list cost equals less leeching of profit – and more money in your pocket.
(2) Limiting Exposure for Alleged Defective Construction. Final completion means acceptance of the work by the owner, known warts and all. Generally speaking, “patent” or obvious deviations from the plans and specifications become non-actionable once the project is accepted by the owner. That means the sooner final completion is achieved, the sooner liability for alleged defective construction is limited to “latent” or non-obvious defects.
(3) Avoiding Reputational Damage. How you handle close-out could go a long way toward crystallizing the owner’s opinion of your overall project performance. If you want the owner to consider using you again – and to say nice things to others who may wish to retain your services – remember this variation on a popular expression: you never get a second chance to make a last impression.
What do you think? Are there other reasons why contractors should be focused like a laser on project close-out? And do you have any tips for achieving timely the ultimate milestone of project completion? Chris and I would love to hear from you.
Yes there are some other actions that help pave the way to a successful and timely project close-out.
Definition is one: the contract should leave the requirements of close out totally unambiguous, down to what document submittals are required for close-out, and when during the course of the work each type is required. Too often there are differences of opinion between parties. A good example is as-builting of small bore field run piping on industrial projects, an issue that frequently results in a surprised contractor at completion. Similar issues tend to arise with field run underground utilities covered by construction before measurements are recorded.
Training is another: frequently team members are surprised to learn too late of contractual
details for close out, leading to differences of opinion and sometimes rework. These details are far from the typical foreman’s, supervisor’s or field engineer’s mind during the heat of construction.
Surprisingly, significant retention tied to final submittals often fails to accomplish a timely close-out, partly due to the foregoing issues, as well as a lack of emphasis by management in the day to day course of the work.